Optimal strategies for green investment, sharing contract and advertisement effort in a supply chain coordination problem

Abstract

The global environment is experiencing increasingly rapid pollution due to the presence of harmful products generated by human activities, the emissions from vehicular traffic, and the release of carbon dioxide from industrial sources. To save this beautiful earth as well as human beings, it is necessary to reduce pollution by producing eco-friendly products and reducing reckless carbon emissions from industry. Furthermore, advertising serves as a very efficacious strategy for promoting sustainable green products and encouraging customer engagement. In response to the current circumstances, a supply chain model including a manufacturer, a retailer, and customers is devised, incorporating investments in green practices and advertising. This study examines the relationship between client demand and three key factors: marketing effort, the product's green level, and the selling price. In addition, a sharing contract policy between the manufacturer and the retailer on green investment costs is applied in this model. The main focus of this study is to find the optimal values of advertisement effort, the product's green level, the manufacturer's wholesale price, the retailer's selling price and the sharing percentage of green investment that maximize the profits of the retailer and manufacturer, as well as the integrated supply chain system of the proposed model. In order to demonstrate the practical significance of the concept, a numerical example is solved and then a comparative analysis is conducted. Moreover, sensitivity studies are performed to assess the impact of different model parameters on decision factors and profitability. In conclusion, this study provides management insights and offers some closing observations, along with suggestions for future research directions. The findings indicate that the implementation of a sharing contract policy yields more earnings to the participants in the supply chain compared to a decentralized situation. The centralized strategy in supply chain management (SCM) results in higher joint earnings for the manufacturer and the retailer compared to the decentralized and sharing contract policies.