Trade-offs between environmental and economic performance in production and inventory-routing problems

The integration of operational decisions of different supply chain functions is an important success factor in minimizing their total costs. Traditionally, supply chain optimization has merely concentrated on costs or the economic aspects of sustainability, neglecting its environmental and social aspects. However, with the growing concern towards green operations, the impact of short term decisions on the reduction of carbon emissions can no longer be overlooked. In this paper, we aim to compare the effect of operational decisions not only on costs but also on emissions, and we reassess some well-known logistic optimization problems under new objectives. We study two integrated systems dealing with production, inventory, and routing decisions, in which a commodity produced at the plant is shipped to the customers over a finite time horizon. These two problems are known as the production-routing and the inventory-routing problems. We define and measure several metrics under different scenarios, namely by minimizing total costs, routing costs only, or minimizing emissions. Each solution is evaluated under all three objective functions, and their costs and business performance indicators are then compared. We provide elaborated sensitivity analyses allowing us to gain useful managerial insights on the costs and emissions in integrated supply chains, besides important insights on the cost of being environmentally friendly.