Optimizing the Replenishment Cycle and Selling Price for an Inventory Model Under Carbon Emission Regulation and Partially Permissible Delay in Payment

• Published in: Process integration and optimization for sustainability 2021-09, Vol.5 (3), p.577-597
• Main Author: Sepehri, Arash
• Format: Article
• Language: English
• Subjects: Carbon; Credit policy; Customer satisfaction; Customers; Delay; Economic models; Economics and Management; Emission inventories; Emissions; Emissions trading; Energy Policy; Engineering; Environmental regulations; Environmental tax; Expiration; Food industry; Industrial and Production Engineering; Industrial Chemistry/Chemical Engineering; Inventory; Inventory management; Investigations; Literature reviews; Mathematical models; Optimization; Original Research Paper; Payments; Prepayments; Replenishment; Retail stores; Risk; Sensitivity analysis; Suppliers; Supply chain sustainability; Supply chains; Sustainability; Sustainable Development; Tax regulations; Taxation; Waste Management/Waste Technology
• ISSN: 2509-4238; 2509-4246
• DOI: 10.1007/s41660-021-00164-9

Utilizing carbon emission regulations helps firms to develop a sustainable supply chain. In a two-echelon supplier-retailer-customer relationship, offering a trade credit period can manage the inventory level. However, there will be a risk of settling the accounts during the trade credit period. Therefore, a portion of purchasing cost is charged as prepayment to mitigate some risk of payment delays. Moreover, obtaining the optimal price for perishable items with expiration dates has become a challenge because of their perishing process. Despite the importance of these challenges, very few papers have concentrated on sustainability considerations for perishable items. Also, the contribution of these issues to the credit risk buyers has never been studied. To address the mentioned gap in the literature, this elaboration investigates a supplier-retailer-customer economic order quantity model for perishable items when two levels of partial delay in payment are permissible and a carbon cap and tax policy is regulated to mitigate the impact of emissions on the two-echelon supply chain. The developed model is applicable in food industries to outline the challenges associated with deterioration, payments, and carbon emissions. This paper determines the optimal replenishment and selling price taking into account the following: (a) perishable items have their specific expiration dates, (b) a prepayment is charged from the buyer when offering a permissible delay in payment, (c) a carbon cap and tax policy is applied to approach the sustainability. Necessary and sufficient conditions of optimality are provided as the solution approach. A case study is presented, and numerical examples and sensitivity analyses are illustrated for validation. Finally, managerial applications are exposed, and results are concluded using future research insights.