Strategic selection of VMI replenishment policy with emission costs: an analytical approach

Abstract

Organizations are actively trying to incorporate sustainability considerations in their strategic and operational decision making. Recent studies suggest that business process redesign offers a promising avenue for meeting business goals. In this paper, we build on some recent studies that have shown that vendor-managed inventory-based supply chain coordination not only leads to cost savings, but also is a very useful tool in reducing greenhouse gas emissions. Both operational- and emission-related costs are incorporated in such models. We present different ways of structuring the replenishment policy and show that each of the policies leads to different performance outcomes. Furthermore, we also discuss how these policies can be used to cater to the strategic imperatives facing an organization. Implications for proper design of government legislation have also been discussed.