Incorporating environmental aspects in an inventory routing problem. A case study from the petrochemical industry

Carbon emissions from transport activities in a supply chain are extensively contributing to global warming. However, the focus of literature in the field of sustainable supply chain management is mainly on production processes or network design decisions, considering transportation as a “necessary evil”. Consequently, transport activities are often accounted for in a rather simplified way in the analyses and are rarely analyzed on a high level of detail. Thereby the actual impacts transport processes have on the economic and environmental performance of a company are distorted. Our work focuses solely on the analysis of transport processes and shows the economic and environmental effects of routing decisions in a supply chain with vertical collaboration, for instance through vendor-managed inventory. We propose an Inventory Routing Model and apply it to a case study from the petrochemical industry. The outcome from this detailed transport analysis is then compared with results from former studies, where the main focus was on facility location decisions rather than on transportation decisions. The results point out the importance of detailed transport process analyses in order to get accurate results and suggest a potential for achieving pareto-improvements by reducing at the same time both costs and carbon emissions in a supply chain with vertical collaboration.