Integrating Carbon Footprint into Coordination of Constant Pricing and Lot Sizing Problem
The purpose of this paper is to improve our understanding of how carbon emission concerns could be integrated into operational decision-making with regard to procurement, production, and inventory management. Lot sizing model with constant product pricing can be modified to support decision-making that accounts for both profit and carbon footprint, by combining carbon footprint parameters with various decision variables. In the first case, the strict carbon cap is introduced into coordination of product pricing and lot sizing. The second case with carbon trade can be achieved by the Lagrangian relaxation of the carbon cap in the first case. In particular, the model with carbon trade is transformed into the third model with carbon tax when the carbon cap equals zero. The results show a series of insights that highlight the impact of operational decisions on carbon emissions and the importance of operational models in evaluation the impact of different regulatory policies and in assessing the benefits of investments in more carbon efficient technologies.