Optimal Inventory and Pricing Strategies for Integrated Supply Chains of Growing Items Under Carbon Emission Policies
Abstract
:1. Introduction
2. Contextual Analysis of the Literature
Research Gap
3. Nomenclature and Assumptions
3.1. Nomenclature
3.2. Assumptions
- The supplier’s inventory techniques do not involve stock-outs.
- Carbon emissions are accounted for in all inventory activities, resulting in higher expenses due to various carbon regulations enforced by authorities.
- The customer demand structure, , is a nonlinear function of both selling price per weight unit and storage time, stated in a separable and additive manner. The demand function is represented as , where , , and . The highest selling price possible for each weight unit is taken to be .
- The credit period enables retailers to collect revenue from sales while earning interest on their capital without paying any interest expenses. This structure gives them more financial freedom and improves their overall profitability.
4. Mathematical Model
4.1. Supplier’s Profit Components
- Purchasing Cost: Since the supplier’s purchase cost is per unit weight of a newborn item, the total purchase cost is given by
- ii.
- Ordering Cost: The supplier’s fixed ordering cost is given by
- iii.
- Feeding cost: Since the supplier feeds and nurtures the newborn items for the time period to , the total feeding cost is
- iv.
- Opportunity Cost: When a supplier offers a retailer a credit period, they face an opportunity cost in the form of lost interest income, that is, the supplier misses out on the opportunity to invest that money elsewhere, which is given by
- v.
- Sales Revenue: Since the supplier earns per unit weight of a grown item, the total sales revenue is
4.2. Retailer’s Profit Components
- Purchasing Cost: Since the retailer’s purchase cost is per unit weight of a grown item, the total purchase cost is given by
- ii.
- Ordering Cost: The retailer’s fixed ordering cost is given by
- iii.
- Transportation Cost: Since the retailer has to transport the items from the supplier at the cost of per unit weight, the total transportation cost is given by
- iv.
- Inspection Cost: The retailer starts inspecting the items as the order is received from the supplier at the rate of per unit weight; hence, the total inspection cost is
- v.
- Holding Cost: The retailer holds the inventory at the rate of per unit weight, until inspection is completed, and items are sold to the customers; hence, the holding cost is
- vi.
- Carbon Emissions Cost: The retailer bears the cost of producing emissions through various activities involving purchasing (), ordering (), holding (), and transporting () the items from the supplier. Hence, the total carbon emissions cost will be
- vii.
- Sales Revenue: The retailer makes revenue by selling good quality items at per unit item and imperfect quality items at a discounted price of per unit item. Hence, the total sales revenue is
4.3. Trade-Credit Policy
- .
- Case 1:
- Case 2:
- Case 3:
- Case 4:
- Case 5:
- Case 6:
4.4. Implementing Carbon Emissions Policies
- A carbon tax policy imposes additional expenditures on the SC by imposing taxes based on the carbon emissions produced. By representing the problem numerically, where represents the tax amount levied for each unit of carbon released per unit of time, companies can better understand the financial implications and develop strategies to mitigate these costs while promoting sustainable practices within their operations. Hence,
- ii.
- A carbon cap policy imposes critical restrictions on SCs by limiting total carbon emissions. The produced emissions throughout the SC must stay below this limit. Using as the maximum permissible carbon emissions per unit of time, may be represented analytically as
- iii.
- A carbon cap-and-trade policy effectively allows companies to trade carbon credits, encouraging businesses to innovate and find ways to lower their emissions. Companies that reduce their emissions below the cap can sell their extra credits to other businesses failing to meet their targets. This allows additional money because these credits may be sold at current market pricing. If a company exceeds its emissions limit, it must purchase more credits from the market to offset the excess emissions. By defining as the emissions cap per unit time and as the market price for selling carbon emissions, may be mathematically expressed as
5. Solution Procedure
- Differentiate partially with respect to and for any fixed , and then put it equal to to optimize the variables to maximize .
- However, it is impossible to analytically find the values of and . Therefore, the values are calculated in the following section through a numerical example.
- The second optimality condition to demonstrate the concavity of in each case is given by and .
6. Numerical Example
7. Sensitivity Investigation
Managerial Implications
- Figure 10 shows that, as changes, the relationship between selling price and cycle length with becomes nonlinear. Increasing the selling price usually raises , but the impact reduces as prices rise, demonstrating an optimal pricing range. Similarly, while a longer cycle length initially increases , it eventually decreases , implying that there is an optimal shorter cycle length for maximizing profits.
- Figure 11 shows that as increases from −40% to 40%, increasing the selling price usually raises , but the impact reduces as prices rise. Similarly, while a longer cycle length initially increases , it eventually decreases , implying that there is an optimal shorter cycle length for maximizing profits.
