Manufacturers'/remanufacturers' inventory control strategies with cap-and-trade regulation

The increased awareness of the need for protecting the environment and policies relating to carbon emissions has resulted in manufacturers viewing carbon emissions as one of the most critical elements affecting production decisions. As a gradually maturing production form, remanufacturing plays an increasingly pivotal role in economy, environment and society. This paper extends the classical EOQ model, considers carbon emissions in (re)manufacturing activities and product transportation and builds an inventory cost model with carbon constraints. The optimal batch and quantity of manufacturing/remanufacturing and the frequency of cyclic remanufacturing are derived with and without carbon constraints through analysis of the model. At the same time, this paper investigates the impact of carbon emissions quota and its trade prices, remanufacturing ratio and different means of transportation on manufacturers' decisions. The examples show that the batch size of manufacturing and remanufacturing is identical within the period with carbon constraints; the batch size of manufacturing without carbon constraints is less than remanufacturing with carbon constraints; the results are just the opposite in terms of the batch of remanufacturing and the number of remanufactured products. In other words, the (re)manufacturers' total cost and carbon emissions with carbon constraints are lower than those without carbon constraints. Starting from the real-life circumstances, this article considers manufacturers' total cost with imperfect remanufacturing, varied means of transportation, carbon quota and its trade, which have not been taken into account previously, the manufacturer's optimal decisions are derived. Meanwhile, the analysis of carbon quota can provide some insights for governments and enterprises in terms of carbon emissions rights allocation.