An Integrated Logistics Model for Environmental Conscious Supply Chain Network Design

Operations Research has addressed a variety of environmental problems outside the traditional supply chain management area such as remanufacturing, reverse logistics, and waste management. Supply chain sustainability, which includes designing green supply chains, will gain much more attention in the future. Indeed, most companies are still in the early stage of considering a green initiative. Traditionally, optimization models for supply chain network design looked to different strategic network alternatives, and analyze the trade-offs between logistics costs and service requirements. Today, with the strong emphasis in reducing greenhouse gas footprint, the integration of such consideration into the supply chain network design phase will provide to companies much more visibility on how to manage efficient, effective, and green supply chains. In this paper, a mathematical programming model for environmental conscious supply chain network design is introduced with the explicit inclusion of carbon emission cost. By considering the greenhouse gases emissions cost together with traditional logistics costs, the problem is formulated as a single objective optimization program. The methodology uses mixed integer linear programming modeling technique to deal with different strategic decisions, including supplier and subcontractor selection, product allocation, capacity utilization, and assignment of transportation links required to satisfy market demand. This new formulation provides decision makers with a quantitative decision support system to understand the tradeoffs between the total logistics cost and the carbon footprint reduction.