Closed-loop supply chain system with energy, transportation and waste disposal costs

Energy usage and consumption play important and strategic roles in modern manufacturing, inventory and logistics systems. The literature on inventory models for closed-loop supply chains reveals that, for no clear reasons, energy costs were ignored along with transportation and disposal costs. This paper introduces a closed-loop supply chain model that considers the economic value and energy content of products. It also offers a novel framework for studying lot-sizing policies of production processes in that context. Thus, a mathematical model for a closed-loop supply chain system with energy, transportation and disposal costs is developed. Numerical examples are provided with their results discussed. The developed model was also compared to that of Richter (1996) to stress the importance of accounting for the three noted costs. The numerical results emphasise that accounting for energy, transportation and disposal costs in supply chain modelling increases the sustainability of a production-inventory system due to the strong interdependence of the three costs on one hand, and their relationship to the environment on the other hand.