A model proposal for green supply chain network design based on consumer segmentation

Abstract

The consumption-based economy has created enormous ecological footprint of product and service life cycles. Therefore, the environmental sustainability has become one of the major concerns of today's society and sparked tremendous amount of research. According to the related literature analysis, there is no specific study to design the green supply chain network based on consumers' green expectations. This study aims to contribute to the fulfillment of this research gap by proposing a goal-programming model considering three consumer segments, i.e., green, inconsistent and red consumers. A hypothetical real-life-like example problem is solved to demonstrate clearly the value and applicability of the proposed model. A set of scenarios is also studied to offer an insight on how the consumer determination level of greenness affects the green supply network. The findings of the study present a way to measure the relations between green supply chains and consumer behavior.

Introduction

The concern on environmental sustainability has lead to “green” practices related to entire cradle to grave life cycles of products. Designing products based on green initiatives, generating environmentally benign production environments and processes, warehouse management and designing forward and backward distribution networks based on green principles are very important decision domains related to environmental sustainability (Gungor and Gupta, 1999, Ilgin and Gupta, 2010, Sarkis, 2003).

The entire supply chain is sort of a pull system triggered by consumers' demand. The success of the chain is mainly determined by the satisfaction of the consumer expectations. In order to realize the efficient utilization of natural resources and minimization of pollution, consumer behavior is one of the critical factors and needs to be taken into account by the decision makers of involved companies on the supply chain. In other words, consumers' purchasing attitudes towards green products are important information when managing the entire supply networks. Consumers develop their perceptions on green products based on their own experiences or the information they receive from other sources such as media and/or word-of-mouth. Some may think green products are expensive or some may think there is no need to purchase green products based on the claim that they are just a marketing trend. All these issues can negatively influence the spread of green practices (Hervani et al., 2005, Lin, 2013, Mathiyazhagan et al., 2013, Sarkis, 2003, Solér et al., 2010).

There are some consumer research studies to understand the consumers' behavior towards green products (GfK, 2012, Goldstein, 2012). These studies indicate that while environmental issues are on the rise, its effect on consumers' purchasing behavior is not as high. American consumers prefer green products and services with 79% in 2011, slightly up from 78% in 2010 and 76% in 2009. In addition, 31% of them stated they were willing to pay extra for a green product, up from 28% in 2010. 32% of the consumer said the same in 2009 (Goldstein, 2012). Results of a consumer research study in Turkey in 2012 indicated that 80.5% of the consumers are able to define what an environmentally friendly product is and 68% of them very often or sometimes use environmentally friendly products (GfK, 2012). Only 13% of Turkish consumers stated they usually buy green products. More than half of the consumers in the same study stated they do not prefer green products since they are expensive as compared to non-green alternatives. Another interesting finding of the study is 51.7% of the respondents state that green products are not easily accessible (GfK, 2012).

The above representative research findings indicate there are various types of consumers according to their approach towards green products. Accessibility and the price of green products are very important factors on consumers' purchasing decision (Akenji, 2014, Lin, 2013) for both developed and developing countries (GfK, 2012, Goldstein, 2012). Therefore, the expectations of consumer types need to be satisfied through the efficient management of the green supply chain (Tseng and Hung, 2013). This study is designed based on this idea.

We define three consumer segments based on their purchasing behavior and their green consciousness. Green consumer segment defines consumers who demand green products for sure and willing to pay extra for them. These consumers also pay attention to the environmental issues on products' life cycle. The second segment define inconsistent consumers who have some level of awareness towards environment yet they prefer a green product only if the price is same or little above the price of alternative non-green one. Third segment hosts red consumers who do not pay any attention to products' greenness and make up his/her purchasing decision based on other commonly used criteria. We then optimize retailer-managed supply chain network consisting of manufacturers, carriers and distribution centers, based on the green expectations of consumer segments. This problem is modeled using goal programming approach in order to meet several predefined objectives. It matches the product and the consumer so that it satisfies the expectations of consumer segments and the retailer and network restrictions. Furthermore, the paper presents a set of scenarios to provide with the decision maker an insight on how the green determination level of consumers influences the green supply chain.

The paper is organized as follows: In Section 2, related literature is provided and the contribution of the study is clearly identified. Section 3 presents the proposed theoretical mathematical model. An example study and several scenarios are given to demonstrate the value of model in Section 4. The last section contains conclusions and future research directions.