Ramification of information asymmetry on a green supply chain management with the cap-trade, service, and vendor-managed inventory strategies

Abstract

The competition in the supply chain business has become considerably challenging. The environment protection is another problem adjacent to the competitive business. The supply chain players follow carbon policies to reduce carbon emissions along with profit maximization. But, asymmetric information sharing among supply chain players affects supply chain profit. This information asymmetry may be profitable for a few supply chain players but not beneficial for an entire supply chain and it may cause a non-coordination within them. A green supply chain management is developed with carbon tax & cap and trade regulations, where information asymmetry is reduced by the technology support through a radio frequency identification. This study finds the best service and distance between radio frequency identification readers to reduce asymmetry, and the optimum order quantity to obtain the maximum total profit for coordination or non-coordination policy. The objective function becomes a non-linear function with inequality constraint and the optimum solutions are derived using Kuhn–Tucker conditions. The optimum values of the objective function are found by using two subproblems because of the alternative scenarios of the cap and trade policy. Results indicate that a non-coordination policy is a better strategy than a coordination policy when information and product security play a major role in a green supply chain management. The effects of changes in cost parameters are identified via sensitivity analysis. The profit of the non-coordination policy is 6.07% more than the coordination profit.