Supply chain models with greenhouse gases emissions, energy usage, imperfect process under different coordination decisions

Abstract

Environmental issues, mainly greenhouse gas (GHG) emissions, are in large part the result of the excessive use of energy in production systems. The scarcity of resources, governmental regulations, and public awareness about sustainability make them expensive for companies. The speed of producing items (production rate) impacts GHG emissions generation in manufacturing, i.e., usually faster production results in more emissions, which is controllable in many cases. The production rate also affects the process quality and reliability; i.e., fast production speeds deteriorate the system fast, resulting in reworking defective items and machine failure. Such quality and reliability issues increase energy consumption and subsequently costs. This paper develops two-level (vendor-buyer) supply chain models that tackle these issues. It considers two coordinated policies: classical and vendor-managed inventory with consignment stock (VMI-CS), where the objective is to find the values of the decision variables that yield the minimum total supply chain cost. It includes the costs of holding inventory, GHG emissions and tax, energy usage, product and process quality, and transportation operations. The decision variables are the order quantity, the number of shipments, and the production rate. The paper compares the numerical results of the two coordination policies. It also provides managerial insights on the economic and environmental performance of the supply chains.