Modelling an environmentally-extended inventory routing problem with demand uncertainty and a heterogeneous fleet under carbon control policies

Abstract

Carbon emissions produced by supply chain activities, and in particular by transportation, contribute substantially to global warming. In order to tackle this problem, many governments and regulatory authorities have started to implement carbon control policies, which may directly impact on the decisions of a company. In a traditional inventory routing problem, a supplier determines the optimal vehicle routing and scheduling of deliveries, based on the observed inventory levels of the customers, to minimise the costs of the entire system. This research contributes by modelling the problem simultaneously taking into account the uncertainty in customer demand, a comprehensive emissions model, and a heterogeneous fleet of vehicles. The proposed model is further deployed to address four different policies, namely the cap, the carbon tax, the cap-and-trade and the cap-and-offset. Based on a case study, the economic and environmental implications of each different policy are discussed, focusing on the operational decisions of the models.