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ISSN : 2005-0461(Print)
ISSN : 2287-7975(Online)
Journal of Society of Korea Industrial and Systems Engineering Vol.42 No.4 pp.61-68

An Integrated Multi-Product Inventory Model for a Two-Echelon Supply Chain under Cap-and-Trade Mechanism

Dae-Hong Kim
Department of Industrial & Management Engineering, Hansung University
Corresponding Author :


Currently many companies are interested in reduction of the carbon emissions associated with their supply chain activities such as transportation and operations. Operational decisions, such as modifications in order quantities could an effective way in reducing carbon emissions in the supply chain. Cap-and-trade regulation, sometimes called emissions trading, is a market-based tool to limit greenhouse gas emissions. Under cap-and-trade regulation, emission credits are allocated to the firms and the firms trades emissions under cap-and-trade schemes. In this paper, we propose a single-manufacturer single-buyer two-echelon supply chain problem under the cap-and-trade mechanism incorporating the carbon emissions caused by transportation and warehousing activities where a single manufacturer produces a family of items in order to deliver a family of items to a single buyer at a fixed interval of time for effective implementation of Just-In-Time (JIT) Purchasing. An integrated multi-product lot-splitting model of facilitating multiple shipments in small lots between buyer and manufacturer is developed in a JIT Purchasing environment. Also, an iterative heuristic algorithm is developed to derive the common order interval, the number of intervals for each product and the number of shipments between the buyer and the manufacturer during the common interval. A numerical example is given to illustrate the savings in reduction of total cost and carbon emissions by the inventory model incorporating cap-and-trade mechanism compared to the classical inventory model. The proposed inventory model could be useful for the practical solution of two-echelon supply chain inventory problem under cap-and-trade mechanism.

배출권거래제 하에서 2단계 공급사슬에서 다품목의 통합재고모형

한성대학교 산업경영공학과