The choice of sustainable coproduction technology in a supply chain

Abstract

Coproduction is recognised as a sustainable technique that promotes optimal resource use by extracting value from leftover materials that would otherwise be wasted in traditional manufacturing processes. However, the sustainability of coproduction technology in supply chains remains uncertain, subject to fluctuations in suppliers' raw material prices. In this paper, we model a decentralised supply chain consisting of a raw material supplier and a coproduction manufacturer, and investigate how their interactions affect the economic and environmental performance of coproduction. We find that manufacturers should consider adopting coproduction technology when the size of the green consumer segment is either relatively small or significantly large. Specifically, if applicable, the manufacturer will endogenously set the coproduct quality at a moderate level, maximising material utilisation. This result offers novel insights into the choice of coproduction technology within a supply chain, particularly considering that a significant motivation for manufacturers to embrace coproduction is to capture value from green consumption. Additionally, when the size of the green consumer segment is sufficiently large, the supplier can benefit from coproduction by raising the wholesale price for raw materials, creating a win-win outcome for both the supplier and the manufacturer. However, we also find that coproduction technology is not always beneficial to the environment. The manufacturer may produce large quantities of coproducts due to high demand from green consumers, leading to increased total material consumption and waste generation.

KEYWORDS:

• Coproduction
• sustainable operations
• supply chain management
• environmental performance

Sustainable Development Goals:

• SDG 12: Responsible consumption and production

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data sharing is not applicable to this article as no data were created or analysed in this study.

Notes

1 See the report on https://www.ikea.com/us/en/this-is-ikea/sustainable-everyday/choosing-materials-being-a-large-business-comes-with-large-responsibilities-pub47a5ba42.

2 To prevent the trivial case where no green consumer purchases the traditional product, which is inconsistent with practical scenarios, we assume $\theta <\overline{\theta }$ ($\overline{\theta }$ is provided in the appendix), implying that the additional public-good utility from the consumption of coproduct will not be too large to drive the traditional product out of the market for the green consumer segment. We relax this assumption in Section 6.3 and find that the structural results and key insights remain valid. Detailed analysis can be found in Appendix D.

Additional information

Funding

This work was supported by National Natural Science Foundation of China [grant numbers 72071020, 72203028, 71991464/71991460].

Notes on contributors

Minyue Jin

Minyue Jin is an Associate Professor at the School of Economics and Business Administration, Chongqing University. Her research interests focus on sustainable operations and supply chain management. Her publications have appeared in journals such as Manufacturing & Service Operations Management, European Journal of Operational Research, International Journal of Production Research, International Journal of Production Economics, and Omega - The International Journal of Management Science.

Baoyong Li

Baoyong Li is a PhD candidate at the School of Economics and Business Administration, Chongqing University. His research focuses on new technology operations and sustainable supply chain management.

Xiaolan Qiu

Xiaolan Qiu is a PhD candidate at the School of Economics and Business Administration, Chongqing University. Her research primarily focuses on sustainable operations and supply chain management.

Feng Yang

Feng Yang is a professor at the School of Management, University of Science and Technology of China. His research interests primarily focus on decision science and operations management. Yang is a recipient of the National Science Fund for Excellent Young Scholars and has been selected for the Ministry of Education's New Century Excellent Talents Support Program. He has also led key projects funded by the National Natural Science Foundation of China. His research achievements have earned him multiple awards, including the First Prize in Natural Science from the Ministry of Education and the First Prize in Natural Science from Anhui Province.

Jiajia Nie

Jiajia Nie is a Professor and Vice Dean of the School of Economics and Management at Southwest Jiaotong University, China. He specialises in logistics and supply chain management. His research has been published in journals such as EJOR, IJPE, IJPR, TRE, JORS, ANOR, and CIE.