Lot size optimisation in two-stage manufacturer-supplier production under carbon management constraints

Abstract

Carbon management of production planning involves multiple supply chain parties in different processes. This paper studies synergistic cooperation among supply chain parties for more effective emission reduction. Since a supply chain generally includes multiple parties, this paper focuses for simplicity on supplier, manufacturer and retailing. It studies a centralised make-to-order (MTO) production system involving a manufacturer and an internal supplier, with an objective to maximise the total profit by optimising the production lot sizes for the supplier and the manufacturer, who each operates a production line under MTO mode. The proposed model considers two carbon management scenarios of carbon cap and product sustainability under consumer green awareness, of which the impacts are deliberated with analytical solutions and numerical experiments. The result shows that the maximal profit can be achieved under carbon management constraints by adjusting the production lot size in both scenarios. Through sensitivity analysis, it is found that the carbon cap policy restricts the company profitability and that a high consumer green sensitivity can improve the profitability of green products. Therefore, the government and companies should cooperate to improve product sustainability and create greener markets. This paper contributes to the burgeoning field of carbon management in supply chain and provides theoretical guidance for adjusting production plans.