Sustainability in Material Purchasing: A Multi-Objective Economic Order Quantity Model under Carbon Trading

Abstract

Sustainability in material purchasing is a growing area of research. Goods purchasing decisions strongly affect transportation path flows, vehicle consolidation, inventory levels, and related obsolescence costs. These choices have an economic impact on the supply chain, in terms of different logistic costs, and an environmental impact, in terms of the carbon emissions produced during goods transportation, storage and final recovery. In this paper, we initially analyze and compare the environmental economic policies established by the International Governments in relation to the carbon trading systems adopted. Then, we overcome a traditional single objective formulation, by developing a bi-objective lot-sizing model in which costs and emissions are kept separated and analyzed by using a Pareto frontier subject to a Cap and Trade mitigation policy. The model is useful in practice to support managers in understanding the Pareto frontier shape linked to a specific purchasing problem, defining the cost-optimal and emission-optimal solutions and identifying a sustainable quantity to purchase when a Cap and Trade mitigation policy is present. We further analyze the model behavior according to variation in market carbon price and we finally analytically demonstrate that today carbon prices are still far too low to motivate managers towards sustainable purchasing choices: there is still a gap of about 79%.

Sustainable dynamic lot sizing models for cold products under carbon cap policy

“… √ Four policies Mohammed et al (2017) Multi echelon √ √ √ √ Simplified Four policies Ghosh et al (2017) SV-SB √ √ √ None Carbon cap Li, Su, and Ma (2017) Two echelon √ √ √ Simplified Carbon tax, Cap & trade Lee et al (2017) Single echelon √ √ √ Fixed + Var. √ Emission cost Battini et al (2018) Single echelon √ √ √ Fixed + Var. √ Cap & trade Shuang et al (2019) Multi echelon √ √ √ √ Fixed + Var.…”

“…Several authors considered different demand patterns when addressing sustainable lot sizing problems for non-perishable and cold items such as deterministic ( Battini et al, 2018 , Lee et al, 2017 ), dynamic or time varying ( Absi et al, 2013 , Shuang et al, 2019 ), and stochastic ( Mohammed et al, 2017 , Muriana, 2016 ). However, the dynamic or stochastic demand patterns are more practical as they better capture real-life dynamics of the demand for many products such as the ones under study here.…”

The Optimal Emission Decisions of Sustainable Production with Innovative Baseline Credit Regulations

“…Finally, it is also shown how the impact of customers' low-carbon preference affects the optimal pricing and emission reduction amount. The authors of [27] handle material purchasing in terms of sustainability. Then, they develop a bi-objective EOQ model of transportation and lot-sizing when seeking a Pareto frontier with a CAT mitigation policy.…”

Impact of Logistic Processes on Economic Order Quantity with Quantity Discount: An Optimization Approach

“…There are, of course, many possible answers to this question, some possible models and approaches are discussed in Table 1. [4]    Sremac et al [5]   Nobil et al [6]   Tripathi [7]    Battini et al [8]     Wang et al [9]     Godicaud et al [10]    Pereira et al [11]     Rezaei [12]  Zhou et al [13]   Shekarian et al [14]     Widyadana et al [15]    Combes [16]    Taleizadeh et al [17]   Taleizadeh et al [18]   Nia et al [19]       Taleizadeh et al [20]   Cardenas et al [21]      Kazemi et al [22]   San-Jose [23]   Samal [24]    …”