- Figure 12 shows that as increases from −40% to 40%, increasing the selling price decreases , but the impact reduces as prices reduce. Similarly, while a longer cycle length initially decreases , it eventually increases , implying that there is an optimal shorter cycle length for maximizing profits.
- Figure 13 shows that as increases from −40% to 40%, increasing the selling price decreases , while decreasing the cycle length reduces .
- Figure 17 shows that both the selling price and cycle length have a negative impact on as increases, which implies that a decrease in the selling price and cycle length leads to an increase in .
8. Conclusions
Future Implication
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
Appendix A
- Case 1:
- Case 2:
- Case 3:
- Case 4:
- Case 5:
- Case 6:
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Authors | Imperfect Quality Items | Growing Items | Trade-Credit Policy | Demand | Carbon Emissions |
---|---|---|---|---|---|
Khalilpourazari et al. [4] | ✓ | Constant | |||
Sebatjane and Adetunji [32] | ✓ | ✓ | Constant | ||
Pourmohammad et al. [7] | ✓ | Constant | |||
Mittal and Sharma [9] | ✓ | ✓ | Constant | ||
Sarkar and Bhuniya [33] | ✓ | Variable | |||
Sharma and Mittal [10] | ✓ | ✓ | ✓ | Constant | |
Alfares and Afzal [8] | ✓ | ✓ | Constant | ||
Sebatjane and Adetunji [14] | ✓ | Price and freshness | |||
Mahata et al. [18] | ✓ | Constant | |||
Garai and Sarkar [34] | Fuzzy | ||||
Moon et al. [35] | ✓ | Variable | ✓ | ||
Mahata et al. [17] | ✓ | Price sensitive | |||
Mahapatra et al. [36] | ✓ | Selling and advertisement | ✓ | ||
Hovelaque and Bironneau [25] | Carbon emissions | ✓ | |||
Lin et al. [26] | ✓ | Constant | ✓ | ||
Sarkar et al. [37] | Price | ✓ | |||
Present study | ✓ | ✓ | ✓ | Price and time-dependent | ✓ |
Symbol | Description |
---|---|
Parameters | |
Per unit supplier’s selling cost ($/kg) | |
Retailer’s fixed ordering cost ($) | |
Retailer’s fixed transportation cost ($) | |
Per unit retailer’s inspection cost ($) | |
Per unit retailer’s holding cost ($/kg/year) | |
Per unit selling price of defective items ($) | |
Fraction of defective items | |
Scale parameter of the time-sensitive demand where ∈ (−∞,∞) (kg/day) | |
Index of power demand pattern in customers’ demand where > 0 | |
Highest potential customers’ demand rate without impacts of price and time (kg/day) | |
Price-sensitive parameter in customer’s demand (> 0) | |
Price index based on customer’s demand (≥ 1) | |
Highest possible selling price of each growing item ($/kg) | |
Supplier’s inventory cycle length (years) | |
Screening period (years) | |
Weight of each newborn growing item initially (kg) | |
Weight of each newborn growing item at any time (kg) | |
Supplier’s fixed ordering cost ($) | |
Per unit supplier’s purchasing cost ($/kg) | |
Per unit supplier’s opportunity cost ($/kg) | |
Per unit feeding cost of newborn items ($/kg) | |
Retailer’s trade-credit period offered by the supplier (years) | |
Customer’s trade-credit period offered by the retailer (years) | |
Retailer’s earned interest (%/year) | |
Retailer’s paid interest (%/year) | |
Constant of integration (>0) | |
Asymptotic weight of each growing item when the feeding period tends to infinity (>0) (kg) | |
Growth rate (>0) | |
Carbon emissions from purchasing growing items (ton/kg/year) | |
Carbon emissions from ordering growing items (ton/kg/year) | |
Carbon emissions from holding growing items (ton/kg/year) | |
Carbon emissions from transporting growing items (ton/kg/year) | |
