Optimizing Fresh Food Supply Chains: Leveraging 3PL for Carbon Reduction and Profit Maximization - A Game-Theoretic Analysis

Mounting pressure on governments to reduce carbon emissions has forced them to impose regulations on supply chain members. Carbon cap-and-trade regulation has been widely adopted as a means to reduce carbon emissions. A fresh food supply chain involving a Manufacturer, 3PL, and a retailer is introduced. The 3PL is used by the manufacturer for its logistics because of its expertise, resources, and sustainable practices, Also many third-party logistics companies(3PL) offer refrigerated logistics services to the retailer and the 3PL has an overabundance of carbon permits. Trading of permits occurs and the impact on the retail price, the price of refrigerated logistics services in different carbon trading options, without carbon trade, inner carbon trade, and inner and outer carbon trade is studied. The prices are optimized through a game-theoretic approach, we model the trading of carbon permits as a leader-follower game with the 3PL as leader and Retailer as followers. The items are assumed to be of imperfect quality when delivered to the retailer by the 3PL.