Sustainable supply chain coordination with consumer green awareness

Abstract

The recent aggravation of global warming have highlighted the imperative of mitigating carbon emission. Since the manufacturing industry is a major emission source, carbon management in manufacturing is crucial to emission abatement. To help control carbon emission in manufacturing companies, governments have promulgated different policies. Moreover, growing green awareness among consumers has tilted market preferences towards greener products, underscoring considerable profit potential brought by development of product sustainability. The external regulatory pressure and the internal market motivation have stimulated manufacturing companies to control carbon emission actively for improvement of product sustainability. Carbon emission exists in every stage of a supply chain, from acquisition of raw materials to disposal and recycling of end products. Therefore, it is imperative to involve all major supply chain parties in carbon abatement. Proper coordination between the manufacturer and other supply chain parties can help all parties achieve better sustainability and profitability. To this end, this dissertation proposes four models to study the sustainable supply chain coordination in production planning, with the consideration of consumer green awareness and other carbon management constraints. The first two models investigate the influence of supply chain coordination on the lot sizing decision of the manufacturer in the make-to-order production system. Particularly, the first model conducts the study of coordination between a manufacturer and its internal supplier in their lot sizing and sustainability decisions. It discusses the influence of carbon cap policy and also the consumer green awareness with analytical solutions. It is found that the carbon cap policy may restrict the company profitability and that a high consumer green sensitivity can improve the profitability of green products. In the second model, the coordination between a manufacturer and its retailer in the make-to-order production system is discussed. It considers the influence of price variation and the consumer green awareness on the product demand, and two contracts are applied to help the manufacturer and retailer achieve better coordination. To further explore the relationship among different supply chain parties, the dissertation examines the coordination among multiple supply chain parties by applying the newsvendor model for order quantity decision in the third and fourth models. The third model of this dissertation studies the coordination for one supplier and one manufacturer that embark on sustainability development under make-to-order production, as well as a retailer determines the order quantity based on consumer demand. In the fourth model, a study for the coordination among two competitive manufacturers and one retailer is conducted, with the application of two low-carbon strategies to the supply chain. It shows the involvement of multiple supply chain parties in sustainability development can help all parties achieve better profitability. In summary, this dissertation studies the production and sustainability decisions in the manufacturer and other coordinated supply chain parties with consumer green awareness and regulations. Numerical case studies and sensitivity analyses are conducted to validate the proposed models and provide managerial insights for supply chain parties to achieve better profitability with sustainability development.