Strategic defect management for a sustainable green supply chain

Abstract Management of defectives and carbon-emissions are prominent inefficiencies identified by the environmental accounting practitioners. Minimizing these inadequacies within a supply chain through careful management strategies translates it reliably into a green system rationally. The concept of defect management is a recent trend in various industries as it aids in the better management of the products by giving them a new horizon through various operations. With such incentives, a vendor-buyer inventory strategy is formulated for an imperfect manufacturing process considering carbon-emissions and defect management. A certain proportion of defectives are produced by the vendor which undergo inspection at the buyer's domain. The secluded defectives are returned by the buyer to the vendor for which the latter incurs a warranty cost. Instead of adopting the traditional approaches of handling defectives, the vendor prefers to invest in a strong inspection which classifies the defectives into three categories viz. repairable, non-repairable, and design flawed ones. Such an approach aids in fetching profits and reducing waste thereby contributing towards a greener environment economically. The vendor also considers carbon-emission costs due to transportation and waste disposals as a step towards sustainability. The paper develops two models, the first model discusses the integrated problem-solving approach and the second one uses the Stackelberg policy. The total profit is maximized by jointly optimizing the number of shipments, order quantity and backordering quantity. Numerical analysis and sensitivity analysis is performed to establish the validity and robustness of the developed study. Findings suggest better performance of the integrated model over the Stackelberg game model. Moreover, the study highlights the significance of defect management so as to achieve sustainability goals without compromising financial objectives.