The effect of GHG emissions on production, inventory replenishment and routing decisions in a single vendor-multiple buyers supply chain

This paper studies a supply chain in which one vendor supplies one item type to multiple buyers. The product is transferred from vendor to buyers according to a collection of delivery routes that specifies the number of routes, the buyers served in each route, and the order with which the buyers are served in each route. A mathematical model is developed to evaluate the long-run expected total cost per time unit of the supply chain. The model includes the transportation cost and the cost for emissions of Greenhouse Gases (GHGs) arising from the production and transportation processes. The objective is to find the production rate of vendor, the order quantity and the reorder point of each buyer, the number of shipments from vendor to buyers, and the collection of delivery routes that minimize the long-run expected total cost per time unit. The properties of the cost function are studied, and a two-phase, heuristic algorithm is proposed to approach the minimization problem. Numerical experiments are finally carried out to investigate model sensitivity in respect to input parameters. Some insights into how production, inventory replenishment, and routing decisions should be adapted in the presence of different legislation schemes concerning GHG emissions are given.