Cap for carbon emissions (ton/kg/year) | |
Tax on carbon emissions () | |
Market price of carbon emissions () | |
Decision Variables | |
Number of newborn items purchased by the supplier (integer) | |
Selling price of good quality items ($/kg) | |
Retailer’s inventory cycle length (years) |
Cases | ($/kg) | (years) | ($/cycle) | ($/cycle) | ($/cycle) |
---|---|---|---|---|---|
1 | 66 | 3.6 | 9475.36 | 2865.67 | 3428.06 |
2 | 47 | 3.03 | 8168.02 | 6285.25 | 4770.06 |
3 | 46.5 | 2.21 | 8352.2 | 7885.03 | 4689.39 |
4 | 46 | 2.8 | 6226.67 | 6280.85 | 4466.97 |
5 | 47 | 2.9 | 6329.27 | 6367.68 | 4378.26 |
6 | 46 | 2.85 | 5715.67 | 6587.15 | 4316.76 |
Policy | ) | ) | /cycle) | |
---|---|---|---|---|
Carbon tax | 1.25 | 0 | 0 | 4732.28 |
Carbon cap | 0 | 2000 | 0 | 4921.15 |
Carbon cap and trade | 0 | 2000 | 2.5 | 6193.58 |
Policy | Case 1 | Case 2 | Case 3 | Case 4 | Case 5 | Case 6 |
---|---|---|---|---|---|---|
Carbon tax | 3406.99 | 4732.28 | 4656.68 | 4429.83 | 4341.35 | 4279.3 |
Carbon cap | 3512.35 | 4921.15 | 4820.29 | 4615.54 | 4525.9 | 4466.71 |
Carbon cap and trade | 4690.52 | 6193.58 | 5492.71 | 6029.83 | 5880.94 | 5846.27 |
Parameters | % of Change | |||
---|---|---|---|---|
−40 | 47.2366 | 3.04211 | 6034.30 | |
−20 | 47.1804 | 3.04149 | 6032.24 | |
+20 | 47.059 | 3.03654 | 6030.03 | |
+40 | 46.9939 | 3.03472 | 6029.01 | |
−40 | 46.4436 | 3.07327 | 6009.49 | |
−20 | 46.7709 | 3.04818 | 6103.38 | |
+20 | 47.3542 | 3.01862 | 6281.29 | |
+40 | 47.6131 | 2.98854 | 6380.35 | |
−40 | 47.1967 | 3.06737 | 6187.41 | |
−20 | 47.1371 | 3.05138 | 6188.05 | |
+20 | 47.1018 | 3.02744 | 6190.86 | |
+40 | 47.0878 | 3.0188 | 6192.02 | |
−40 | 47.0408 | 3.08359 | 6244.86 | |
−20 | 47.0788 | 3.06071 | 6216.89 | |
+20 | 47.1553 | 3.05991 | 6136.41 | |
+40 | 47.1938 | 2.9952 | 6135.44 | |
−40 | 47.1181 | 3.03826 | 6189.61 | |
−20 | 47.1181 | 3.0383 | 6189.47 | |
20 | 47.1182 | 3.0384 | 6189.25 | |
40 | 47.1182 | 3.0385 | 6189.11 | |
−40 | 47.0338 | 3.03662 | 6254.83 | |
−20 | 47.0760 | 3.03749 | 6222.06 | |
+20 | 47.1604 | 3.03923 | 6156.70 | |
+40 | 47.2025 | 3.0401 | 6124.10 | |
−40 | 47.1114 | 3.03822 | 6194.58 | |
−20 | 47.1148 | 3.03829 | 6191.97 | |
+20 | 47.1215 | 3.03843 | 6186.74 | |
+40 | 47.1249 | 3.0385 | 6184.12 | |
−40 | 47.3184 | 3.18697 | 5853.21 | |
−20 | 47.2115 | 3.10584 | 6023.54 | |
+20 | 47.0356 | 2.98132 | 6351.47 | |
+40 | 46.9618 | 2.93247 | 6510.53 |
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Sharma, M.; Mittal, M.; Agarwal, D.; Dhanda, A.; Guchhait, R.; Sarkar, M. Optimal Inventory and Pricing Strategies for Integrated Supply Chains of Growing Items Under Carbon Emission Policies. Mathematics 2025, 13, 1567. https://doi.org/10.3390/math13101567
Sharma M, Mittal M, Agarwal D, Dhanda A, Guchhait R, Sarkar M. Optimal Inventory and Pricing Strategies for Integrated Supply Chains of Growing Items Under Carbon Emission Policies. Mathematics. 2025; 13(10):1567. https://doi.org/10.3390/math13101567
Chicago/Turabian StyleSharma, Mehak, Mandeep Mittal, Divya Agarwal, Anil Dhanda, Rekha Guchhait, and Mitali Sarkar. 2025. "Optimal Inventory and Pricing Strategies for Integrated Supply Chains of Growing Items Under Carbon Emission Policies" Mathematics 13, no. 10: 1567. https://doi.org/10.3390/math13101567
APA StyleSharma, M., Mittal, M., Agarwal, D., Dhanda, A., Guchhait, R., & Sarkar, M. (2025). Optimal Inventory and Pricing Strategies for Integrated Supply Chains of Growing Items Under Carbon Emission Policies. Mathematics, 13(10), 1567. https://doi.org/10.3390/math13101567