Track: Inventory Control

Abstract

In this paper, a joint economic lot-sizing (JELS) model consisting of a manufacturer and a retailer is formulated. The retailer orders product to the manufacturer and then sell them to end customers. The manufacturer produces product and deliver them to the retailer with equal-sized shipment. A hybrid system made of a green production and a regular production is utilized by the manufacturer to produce product. The green production generates fewer emissions than the regular production, but it requires higher production cost. Three activities in the supply chain generate emissions, which are transportation, production and storage. A carbon tax policy is applied by the regulator to control the emissions. A mathematical inventory model is proposed to determine the optimal values of number of shipments, shipment lot, safety factor and production allocation so that the total cost can be minimized. An iterative procedure is also formulated to solve the model and a numerical example is presented to show the application of the model. The results show that by controlling the production allocation, the emissions can be reduced, thus minimizing the total cost. It is also observed that the changes in the carbon tax and emission parameters give significant impact on the optimal production allocation.