Supply chain models with greenhouse gases emissions, energy usage and different coordination decisions

Guaranteeing environmentally conscious supply chain operations is closely linked to an organization's sustainability and success. This paper presents two models that consider energy used for production along with the greenhouse gases (GHG) emissions from production and transportation operations in a single-vendor (manufacturer) single-buyer system under a multi-level emission-taxing scheme. The first model considers a classical coordination policy, while the second considers a vendor-managed inventory with consignment stock (VMI-CS) agreement policy. Numerical examples are provided and the two models are compared to outline managerial implications and insights. Energy usage has been found to be the main cost component for both models, thus reducing energy usage is a priority. Key results show that the VMI-CS model, over the different scenarios considered, allows the system to operate more economically.