Abstract
With increasing concern over the environment, shipment consolidation has become one of a main initiative to reduce CO2 emissions and transportation cost among the logistics service providers. Increased delivery time caused by shipment consolidation may lead to customer’s order cancellation. Thus, order cancellation should be considered as a factor in order uncertainty to determine the optimal shipment consolidation policy. We develop mathematical models for quantity-based and time-based policies and obtain optimality properties for the models. Efficient algorithms using optimal properties are provided to compute the optimal parameters for ordering and shipment decisions. To compare the performances of the quantity-based policy with the time-based policy, extensive numerical experiments are conducted, and the total cost is compared.
Highlights
With increasing concern over the environment, many companies worldwide are improving their supply chain sustainability under pressure from the government or from their own shareholders [1]
Using the above optimality conditions, we develop a simple enumeration algorithm to obtain the optimal parameters for the proposed policy
We considered a single-item inventory system where shipments are consolidated to reduce the transportation cost using quantity-based and time-based consolidation policies for the purpose of the sustainability enhancement
Summary
With increasing concern over the environment, many companies worldwide are improving their supply chain sustainability under pressure from the government or from their own shareholders [1]. Since uncertainty is caused by many factors including inventory management, vendor selection, transport planning, production planning, distribution planning, and procurement planning, it is important to understand, manage, and reduce uncertainty in supply chain to improve performance [9]. Such trade-offs must be considered when making decisions about shipment consolidation [10]. We consider order cancellation scheme and develop both quantity-based shipment consolidation policy and time-based shipment consolidation policy to minimize the total cost incurred and to reduce environmental hazards such as CO2 emission caused during transportation.
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