A supply chain sourcing model at the interface of operations and sustainability

Abstract

In this article, we develop a supply chain sourcing model that incorporates both sustainability and operational performance measures. The model selects suppliers and determines sustainability investments and order allocations among the selected suppliers. High sustainability performance, as well as cost efficiency, is achieved while a high operational performance level is maintained. We formulate the problem as a nonlinear bi-objective integer-programming model, discover the model’s special features, and propose an effective and computationally efficient algorithm to solve it. To quantify a supply chain’s sustainability performance, we adopt the Environmental, Social, and Governance index. Instead of searching for just one sourcing solution, we find the Pareto-optimal set of effective solutions. Numerical tests verify that our algorithm outperforms an existing sourcing algorithm in terms of computational efficiency. A simulation of Apple’s sourcing decisions demonstrates the effectiveness of the model in business practice. Our work also provides managerial insights on how sustainable operations alter traditional supply chain sourcing decisions. It helps practitioners make fast and effective sourcing and investment decisions to implement their sustainability strategies at the operational level.

Keywords:

• Supply chain management
• sustainability
• nonlinear bi-objective model
• sourcing plan
• Pareto optimal

Additional information

Notes on contributors

Gang Li

Gang Li is an associate professor of supply chain and operations management at the Management Department, Bentley University. His research interests focus on model and algorithm development for service operations and supply chain management. He is also interested in studying the impact of operations decisions on society and the environment. He has published his work in a number of leading academic journals, including Operations Research, European Journal of Operational Research, Journal of Business Ethics, Omega - The International Journal of Management Science, Service Science, among others. He holds a PhD in supply chain and operations management from the University of Texas at Austin and another PhD in systems engineering from Beijing University of Aeronautics and Astronautics. He is also an ASQ Certified Six Sigma Black Belt.

Yu Xia

Yu A. Xia is a professor of business at the Raymond A. Mason School of Business of the College of William and Mary. She received her PhD degree in business administration with a concentration on operations/supply chain management and her master’s degree in statistics, both from Washington State University. Her research focuses on supply chain coordination, competition, contract design, sourcing, and risk management. Her recent research interests include the integration of emerging technologies (blockchain, artificial intelligence, etc.) into supply chain sourcing planning and risk management. Her research articles have been published in journals such as Management Science, Production and Operations Management, European Journal of Operational Research, IIE Transactions (IISE), and Omega. Her research projects have been funded by the Defense Advanced Research Projects Agency (DARPA) LogX program and Lagrange program.