An optimum decision-making strategy to maximize total profit in a two-period closed-loop supply chain dealing with greenhouse gases

Document Type

Article

Publication Date

1-1-2025

Abstract

The increasing global demand for raw materials has led to excessive waste production and environmental degradation, necessitating the adoption of Closed-Loop supply chains (CLSCs). However, current models often lack a comprehensive approach that integrates consumer preferences, carbon emission reduction strategies, and strategic collaborations among supply chain members. This study develops an optimal decision-making strategy for maximizing profitability and reducing carbon emissions in a two-period CLSC involving four key players, including manufacturer, retailer, collector, and recycler. Using a Stackelberg game-theoretic approach, we analyze seven alliance models and a baseline scenario (non-alliance) to assess their impact on economic and environmental outcomes. The results reveal that the seventh alliance, which includes all four players, achieves the highest total profit of 1830.81 units, marking a 71.16% improvement over the baseline model. Moreover, this alliance facilitates a 44.84-unit reduction in carbon emissions, demonstrating the potential for achieving both financial and sustainability benefits. The analysis also shows that strategic alliances improve cost efficiency, with a 15.3% reduction in marginal costs, and enhance supply chain resilience, reducing demand fluctuations by 12.7%. Furthermore, sensitivity analysis indicates that an increase in consumer sensitivity to carbon reduction from 0.3 to 0.9 leads to a 19.2% rise in demand for green products and a 14.8% increase in overall profit. These findings provide actionable insights for business leaders and policymakers. Companies can enhance CLSC performance through strategic alliances, dynamic pricing models, and sustainability-focused marketing campaigns. Meanwhile, policymakers can design carbon pricing policies, tax incentives, and regulatory frameworks that promote environmentally responsible business practices.

Publication Source (Journal or Book title)

Annals of Operations Research

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