Impact of transportation lead-time variability on the economic and environmental performance of inventory systems

Abstract

Storage and transportation of goods within global supply chains is a major cause of environmental damage in modern value added processes. Thus, in the past, theory and practice developed several approaches in order to decrease these negative environmental impacts that frequently counteract the traditional efficiency-oriented ambitions. However, in many cases the economic and environmental performance can be improved at the same time. As many activities in logistics and inventory management are related to the treatment of potential uncertainties in the system by establishing redundancies, the reduction of uncertainty has equally a positive impact on both performance measures. To investigate the interrelation between uncertainty and the economic and environmental performance of supply chains, a serial inventory system consisting of a manufacturer who works with overseas suppliers and a carrier is considered, whereas the carrier is able to reduce lead time uncertainty. The relationships between uncertainties and the economic and environmental performance of the considered inventory system are highlighted by a simulation study based on empirical data from an international container shipping supply chain.