Emission policies and their analysis for the design of hybrid and dedicated closed-loop supply chains

Abstract Government legislation and consumer awareness on carbon emissions have required industries to seek alternative ways to reorganize their supply chains. Therefore, industries have to consider not only the activities in the forward supply chain but also in the reverse supply chain. An integrated supply chain, that combines the activities of both the forward and reverse supply chains, is referred to as the closed loop supply chain (CLSC). There are two main types of CLSC structures: hybrid and dedicated. In this research, we analyze the effect of carbon emissions consideration on the design of both hybrid and dedicated CLSCs. In particular, we develop a set of integrated mixed integer linear programming (MILP) models to quantify and compare both of the environmental and economic impacts of carbon emissions policies (carbon cap, carbon tax, and carbon cap-and-trade), and market factors (scale effect, product return rate, and the customer demand) on the design of CLSCs with respect to both CLSC structures. Our analysis shows that when market conditions are considered, total cost and total emissions are more sensitive to customer demand than to the scale effect and the product return rate. When an industry faces fluctuation on the quantity of the returned products, adopting a dedicated CLSC would lead to a lower total cost. Under cap-and-trade policy, dedicated CLSC can produce less total emissions. We also observe that dedicated CLSC is more cost efficient under carbon cap policy and hybrid CLSC is more emissions efficient when the carbon tax is introduced.