Environmental performance—Impacts of vendor–buyer coordination

Effective coordination is a hallmark of successful supply chain management. Without such coordination, vendors and buyers will act independently to make decisions that optimize their own objectives (e.g., maximize their respective profits or minimize their costs). This non-coordinated approach is unlikely to be optimal when one considers the supply chain as a whole. Most vendor–buyer coordination research concentrates only on an objective of minimizing total system costs; but with the increasing environmental awareness in business and the general public, many organizations acknowledge that strategies and practices which incorporate environmental considerations are essential to acquire a competitive advantage. The objectives of this research are concerned not only with the economic impact of vendor–buyer coordination on the organizations involved, but also with the wider effects on society, such as the effects of pollution on the environment. This research demonstrates how to effectively incorporate environmental issues into vendor–buyer coordination. First, we study the impacts of cost-minimizing vendor–buyer coordination models on environmental performance when compared with independent (non-coordinated) optimization. Second, we develop a single-vendor multi-buyer coordination model that includes both costs and environmental performance measures in its objective function. A numerical example and a real case study show how both the total system cost and the environmental performance can be simultaneously improved.