Production planning with transshipment in a global supply chain under different carbon trading mechanisms

Abstract

To cope with the supply-demand mismatch in the global market, transnational enterprises usually adopt the strategy of lateral transshipment. This paper studies the production planning, transshipment and carbon trading problem of a large transnational manufacturer in a global supply chain. Two countries are involved in the operation of the transnational manufacturer, where different carbon trading mechanisms are implemented. Operational decisions of the transnational manufacturer are optimized in a mixed integer programming model with the purpose of maximizing its total profit. Then, we analyze the influence of the difference between carbon trading mechanisms on the transnational manufacturer, retailers, the countries involved and the global supply chain. Theoretically, our research enriches the research streams of lateral transshipment and carbon cap-and-trade policy. Moreover, managerial insights are provided for global supply chain members and international emission reduction regulators, which contribute to the smooth operation of global supply chains and enhance emission reduction. Especially, the conditions under which local governments should emphasize on economic development or environmental protection are revealed.