Abstract
Sustainability in material purchasing is a growing area of research. Goods purchasing decisions strongly affect transportation path flows, vehicle consolidation, inventory levels, and related obsolescence costs. These choices have an economic impact on the supply chain, in terms of different logistic costs, and an environmental impact, in terms of the carbon emissions produced during goods transportation, storage and final recovery. In this paper, we initially analyze and compare the environmental economic policies established by the International Governments in relation to the carbon trading systems adopted. Then, we overcome a traditional single objective formulation, by developing a bi-objective lot-sizing model in which costs and emissions are kept separated and analyzed by using a Pareto frontier subject to a Cap and Trade mitigation policy. The model is useful in practice to support managers in understanding the Pareto frontier shape linked to a specific purchasing problem, defining the cost-optimal and emission-optimal solutions and identifying a sustainable quantity to purchase when a Cap and Trade mitigation policy is present. We further analyze the model behavior according to variation in market carbon price and we finally analytically demonstrate that today carbon prices are still far too low to motivate managers towards sustainable purchasing choices: there is still a gap of about 79%.
Highlights
Introduction and BackgroundThe international increasing concern on environmental problems stresses the need to treat inventory management and goods purchasing decisions by integrating economic, environmental and social objectives
Several managers are looking beyond the traditional economic parameters and are starting to make decisions based on the whole life cost, the associated risks, measures of success and impacts on society and environment
In order to follow the research agenda described by Andriolo et al [9] and to make a step forward respect to the literature just described, the present work provides a new multi-objective Economic Order Quantity model for supporting managers in taking sustainable purchasing decisions
Summary
The international increasing concern on environmental problems stresses the need to treat inventory management and goods purchasing decisions by integrating economic, environmental and social objectives. Toptal et al [13] extend the traditional EOQ model to consider total cost and emission reduction investment under three emission regulation policies He et al [14] examine the production lot-sizing issues of a firm under the Cap and Trade and Carbon Tax regulations, respectively. By applying the model to various numerical scenarios, they show the effects of incorporating sustainability considerations into the traditional inventory model on operational decisions All these works apply a direct-accounting method with a single cost objective function by transforming CO2 emissions or social effects in economic measures. In order to follow the research agenda described by Andriolo et al [9] and to make a step forward respect to the literature just described, the present work provides a new multi-objective Economic Order Quantity model for supporting managers in taking sustainable purchasing decisions.
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