In-house purchasing for green design products when the manufacturer’s promised-delivery-time matters

Abstract

In practice, many brand-owners (e.g., Nike, Adidas, and Louis Vuitton) have developed green design products using the same materials as regular products. This helps reduce greenhouse gas emissions meanwhile do not waste materials to achieve social responsibility. However, the development of green design products will lead to competition with the regular products, and further increases the manufacturer’s workload, resulting in longer and uncertain delivery time. In this paper, we investigate the brand-owner’s in-house purchasing strategy for green design products which seems to isolate the material procurement of green and regular products but may prepose the manufacturer’s delivery time. We find that under Green In-house Purchasing Strategy the material supplier can avoid the impact of the manufacturer’s promised-delivery-time and the introduction of green design products, because it can bypass the cost by balancing brand-owner’s order quantities of the two products. This harms the brand-owner and induces it to prefer Full Purchasing Outsourcing Strategy when either the green market expansion or the promised-delivery-time cost is high. We also find the incentive alignment opportunities between the brand-owner and the manufacturer where both of them can benefit from Full Purchasing Outsourcing Strategy. The robustness of our main findings is further verified by considering the positive production cost and the regular product’s environmental impact.

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