Influence of procurement decisions in two-period green supply chain

Abstract

Abstract This paper focuses on optimal retail pricing and procurement decision of a retailer, and wholesale pricing and product's greening level decision of a manufacturer under two-period supply chain frameworks. In manufacturer-Stackelberg vertical game setting, three procurement scenarios are considered. It is found that the product greening level cannot achieve its optimum level if the retailer and manufacturer remain strict to imply the conventional single period procurement decision. If the retailer decides to buildup strategic inventory then the supply chain members receive higher profits and the manufacturer can invest more in improving product greening level. The consumer also receives product at its highest greening level. If the retailer procures products in a single lot to satisfy demand of two selling consecutive periods, then consumer receives the product at its lowest greening level and the manufacturer receives lowest amount of profits among three procurement scenarios. If the retailer participates with the manufacturer's green supply chain initiatives then the retailer can receive highest amount of profit, but the greening level of the product reaches at its lowest level. Therefore, the retailer's participation does not always motivate the manufacturer to produce greener product. Overall, the retailer's procurement decision is a key factor for the green supply chain initiatives of the manufacturer.