Sustainable Supply Chain Optimization in the Automotive Industry

Abstract: Sustainability in supply chain management requires the consideration of environmental and social factors in operational decisions. Over the last few years, sustainability has become a highly relevant topic for researchers and practitioners. However, there is an acute lack of focus on sustainability in the management of global supply chains by multinational corporations, despite the considerable impact global transportation operations have on environmental pollution levels. Motivated by this fact, we model a global supply chain of an automobile manufacturer with overseas suppliers and alternative transportation modalities with varying lead times. Our goal is to determine the order quantities for each transportation modality to satisfy the production requirements at minimum cost and environmental impact. We formulate a Mixed-Integer Linear Program to determine optimal order quantities over a planning horizon. In addition to the usual inventory balance constraints, our model includes a carbon emission budget for each week and also for the entire planning horizon. The objective function uses cost coefficients that serve as a joint measure of economic and environmental impacts of order allocation decisions for each transportation mode. The model is solved using Gurobi optimization solver. We conduct a sensitivity analysis to determine the impact of part types, cost parameters, and the inclusion of carbon emission budgets on the use of different transportation modalities.

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