Abstract
By-product synergy (BPS) is an innovative method to convert waste into valuable by-products effectively. Based on a three-echelon supply chain composed of an upstream manufacturer, a processing plant with limited processing capacity, and a downstream manufacturer, this study derives the production quantity and waste disposal decisions of the upstream and downstream manufacturers as well as the optimal transfer price decision of the processing plant. Moreover, we assess the environmental performance of BPS. Analytical results suggest that the upstream manufacturer's production quantity and waste disposal decisions and the processing plant's transfer price decision are threshold dependent on the processing plant's capacity, whereas the downstream manufacturer's production quantity decision is threshold dependent on the processing plant's capacity and price of raw materials. BPS is beneficial for all members of the supply chain to increase profit. The production promotion and cost-saving effects ensure that the supply chain members maximize their profit. However, BPS does not always have a positive effect on the environment; when the processing plant's capacity and price of raw materials are below the threshold, implementing BPS results in a win-win situation of economic and environmental benefits.
Highlights
The manufacturing process inevitably generates fixed proportions of waste output
Based on the practice of by-product synergy (BPS), the main work of this paper is to investigate the interaction effect of BPS on operations among different parties based on a three-echelon supply chain composed of an upstream manufacturer, a downstream manufacturer, and a limited capacity processing plant
This study focuses on the effect of BPS on the operational decisions and environmental benefits of a three-echelon supply chain composed of an upstream manufacturer, a downstream manufacturer, and a limited capacity processing plant
Summary
The manufacturing process inevitably generates fixed proportions of waste output. the waste is not worthless, it can be captured value through reuse or further processing (Yang et al, 2014; Zhang et al, 2018). The multiple raw materials purchasing channels should be considered because of the processing plant may not supply sufficient by-products (Cho and Tang, 2014; Yazan and Fraccascia, 2020). Based on the practice of BPS, the main work of this paper is to investigate the interaction effect of BPS on operations among different parties based on a three-echelon supply chain composed of an upstream manufacturer, a downstream manufacturer, and a limited capacity processing plant. By considering the limitations of waste converting and the by-product supply, this study expands the research on BPS supply chain with limited processing capacity. From the perspective of productive use of waste stream, this study states whether BPS can achieve the win-win situation of economic and environment. The proof of this study is attached to the appendix
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