What is Salvage

This chapter examines the ways that firms decide on inventory-level activities in dealing with global markets and investigates the effects of alternative shipment strategies on carbon emissions arising from inventory management and transportation. The authors develop new mathematical models incorporating salvage, substitution and outsourcing of items of imperfect quality, and the influence of fluctuating exchange rates between firms within the framework of a joint economic policy for lot-sizing in an imperfect production system. An optimization algorithm is constructed, and the authors investigate related properties to analyse the consequences of alternative shipment strategies and associated profits through three models. They demonstrate that a firm's optimum inventory level varies according to currency exchange rates and that differing shipment policies can lead to greater total profit in the supply chain. They discuss the implications of the models for firms' policies and show insights that operations managers and executives can refer to in handling global supply chains.