Abstract Cold chains are a major source of carbon emissions because they make use refrigerated trucks and warehouses for distribution and storage of inventory. Consequently, inventory management in cold chains should prioritise both profitability and environmental sustainability. This paper optimises inventory in a cold chain system consisting of a single warehouse and retail outlet, responsible for storing and selling cold items, respectively. To maintain product quality and safety, these items must be transported and stored in temperature-controlled environments. Two inventory models for the proposed cold chain are formulated and compared under two distinct carbon emissions regulations, namely, cap-and-trade and cap-and-offset, using both financial and environmental metrics. The proposed models factor in carbon emissions from refrigerated trucks and warehouses used for transporting and storing cold inventory. This study examines both a numerical example and a real case study involving a frozen seafood supply chain. The numerical analysis reveals that cap-and-trade regulation is more effective in reducing environmental impact, leading to 4.4% lower carbon emissions compared to carbon cap-and-offset regulation. However, from an economic standpoint, carbon cap-and-offset regulation performs marginally better, generating a 1% higher profit. The study identifies three key factors that significantly influence both financial and environmental outcomes in the cold chain: truck capacity, fuel efficiency, and freezer performance. As a result, management can best improve profitability and reduce emissions in cold chain operations by focusing on optimising these critical elements.
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