Sustainable newsvendor models under trade credit

Abstract

Governments and industry are actively seeking means of reducing global warming. The management of supply chains while taking into account the effects on the environment is an important issue. Therefore, we present newsvendor models that take into account carbon emissions, trade credit, and product recycling, in which the credit period affects the risk of default and the demand is uncertain in this paper. The objective of these models is to determine the optimal ordering quantity, credit period, and recycle price in order to maximize total profits. Three carbon emission incentives are taken into account: (1) carbon tax (2) direct cap (3) carbon cap and trade. We also incorporate risk-management methods to limit risk of default, providing a solution for each type of carbon emission incentive. Numerical analysis is used to illustrate the implementation of solutions and the degree to which system parameters affect profits and decision making. The results show that higher carbon taxes reduce recycle prices, order quantities, and total profits. Increasing the carbon cap leads to increases in recycle price, order quantity, and total profit. A higher carbon price drives down the recycle price, order quantity, and total profits.