Coordinating Green/Functional Quality Decisions in a Two-Stage Green Supply Chain

The current research intends to optimize green/functional quality decisions along with pricing and marketing decisions in a two-echelon supply chain. In this paper, coordination of a supply chain is analyzed under consumer environmental awareness (CEA) where demand is a function of: (1) price, (2) marketing/advertisements, (3) functional quality, (4) green quality. In the investigated supply chain, the retailer decides on price and advertisement decisions while the manufacturer decides on functional/green quality decisions. At first, the supply chain is modeled under decentralized decision making and at the second stage, decision variables are optimized under the centralized structure. Finally, a mathematical programming model is developed to coordinate decision variables and at the same time ensures participation of both supply chain members. Results show that the proposed mathematical model results in higher profit for the supply chain compared to the decentralized model and also achieves a Pareto improvement for supply chain members. In addition, compared to the decentralized model, under the proposed model, the green quality of products is decided in higher levels.