Joint decisions on inventory replenishment and emission reduction investment under different emission regulations

Abstract

Carbon emission regulation policies have emerged as mechanisms to control firms' carbon emissions. To meet regulatory requirements, firms can make changes in their production planning decisions or invest in green technologies. In this study, we analyse a retailer's joint decisions on inventory replenishment and carbon emission reduction investment under three carbon emission regulation policies. Particularly, we extend the economic order quantity model to consider carbon emissions reduction investment availability under carbon cap, tax and cap-and-trade policies. We analytically show that carbon emission reduction investment opportunities, additional to reducing emissions as per regulations, further reduce carbon emissions while reducing costs. We also provide an analytical comparison between various investment opportunities and compare different carbon emission regulation policies in terms of costs and emissions. We document the results of a numerical study to further illustrate the effects of investment availability and regulation parameters. © 2013 Taylor & Francis

Non-stationary stochastic inventory lot-sizing with emission and service level constraints in a carbon cap-and-trade system

“…The issue of sustainability has been addressed in several studies in the context of reverse or closed-loop supply chain, but only few papers apply the sustainability concerns in forward supply chains using quantitative modeling (Seuring, 2013;Gonzalez et al, 2013).Many studies in this area conclude that supply chain decisions have significant impact on carbon emissions (Huisingh et al, 2015;Govindan et al, 2014;Toptal et al, 2014;. The study of Plambeck (2012) suggests that tremendous changes in supply chain design and operation are required to avert climate change and explains through case studies that how carbon emissions can be reduced profitably in supply chains.…”

“…Employing more energy efficient machines/equipments and facilities, and using energy generated by renewable sources are also commonly used but costlier solutions to reduce emissions.But, given the impact of supply chain decisions on carbon emissions, a potential solution could be achieved by incorporating emission concerns in the models to optimize these decisions (Huisingh et al, 2015;Govindan et al, 2014;Toptal et al, 2014;Benjaafar et al, 2013).In addition, modeling of these supply chains considering of stochasticity and dynamic nature of demand process would provide results applicable to more realistic situations. This paper deals with the inventory lot-sizing problem of a firm under non-stationary stochastic demand with carbon emission constraints.…”

A Joint Optimal Decision on Shipment Size and Carbon Reduction under Direct Shipment and Peddling Distribution Strategies

“…Similarly, Jiang and Klabjan [12] reformulated the Newsvendor model to study joint decision on production quantity and carbon reduction under carbon emission regulations. The current literature such as [12,[18][19][20][21] has only dealt with the gross emissions in spite of the difference in technologies for managing carbon emissions from transportation and warehousing. Carbon emissions from energy use in the operation of logistics are broken down into two types: emissions from freight transport and emissions from storage by McKinnon [22].…”

“…They found a condition on the optimal greening effort to achieve better supply chain performance. Toptal et al [20] extended the EOQ model to study joint decisions on order quantity and carbon reduction investment, and presented the possibility of reducing carbon emissions while reducing the cost. Similarly, Jiang and Klabjan [12] reformulated the Newsvendor model to study joint decision on production quantity and carbon reduction under carbon emission regulations.…”

Carbon Reduction Investments under Direct Shipment Strategy

“…Such research proposes a model for determining an optimal level of carbon emissions when processing a single unit of item (i.e., carbon emission factor). Toptal et al (2014) and Hua et al (2011) modify the EOQ model to consider how much to invest in reducing carbon emissions. Swami and Shah (2013) addressing a supply chain coordination problem with carbon trading costs proposes an optimal sustainability level in a closed form.…”