BUS606: Operations and Supply Chain Management

People's growing concern about whether or not the commodities they purchase are environmentally friendly and energy saving has gradually exerted an influence on consumer purchasing behavior, leading to a boom in green supply chain developments, which covers green purchases, manufacturing, green consumption, recycling, green logistics, etc. Porter and Van der Linde provided an analysis of various theories about the supply chain, arguing that the greening of companies will be an integrative process that will increase their competitive advantage. Based on a compilation of state-of-the-art green supply chain literature, Srivastava proposed that its main focuses are green operations, green design, reverse logistics, network design, green manufacture, re-manufacture, and waste management. Wang et al. adopted the company site selection issue as the strategic planning theme, using the multi-objective optimization model to solve the problem of balancing cost and protecting the environment. They concluded that the higher the supply chain network capacity, the lower the carbon emissions and cost. Green et al. explored the impact of the implementation of the green supply chain on the performance of the manufacturing sector in the United States. Adoption of the green supply chain has had a significantly positive impact on environmental, operational, and organizational performance.

Furthermore, the manufacturers and stakeholder have raised their efforts towards implemented carbon management practices due to pressure on carbon disclosure information. According to Herold, companies not only increased the implemented internal and external carbon disclosure management practices but have also implemented internal carbon disclosure measurement. Tognetti explored the impact of carbon emissions on the entire supply chain of the automobile industry in Germany and designed a green supply chain optimization mathematical model to find solutions. Provided that the costs do not increase, the carbon emissions can be reduced by 30%. Through investigation of the relationship between carbon prices and fuel prices, these researchers found that when priced at US$30–40 per ton, carbon emission reduction is significant, while a 30% reduction in fuel cost can be balanced by increasing the carbon price to US$30 per ton. Companies that have implemented the sustainable green concept have been shown to have a better operational and organizational performance. Therefore, this trend is not only environmentally friendly but will also enhance enterprise competitiveness through supply chain network integration.

In addition, it is well known that high-tech products (computers, mobile phones, etc.) which have a high heavy metal content, without proper disposal, will result in serious environmental damage. Thus, reverse logistics in the supply chain plays a protective role on the environment by ensuring the recycling of such products. Through reverse transportation, these items can be reused in the supply chain, leading to a more comprehensive supply chain under forward and reverse transportation scenarios. Wei et al. proposed an inventory control model of recycling and a re-manufacturing process with uncertain needs. The research was established based on a limited plan scope – the manufacturing process integration and entry into the product recycling process. Mitra established a two-order inventory closed-loop supply chain system, including both certain and random factors to analyze the following questions: 1. Why are the costs of the closed-loop supply chain higher compared to the traditional supply chain? 2. Will the total costs be reduced if the high recycling rate is converted into low demand? 3. What are the relationships among expected costs, demand, and recycling? In addition, the supply chain of the mixed integral linear planning implements reverses circulation design and planning by simultaneously taking into account production, distribution, and reverse logistics activities. Zikopoulos and Tagaras assumed a reverse supply chain target function with a negative collection station, the parameters of which include the possibility of recycling sequence, assumptive needs, and recycling quality.

Generally, the current forms of transportation cannot yet achieve zero-pollutant emissions. The transportation industry ranks the highest in the supply chain in terms of the air pollutant volume produced each year other than by manufacturing plants under specific situations. In response, a greater number of companies have chosen to hire third-party specialists to handle logistical distribution in the supply chain. This has been shown not only to reduce transportation costs but also to improve service and operational efficiency. It can also allow for the possibility of reverse logistics, thus achieving the concept of overall logistical continuity. Hence, the use of these specialists in distribution is now an essential part of sustainable logistics.

Third-party logistics utilize end-point distribution models in the supply chain to increase energy conservation. For example, the supply chain for the distribution of the automobile industry's repair parts is divided into three levels: the suppliers, the distribution center (warehouse), and the distribution bases. In the first group included foreign and upstream suppliers as well as supply wholesalers. The supply wholesaler is mainly responsible for stockpiling the goods of upstream suppliers. Then, based on various consumer needs, purchase orders and goods are distributed. The supply manufacturer's major customer is the automobile parts distribution center (warehouse), which transports parts to automobile manufacturing plants. Since the automobile manufacturing plant is a separate supply chain, it will not be discussed here. Various parts are stored at the distribution center (warehouse), which are distributed by third-party logistical specialists based on the needs of the downstream distribution bases.

