Effect of carbon emission regulations on transport mode selection under stochastic demand (original) (raw)
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Effect of carbon emission regulations on transport mode selection in supply chains
2010
More and more companies are paying attention to their carbon footprint beyond production emissions. In this work we consider a 'carbon-aware' company (either by choice or enforced by regulation) that is reconsidering the transport mode selection decision. Traditionally the trade-off has been between lead time (and corresponding inventory costs) and transportation costs but now emission costs come into the equation. We use a carbon emission measurement methodology based on real-life data and incorporate it into an inventory model. We consider the results for different types of emission regulation (including voluntary targets). We find that even though large emission reductions can be obtained by switching to a different mode, the actual decision depends on the regulation and non-monetary considerations, such as lead time variability.
Stochastic Pricing and Order Model with Transportation Mode Selection for Low-Carbon Retailers
Sustainability, 2016
More and more enterprises have begun to pay attention to their carbon footprint in the supply chain, of which transportation has become the second major source of carbon emissions. This paper aims to study both optimum pricing and order quantities, considering consumer demand and the selection of transportation modes by retailers, in terms of carbon emissions sensitivity and price sensitivity under the conditions of a cap-and-trade policy and uncertain market demand. Firstly, we analyze the effects of transportation mode (including transportation costs and transportation-induced carbon emissions), initial emissions allowances, carbon emissions trading price and consumer sensitivity to carbon emissions on the optimum decisions and profits of retailers. The results demonstrate that when consumers are less sensitive to price, the optimum retail price and the optimum order quantity of products are proportional to the transportation cost and transportation-induced carbon emissions of retailers per unit product, the carbon emissions trading price as well as consumer sensitivity to carbon emissions. However, when consumers are highly sensitive to price, the optimum order quantity of products is inversely proportional to the transportation costs and transportation-induced carbon emissions of retailers per unit product, the carbon emissions trading price and consumer sensitivity to carbon emissions. In addition, the optimum retail price of products is inversely proportional to consumer sensitivity to carbon emissions. We also find that retailers prefer a low-carbon transportation mode when the carbon emissions trading price is high. Meanwhile, the carbon emissions trading price influences the carbon emissions trading volume of retailers. These theoretical findings are further validated by some numerical analysis.
Impact of fuel price and emissions on inventory policies
Applied Mathematical Modelling, 2015
The purpose of this paper is to analyze the impact of changes in fuel prices and the imposition of a carbon tax on emissions from transport on shipment lot sizes and supply chain costs. An analysis is done to show that increases in fuel prices should be dealt with differently than other costs. Further, a function to calculate future fuel prices has been developed. This function has been used to calculate transport cost in the future. The EOQ models have been modified to include increasing transport cost and a carbon tax to demonstrate its impact on various inventory policies. Due to increases in fuel prices, the cost of every subsequent order will also increase, thus resulting in an increase of average order cost for all the shipments in a production cycle. Organizations that have their vendors in relatively close proximity will be at an advantageous position in managing their supply chain costs more effectively in the future. On the other hand, organizations that have invested heavily in global supply chains will need to reexamine their supply chain strategy to overcome cost challenges. This research presents a new challenge for supply chains/ logistics management strategies for organizations with global supply chains.
Switching Transport Modes to Meet Voluntary Carbon Emission Targets
2011
The transport sector is the second largest carbon emissions contributor in Europe and its emissions continue to increase. Many shippers are committing themselves to reducing transport emissions voluntarily, possibly in anticipation of increasing transport prices. In this paper we study a shipper that has outsourced transport and has decided to cap its carbon emissions from outbound logistics for a group of products. Setting an emission constraint for a group of products allows taking advantage of reducing emissions substantially where it is less costly and less where it is more costly. We focus on reducing emissions by switching transport modes within an existing network, since this has a large impact on emissions. In addition, the company sets the sales prices for the products, which influences demand. We develop a solution procedure that uses Lagrange relaxation. Conditions on total logistics cost and unit emissions are derived that determine which transport mode is selected for a product. It is observed that a diminishing rate of return applies in reducing emissions by switching transport modes. In a case study we apply our method to a producer of bulk liquids and find that emissions can be reduced by 10% at only a 0.7% increase in total logistics cost.
