Network design for a decarbonised supply chain considering cap-and-trade policy of carbon emissions

Decarbonisation of the supply chain necessitates the control of carbon emissions along with the minimisation of cost. This is quite challenging in a multi-echelon supply chain involving multiple suppliers, multiple products, multiple time periods and multimodal transportation. This research deals with the design of a decarbonised supply chain network, under a dynamic environment, considering carbon emissions at various stages of the supply chain. A Mixed-Integer Linear Program (MILP) has been developed for a four-echelon supply chain. The problem is solved by using two approaches. The integrated approach, which considers the entire supply chain network as a single entity, yields better results in terms of profitability and more so, when the selling price is lower. Scenario analysis reveals that as the carbon cap reduces, the gross profit shows concomitant reduction and when the former goes below a threshold value, carbon procurement becomes necessary lowering the gross profit further. As the carbon price per unit increases, the gross profit initially decreases and then stabilises. This study contributes by developing an integrated dynamic supply chain network model incorporating carbon emissions at different stages.