Warehouse Outsourcing Decisions for Green Supply Chain Management

Abstract

The cooperation mode with third party logistics is getting diversified around the world because of its lower costs and higher efficiency. With professional management and low-carbon emission technologies, third party warehousing is applied in many countries concomitantly as an advanced branch of third party logistics. However, losing direct control of products and employees, and even taking the risks of security and confidentiality stop a number of companies from warehouse outsourcing services. This project stands at an enterprise’s angle to propose a green supply chain model incorporating warehouse outsourcing to analyze whether and to what extent should enterprises use third party warehouses. The supply chain model is modelled via mixed integer linear programming technique, which can accurately represent the important decision choices, constraints and objectives of a supply chain problem in order to minimize the total cost through setting the weight for relevant factors to evaluate the performance of the supply chain. Three echelons of production plants, warehouses, and customers are designed in the model, considering the cost in the processes of production, transportation, warehousing, customer fulfilment, and backordering of the supply chain.

Furthermore, for the eco-friendly target of green supply chain management, the model calculates the carbon emission cost under both tow carbon emission policies of carbon taxing and carbon trading, and the carbon footprint is analyzed in the project to balance the influence on the carbon emission by warehouse outsourcing. Meanwhile, a benchmark model without warehouse outsourcing decision is delivered for the comparison of carbon emission quantity and total cost with the proposed green supply chain model. The feasibility of the proposed model is verified by a case study of a textile industry in Guangdong Province, China. The computational results of benchmark and the proposed model show the possibility to reduce the total operation costs and the carbon emission amount by implementing the warehouse outsourcing decisions.

No published work has integrated warehouse outsourcing decisions in green supply chain management to explore the influence of warehouse outsourcing strategies on environmental sustainability. This project is a contribution to enriching the academic study of third party logistics by specifically integrating warehouse outsourcing decisions to green supply chain management, while considering other supply chain management issues, under both carbon taxing and trading.