Integrated production transportation and storage policies with carbon costs

Abstract

Governments adopt carbon policies such as taxation in order achieve carbon reduction targets set by global agreements. In this study, we analyze a two-echelon supply chain model where production and dispatching decisions are made in an integrated way. We allow the use of multi-modes of transportation under carbon taxation. We consider a system with a single retailer and a manufacturer and assume that demand is deterministic and constant. We rst assume that lead time is negligible, which is then extended to a case where lead time is a stochastic random variable. For transportation, we focus on a system where both in-house and outsource transportation options are available. Our objective is to minimize average total cost which is composed of operational costs and carbon tax by determining optimal production interval, number of dispatches, backorder level and number of vehicles to be used. We provide structural results and solution algorithms to select the optimal policy. We also present di erent integration scenarios to discuss the bene ts of integrated supply chains. The proposed methods are applied in a numerical study and the results are explained in detail. Finally, we discuss bene ts of integrating system and introducing carbon tax and show that signi cant carbon reductions can be achieved with manageable increase in cost. It is also concluded that although integration and allowing outsource option provides a decrease in total cost of the system, it can yield to a solution with greater carbon emissions.