Analysing a lean manufacturing inventory system with price-sensitive demand and carbon control policies

Abstract

Production lot-sizing techniques used by lean practitioners to lower waste inventories and increase production efficiency in the manufacturing industry, are the subject of this paper’s speculation. Lean manufacturing aims to incorporate innovative tools into the manufacturing process to improve productivity and reduce processing time. In view of this, the model anticipates a flexible production rate based on labor, energy, and tool/die costs, to meet the demand while minimizing wastage. Moreover, a discrete investment in set-up costs is considered to lower the initial set-up cost since it is a critical component of smooth manufacturing operations. Further, it is found that price plays a significant role in stimulating a product’s demand; consequently, demand is presumed to be price-sensitive. Besides this, to reduce the carbon footprint in the production systems, two methods namely “Carbon tax” and “Cap-and-trade”, have been employed. The purpose of the developed model is to maximize total profit by jointly optimizing the production rate, selling price, and set-up cost. Numerical experiments are performed to validate the model findings. Results suggest that manufacturers’ production time decreases simultaneously with the introduction of advanced labor and technologies. With respect to carbon policies, the cap-and-trade policy performs better with an increase in total profit and a higher production rate as compared to a carbon tax. Also, sensitivity analysis is performed to support the manufacturer in the decision-making process for ancillary benefits of the optimal policy.

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