Seminar by Ayşegül Toptal Department of Industrial Engineering Bilkent University
As the world economy becomes increasingly conscious of the environmental concerns, evidence suggests that companies who make better business decisions to consider the interests of other stakeholders, including the human and natural environments, will succeed. While the environmental regulation policies aim to protect consumers, employees and the environment, cost of compliance should not deter companies to do business. To meet regulatory requirements, firms can change their production/inventory related operations and/or invest in green technologies. In this talk, we introduce two inventory models for providing guidance to the companies to make better inventory decisions while utilizing the available environmental technologies, and for helping policy-makers understand the implications of the different regulation policies on the profitability of a company. In the first model that will be introduced, we analyze a retailer’s joint decisions on inventory replenishment and emission reduction investment under three emission regulation policies; cap, tax and cap-and-trade. Our results provide guidelines and insights about five issues: (i) how much the retailer should order at each replenishment and how much he/she should invest in emission reduction to minimize long-run average costs, (ii) what the impact of having an investment option is on the retailer’s annual costs and emissions, (iii) how the retailer’s annual costs and emissions under an emission regulation policy compare to those when no regulation is in place, (iv) how the retailer should choose among different investment options available and (v) how the different regulation policies compare in terms of the retailer’s annual emissions and costs. In the second model, we also consider the retailer’s supplier, and study coordination and contracting between the two parties. We propose coordination mechanisms for this system to increase its profitability. We show that, even though such coordination mechanisms help the retailer and the supplier decrease their costs without violating the emission regulations, they may result in increased carbon emission under certain circumstances.
