Advance selling of uncertain demand in low-carbon supply chain
| DOI | https://doi.org/10.1108/IMDS-04-2022-0239 |
| Published date | 17 October 2022 |
| Date | 17 October 2022 |
| Pages | 2680-2709 |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
| Author | Haicheng Jia,Jing Li,Ling Liang,Weicai Peng,Jiqing Xie,Jiaping Xie |
Advance selling of uncertain
demand in low-carbon supply chain
Haicheng Jia
College of Business, Shanghai University of Finance and Economics,
Shanghai, China and
Business School, Suzhou University of Science and Technology, Suzhou, China
Jing Li
School of Economics and Management,
Shanghai University of Political Science and Law, Shanghai, China
Ling Liang
School of Management,
Shanghai University of International Business and Economics, Shanghai, China
Weicai Peng
School of Mathematics and Statistics, Chaohu University, Hefei, China, and
Jiqing Xie and Jiaping Xie
College of Business, Shanghai University of Finance and Economics,
Shanghai, China
Abstract
Purpose –The developmentof low-carbon productionis impeded by the investmentcosts of green technology
research and development (R&D) and carbon emission reduction while facing the uncertain risk of emission
reduction investment. With the government’s carbon emission constraints, green manufacturers implement the
advance selling strategy to increase both profit and reduction level. However, few studies consider the
consumer’s green preference and emission constraints in advance selling mar ket and spot market
independently. The authors’paper investigates the optimal strategies of advance selling pricing and
reduction effort for green manufacturers to maximize profits.
Design/methodology/approach –The authors’paper designs a stochastic model and investigates the
manufacturer’s optimal strategies of advance selling price and emission reduction efforts by categorizing
different purchasing periods of low-carbon consumers. With the challenges of uncertain demand and
government’s emission constraints, the authors’develop the non-linear optimization model to investigate the
manufacturer’s profit-oriented decisions.
Findings –The results show the government’s carbon constraints cannot influence the manufacturer’s profit,
but the consumer’s low-carbon preference in the advance selling period can. Interestingly, the manufacturer
will make fewer reduction efforts even when the consumers have stronger environmental awareness. In
addition, the increasing consumer price sensitivity will exacerbate the profit loss from mandatory emissions
reduction. Overall, for achieving a win–win situation between emission reduction and profit growth, green
manufacturers should not only consider the sales strategies, market demand, and government constraints in a
low-carbon market, but also pay attention to the uncertainty of green technology innovation.
Originality/value –With the consideration of the government’s carbon emission constraints, uncertain
demand, and low-carbon consumer’s preferences, the authors’study innovatively incorporates the joint
IMDS
122,12
2680
This paper is supported by the Key Program of National Social Science Foundation of China (Grant No.
20AJY008); the Young Program of National Social Science Foundation of China (Grant No. 22CGL020);
the Major Program of National Natural Science Foundation of China (72192830/72192834), and the
Anhui Province Social Science Innovation Development Research Project (No. 2021CX077). The authors
contributed equally to the paper and author names are in alphabetical order.The authors would also like
to express appreciation to the anonymous reviewers and editors for their very helpful comments that
improved the paper.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 20 April 2022
Revised 24 August 2022
Accepted 11 September 2022
Industrial Management & Data
Systems
Vol. 122 No. 12, 2022
pp. 2680-2709
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-04-2022-0239
impacts of advance selling strategy and emission reduction effort strategy and then differentiates between two
cases that pertain to the diverse carbon emission regulations.
Keywords Advance selling, Low-carbon supply chain, Carbon emission, Uncertain demand
Paper type Research paper
1. Introduction
1.1 Background
In October 2018, the United Nations Intergovernmental Panel on Climate Change issued a
special report on global warming of 1.5 degrees, compelling the governments to take action in
controlling the temperature rise. According to the International Energy Agency (IEA), in
2019, carbon dioxide emitted by global power and heat production accounted for 42% of
all carbon emissions, and the transportation industry accounted for 24.6%. Nowadays,
China’s automobile carbon emissions account for more than 80% of the total emissions in
the transportation field and 7.5% of the social emissions. Besides, China’s automobile
carbon emissions in the usage phase reached 720 million tons in 2020, accounting for 90%
of overall emissions in the automobile industry. Therefore, reaching carbon neutrality in
transportation will be a precondition for achieving China’s“dual carbon goals”,which
pledges the country to peak its carbon emissions in 2030 and achieve carbon neutrality
before 2060. To reduce the total emissions in the automobile industry, the Chinese
Government stimulates low-carbon consumption in the automobile industry by
subsidizing the production and sales markets of new energy vehicles. In 2021, the
Chinese automobile manufacturers have produced and sold 26.25 million vehicles, of
which the new energy vehicles account for 13.59%.
However, the acceptable level of new energy vehicles cannot maintain a steady market
demand in different selling seasons, causing the uncertain risk of low-carbon production. As
to the manufacturers, they can influence the demand for green products by making more
emission reduction efforts. For example, the investment costs of green technology research
and development (R&D) can change the product type and performance, such as the oil-electric
hybrid vehicles of Toyota and Honda, plug-in hybrid vehicles of Volkswagen and BMW, and
the pure electric vehicles of Tesla and BYD. Therefore, for solving the problems of uncertain
demand, the new energy vehicle manufacturers can adopt two strategies, including advanced
selling and stock production, to reduce the inventory risk. In practice, the stock production
can improve the modularization and service life of new energy vehicle batteries, attracting
more low-carbon consumers but meanwhile causing a higher production cost. As a result,
most new energy vehicle manufacturers choose to adopt the advance selling strategy.
Previous studies have already proved that the advance selling strategy is applicable to
traditional service industries, such as air ticket pre-purchase, which mainly focus on the sales
activities of unlisted products and services.
With the advance selling strategy, the consumers can purchase products before the start
of spot sales and the sellers deliver the products to the pre-purchasers after the production
process. In this regard, the manufacturers predict market demand at the advance selling
stage and then improve the prediction a ccuracy between production and de mand,
significantly reducing the risk caused by a mismatch between supply and demand and
alleviating the capital pressure of emission reduction investment. Therefore, the government
needs to strike the right balance between carbon emission constraints on one side and
manufacturing industry development on the other. For the manufacturers, there is a trade-off
between a greater emission reduction cost and a bigger share of the green market. The
advance selling strategy, which is considered in our paper, has significant impacts on the
risk-neutral, low-carbon and emission-constrained manufacturer’s decision-making when
consumers have green preferences and market demand is uncertain.
Advance
selling in low-
carbon supply
chain
2681
To continue reading
Request your trial