After the goods arrive at their destination, the specialists must determine how to plan the delivery trucks efficiently as return vehicle utilization, which remains a crucial aspect of the green supply chain. It is indeed challenging to use return vehicles for reverse logistics or for the transportation of new goods. A typical route of the supply chain logistics network is shown in Figure 1 (the yellow arrow represents the return trip). After the distribution of goods by a third-party logistics specialist, the return vehicle heads to the original warehouse. However, if no goods are loaded on the return trip, it is a waste. Hence, in order to ensure a better efficiency of the supply chain, it is important to determine how best to strengthen information circulation in the supply chain and enable the third-party logistic specialists to utilize effectively the return vehicles for goods distribution.

Figure 1. Diagram of the addition of return vehicles in a typical logistics supply chain.

Therefore, in this study, we hypothesized that better utilization of returning vehicles of the distribution process in the logistics network holds significant importance. How to utilize return vehicles to most efficiently load goods remains a difficult real-world NP problem, which leaves much room for testing and research. However, if new goods could be loaded at the bases at the same time as when these vehicles deliver goods there, this would maximize vehicle efficiency. In addition, goods would be safely packaged using green materials. Today's automobile repair parts (sheet metal parts) must be well packaged to ensure that they are delivered safely and to facilitate transportation convenience. It must be noted that this type of packaging material can be recycled and reused. According to the data of the company, this type of packaging material can be directly reused three to four times. Thus, the reverse logistics of recycling and delivery of packaging materials are vital in the supply chain.

In addition, due to peoples' dependence on automobiles, a driver needs to know how long it will take for his or her car to be repaired after sending it to the garage. Thus, it is essential for the automobile repair parts industry to achieve high service standards for efficiency. In fact, consumers are willing to pay the high inventory costs of stocking large quantities of parts at the garage in exchange for the convenience of a short wait time. However, since it is impossible for small warehouses to store a wide variety of automobile parts, garages stock parts that are most often used in typical repairs. Rarer parts must be ordered and sent before repairs can be done. This being said, the speed of distribution is very important at the supply chain end, since only companies that can respond promptly are able to maintain a high standard of service.

In pursuit of a faster response, many inventory management strategies have emerged, such as efficient consumer response, Just in Time (JIT), ship order production, and demand-supply. The Just in Time (JIT) approach, which was developed to address dealer inventory issues at the end of the supply chain, has become increasingly important. The goal of these strategies in the supply chain is to quickly respond to customers' demands. Moreover, the Just in Time (JIT) strategy has forged ahead of the others by resolving the issue of distributor stocking at the supply chain end.

In order for the end distributors to efficiently respond to customers, the first-order suppliers must stock sufficient numbers and varieties of parts to promptly cope with the needs of downstream distributors. On the other hand, the bullwhip effect (demand variance amplification principle) leads to the storage of a much higher quantity of parts on the supplier's end. The JIT management system enables customers (distributors) to lower their inventory costs; however, this will lead to increased inventory on the supplier's side. The automobile repair market is a good example of this phenomenon. In order to provide higher service standards that will hopefully lead to an increase in loyal customers, the garage must be able to promptly acquire various parts for repairs. Therefore, according to the JIT model, in order to quickly supply garages with automobile repair parts, upstream suppliers must stock a large quantity.

Therefore, the main purpose of this study was to properly utilize transportation in the supply chain so that transportation can load the goods with the highest utilization during the return journey. For this reason, this study proposes two scenarios for research. The first scenario is to integrate green and sustainable ideas into the supply chain network. The transportation vehicles in the supply chain have the function of both forward and reverse logistics. The packaging materials can be recycled at each point collection when the items are delivered to the bases. The purpose of this scenario is to make the supply chain more environmentally friendly and reduce the overall carbon emissions. The second scenario is to reverse the returning vehicles from the manufacturing supplier to load the goods and then deliver them directly to the distribution center. By increasing the frequency of delivery from the manufacturer to the distribution center, the supply chain can reduce the overall inventory and improve the economic effect. Through calculation and analysis, we can decide how to achieve economic and environmental trade-offs in two situations.

In Section 2, the modeling and assumptions are defined, as well as the basic model assumptions, and definitions for symbols and parameters. Pareto's multi-objective integer programming is then proposed to solve the formulations and object functions in two scenarios. Section 3 examines the numerical sample and compares the results to the traditional supply chain, Scenario 1 and Scenario 2 cases. Finally, Section 4 concludes the summary of research findings and contributions.