Trade-off model for carbon market sensitive green supply chain network design

Abstract

Regulatory frameworks to reduce greenhouse gases (GHGs) emissions are currently being developed in many countries around the globe. As a consequence, companies need to consider the different available options and mechanisms to meet their legal obligation. This paper introduces a mathematical model and a solution methodology for the ‘carbon market sensitive green supply chain network design’ (CMS/GSCND) problem. Specifically, carbon trading are integrated within the supply chain (SC) network design phase and the problem formulated as multiobjective mixed integer linear optimisation programme to decide on the SC configuration. The solution methodology allows the economic evaluation of different strategic decisions such as supplier and subcontractor selection, product allocation, capacity utilisation, transportation configuration and their impact in term of carbon footprint. It also provides decision makers with the ability to understand the trade-offs between total logistics costs and GHGs reduction. Model validation and extended analysis are demonstrated via a numerical study.