An integrated inventory model for deteriorated and imperfect items considering carbon emissions and inflationary environment

This study presents an inventory model for deteriorating items considering carbon emission and inflationary environment for single-vendor single-buyer. The production process is imperfect due to unreliability of process. Carbon emission is included in the model and calculated from keeping the deteriorated items, transporting, and warehousing. Emission due to transportation relies upon the fuel utilization of the vehicle, the fuel discharge, and the distance traveled. Warehouse emission relies upon the total inventory and the warehouse energy consumption per unit item. Emission due to deteriorating items is related to its disposal. A cap-and-trade policy offers its own favorable circumstances in that emissions allowances can be distributed to minimize the policy’s negative impacts on aggressiveness and anticipate emissions spillage. During storage, inventory has a value of time and investment period so that inflation influences decision-making in inventory management. The purpose of this model is to determine the frequency and quantity of product delivery as well as the inventory level to minimize both carbon emission costs and the total inventory. This paper proposes a solution procedure and provides a numerical example to illustrate the application of the proposed model. Sensitivity analysis is given to show the impact of the changes of decision variables on the model behavior.