Coordination mechanisms in a two-stage green supply chain: analyzing the impact of transportation decisions on environment

In this study, the distributor in charge of freight transport is responsible for replenishing the buyer's inventory level, with the government intervening in the supply chain to reduce greenhouse gas (GHG) emissions. In the proposed model, a periodic review replenishment policy is applied by the buyer, whereby the distributor is responsible for determining the optimal review period. Therefore, a game theory approach is used to show how government intervention influences the replenishment decisions, transportation, and safety factor. Due to the government constraint imposed to control GHG emissions, the distributor has to set a longer review period involving fewer trucks, resulting in his/her decision leading to more shortage costs for the buyer. The results of four numerical examples indicate that the buyer is not given any incentives to cooperate with the distributor due to his/her reduced revenue. Hence, this study proposes two-part tariff (TPT) and cost-sharing (CS) contracts to increase the profitability of both players. Finally, the results show that both coordination mechanisms can effectively coordinate the supply chain, but the TPT contract can also reduce GHG emissions. Furthermore, in all scenarios where the government constraint is implemented, the number of unfilled trucks in each replenishment inventory has been decreased.

Automated summary

This study examines the impact of government intervention on replenishment decisions, transportation, and safety factor in the supply chain. The findings show that government constraints on greenhouse gas emissions result in increased shortage costs for the buyer. To increase profitability, the study proposes two-part tariff and cost-sharing contracts.