An optimization model of supplier selection and order allocation with transportation mode alternatives under carbon cap and trade policy

This research develops an optimization model of supplier selection and order allocation with transportation mode alternatives under carbon cap and trade policy. The objective function of the model is to maximize the manufacturer's total profit. Total revenue comes from the selling of both good items and imperfect items. Total cost in this research consists of purchase cost, transportation costs from supplier to manufacturer and from manufacturer to retailer, transaction cost, holding cost, inspection cost and carbon emission cost. Transaction cost is applied for each selected supplier in each period without considering the type and quantity of the item. This research considers a supply chain with multiproducts, multiperiods, multisuppliers and multiretailers. We assumed that the manufacturer inspects all the products come from the suppliers and some of the products are defective. Those defect items are sold in a lower price at a secondary market. This research has a contribution in the inclusions of carbon emission and defect product in the model. Hence, the model is in line with the sustainability issue and closer to the real condition in terms of imperfect manufacturing. A mixed integer linier programming (MILP) model is developed in this research, and the model was solved using Lingo 15.0 software with branch and bound method. The result of sensitivity analysis shows that the objective function is sensitive to the changes of demand, selling price of good item, transportation cost, purchasing cost and holding cost. While the decision variables of order allocation and the number of transportation mode are sensitive to the changes of demand, transportation cost and purchasing cost.