A Three-Layer Imperfect Production Supply Chain Model with Green Investment Under Trade Credit and Cap-Trade Policy

Abstract

A three-layer supply chain model with a single supplier, manufacturer, and retailer is presented in this paper. This proposed model is analyzed under green investment along with trade credit and cap-trade policy. It is considered that the manufacturer’s production process is imperfect. Few inferior quality products are reworked, and the remaining defective items are discarded. The manufacturer makes investments in green technology to reduce carbon emissions. The product’s demand is influenced by selling price, advertisement, and green-technology level. The total average profit of the supply chain is constructed under three different scenarios of trade credit provided by the manufacturer to the retailer. The primary goal of this research is to obtain the optimal selling price, production rate, and green-technology level to maximize the system’s total average profit by using genetic algorithm. A numerical example is shown to demonstrate the model, and sensitivity analysis is carried out to analyze the impact of numerous input parameters. Managerial insights and conclusions are provided to make this model helpful for manufacturers.