Trade-off between service time and carbon emissions for safety stock placement in multi-echelon supply chains

Abstract

With the low-carbon revolution, many firms face the continuous challenge for reducing carbon emissions in their supply chain activities. Built upon the strategic safety stock placement model, in this paper, we model the carbon emissions for each stage of a multi-echelon supply chain as a function of the service time guaranteed by this stage to its immediate downstream stages. We establish that there is a negative correlation between service time and carbon emissions at each stage. Based on this, we develop two models to study the trade-off between service time and carbon emissions for safety stock placement in multi-echelon supply chains by considering carbon cap and carbon tax, respectively. Both of them are solved using iterative piecewise linear approximations. We implement these two models to study how carbon cap, carbon emission cost rate and guaranteed service time affect the optimal safety stock placement using a real chain.