Sustainability in supply chain management: aggregate planning from sustainability perspective

Abstract

Supply chain management that considers the flow of raw materials, products and information has become a focal issue in modern manufacturing and service systems. Supply chain management requires effective use of assets and information that has far reaching implications beyond satisfaction of customer demand, flow of goods, services or capital. Aggregate planning, a fundamental decision model in supply chain management, refers to the determination of production, inventory, capacity and labor usage levels in the medium term. Traditionally standard mathematical programming formulation is used to devise the aggregate plan so as to minimize the total cost of operations. However, this formulation is purely an economic model that does not include sustainability considerations. In this study, we revise the standard aggregate planning formulation to account for additional environmental and social criteria to incorporate triple bottom line consideration of sustainability. We show how these additional criteria can be appended to traditional cost accounting in order to address sustainability in aggregate planning. We analyze the revised models and interpret the results on a case study from real life that would be insightful for decision makers.