Reduction of waste and carbon emission through the selection of items with cross-price elasticity of demand to form a sustainable supply chain with preservation technology

Abstract

Carbon emission plays a vital role in global warming. In addition to this, wastages due to the deterioration have a hazardous impact on the ecosystem. The responsible managers’ primary concern is to form a sustainable supply chain. Further, supply chain managers select some appropriate combinations when dealing with items that possess cross-price elasticity of demand to make a profitable system. The present model aims to make a sustainable supply chain to reduce waste by obtaining the optimal values of production rate, batch size, several shipments, and preservation investment such that the total profit of the system is maximum. In the present study, a supply chain model with two manufacturers and one common retailer is developed. The proposed supply chain deals with products having negative or positive cross-price elasticity of demand. The carbon emission is also considered, which is associated with different operational activities of inventory such as preparation of setup of manufacturers, transportation of products, waste management, and holding stock at manufacturers and the retailer’s end. The objective function in the present study is a mixed-integer nonlinear optimization problem. A solution methodology based on differential calculus is adopted. The result shows that products of low negative or high positive cross-price elasticity are a profitable combination. Additionally, a 20% reduction in wastage quantity is observed due to the investment in preservation technology. This result indicates that preservation technology positively impacts the environment and the finance associated with the inventory system. The proposed integrated system’s sustainability is illustrated with numerical examples, sensitivity analysis, and pictorial representation. In addition to this, several valuable managerial insights based on the study are provided.