6. Green Inventory Management

Green inventory management is concerned with the overarching question of how to efficiently manage inventories and thereby material flows in supply chains, considering both economic and environmental consequences, commonly translated into costs and emissions. As inventory decisions are interlinked with production and transportation decisions, a total cost and emissions perspective is important to avoid sub optimization. In this chapter we first identify some key questions and challenges for green inventory management by dividing the emissions and costs associated with operating an inventory system into those associated with ordering (i.e., producing and transporting) items, those associated holding items in stock, and those associated with not satisfying customer demand on time. We then provide a literature overview to illustrate what issues and challenges have been addressed in the literature so far and how. This exposé distinguishes between deterministic and stochastic demand models, and between single- and multi-echelon inventory systems. Although there is a wide range of models and results, a recurring finding is that green inventory management methods offer opportunities to substantially reduce emissions with relatively small increases in total costs. The chapter concludes with remarks about findings, practical implications, and what remains to be done.