Production-Inventory Models considering different Carbon Policies: A review
International Journal of Productivity and Quality Management, 2019
Mitigating carbon emissions in supply chains has become an important issue in the recent era. Recently, companies are looking for solutions to lessen carbon emissions associated with their supply chains mainly due to carbon policies imposed by different regulatory bodies. Apart from regulations, competitive advantage, ISO certification, customer satisfaction also influence organisations to adopt green practices in their supply chains. Production and inventory are two important aspects of supply chains, and they contribute to a significant amount of cost and emissions. Organisations try to optimise their production and inventory related activities with operational adjustments while operating under different carbon policies. Over the last couple of years, authors have incorporated different carbon policies while optimising supply chains, especially production-inventory policies. This paper presents a review of quantitative models on green production-inventory problems considering different carbon policies and ends with suggestions for future research.
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With the increasing awareness of low-carbon environmental protection, consumers prefer to purchase low-carbon products. In this paper, a two-echelon low-carbon supply chain consisting of one manufacturer and one retailer in classic single-period model with emission-sensitive stochastic demand is investigated. Firstly, optimal results for the decentralized and centralized decisions in the basic model are presented respectively. It manifests the effect of double marginalization which shows not only a lower order quantity but also higher unit carbon emission. Then, we are going to discuss the introduction of a buyback and cost-sharing contract, and two main carbon emission regulations in the decentralized model. Finally, compared with the basic model, numerical examples are studied on the optimal solutions to the total profit for the supply chain, order quantity, and unit/total carbon emission as the demand sensitivity to carbon emission/green investment coefficient/demand variance varies respectively before reaching several significant conclusions.
Technology Choice and Capacity Portfolios under Emissions Regulation
We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's technology choice and capacity decisions. We show that emissions price uncertainty under cap-and-trade results in greater expected profit than a constant emissions price under an emissions tax, which contradicts popular arguments that the greater uncertainty under cap-and-trade will erode value. We further show that two operational drivers underlie this result: i) the firm's option not to operate, which effectively right-censors the uncertain emissions price; and ii) dispatch flexibility, which is the firm's ability to first deploy its most profitable capacity given the realized emissions price. In addition to these managerial insights, we also explore policy implications: the effect of emissions price level, and the effect of investment and production subsidies.
Logistics
Background: The latest global agreement on net-zero emissions encourages new studies on production inventory optimization that promote carbon emissions reduction without harming a company’s profit performance, particularly because certain carbon-pricing regulations bind manufacturing companies. Methods: This study aims to develop a production inventory model that considers direct and indirect emissions in three emission scopes. It incorporates emissions from production, material handling, transportation, and waste disposal for further treatment under a carbon cap-and-trade regulation. With the help of Maple software, a convex total cost function was solved. Results: The results show that the optimum production quantity depends on the values of demand, setup cost, holding cost, fixed cost per delivery, fixed cost for waste disposal, and other parameters related to carbon prices. This study also found that the total cost was highly dependent on the values of the carbon cap, carbon pri...
Journal of Cleaner Production, 2015
Firms worldwide are taking major initiatives to reduce the carbon footprint of their supply chains in response to the growing governmental and consumer pressures. In real life, these supply chains face stochastic and non-stationary demand but most of the studies on inventory lot-sizing problem with emission concerns consider deterministic demand. In this paper, we study the inventory lot-sizing problem under non-stationary stochastic demand condition with emission and cycle service level constraints considering carbon cap-and-trade regulatory mechanism. Using a mixed integer linear programming model, this paper aims to investigate the effects of emission parameters, product-and system-related features on the supply chain performance through extensive computational experiments to cover general type business settings and not a specific scenario. Results show that cycle service level and demand coefficient of variation have significant impacts on total cost and emission irrespective of level of demand variability while the impact of product's demand pattern is significant only at lower level of demand variability. Finally, results also show that increasing value of carbon price reduces total cost, total emission and total inventory and the scope of emission reduction by increasing carbon price is greater at higher levels of cycle service level and demand coefficient of variation.The analysis of results helps supply chain managers to take right decision in different demand and service level situations.
A hybrid carbon policy inventory model with emission source-based green investments
OPSEARCH, 2019
The present study analyzes a production-inventory system with hybrid carbon regulation policy. This hybrid carbon policy is a combination of carbon tax and cap-andtrade policies. It considers a single item that can be produced in different qualities. Production cost, setup cost, amount of emissions and the demand rate depend on the quality. The demand rate for each quality is price sensitive. Emissions occur from three sources-setup, production process and stock holding. The firm can invest on green technologies in each emission source separately to reduce emissions. This model considers profit maximization policy. The managerial problem is to select the profit-maximizing quality for production, and to find the optimum values of the production run time, green investments and the selling price. An algorithm is provided to solve the model. The model is illustrated by a numerical example. Sensitivity analysis is also performed.