A Vendor-Managed Inventory Model for Imperfect Production Process Using Sustainability Investment and Energy Consumption Under Different Carbon Policies

This study examines the impacts of sustainability investment and carbon policies in a two-level supply chain for a single product under classical and vendor-managed inventory schemes. Further, we classify the effects of carbon taxation, cap and trade, and limited carbon emission policies to reduce greenhouse gas emissions. Although the fundamental purpose of cap and trade is to minimize the carbon emission, a well-structured emission trading system can also provide considerable environmental, economic, and social advantages. The energy consumption is classified by the production and reworking process. The proposed model determines the optimal order quantity under various carbon emission rules. The sustainability investment is a financial activity that deals with projects or areas focused on environmental and natural resource protection, as well as the development of alternative energy sources. It also desires to reduce the use of fossil fuels and carbon emission. The results show that the total cost is less in limited carbon emission policies than carbon tax and cap and trade policies. Moreover, the total cost is less in vendor-managed inventory scheme compared to the classical method. The results also indicate the significance of the present models to reduce carbon emission using sustainability investments