Design and planning of a closed-loop supply chain with three way recovery and buy-back offer

Abstract Due to strict environmental legislations and competitive economics worldwide, closed-loop supply chain (CLSC) management has been receiving increasing attention. In order to improve the return rate of used products, in this paper, a recovery framework is proposed by employing buy-back offer at retailer level. The proposed recovery framework is integrated with an optimization model for a multi-period CLSC under demand and capacity uncertainty to determine optimal buy-back price that needs to be offered to consumers so that the minimum collection limit set by the legislators is fulfilled as well as overall cost of the integrated system is minimized. The developed model addresses the possibility of three way recovery options, namely; product remanufacturing , component remanufacturing , and raw material recovery to determine the optimal manufacturing, remanufacturing and recycling quantity. Sensitivity analysis suggests that there is a trade-off between the extra benefit generated through remanufacturing and the cost of acquisition of used products due to the employment of buy-back offer. A condition for the buy-back offer to be simultaneously advantageous for both manufacturer and retailer under revenue sharing contract is derived. A comparative study is also undertaken to examine the performance of the CLSC when collection is made through buy-back offer vs. third-party collection. The proposed CLSC model is further extended by adding a separate demand for remanufactured products and the performance of the initial model with the extended model is compared.

[1]  Tianqin Shi,et al.  Effects of Remanufacturable Product Design on Market Segmentation and the Environment , 2016, Decis. Sci..

[2]  Benita M. Beamon,et al.  Supply-chain network configuration for product recovery , 2004 .

[3]  P. Georgiadis,et al.  Sustainability in electrical and electronic equipment closed-loop supply chains: A System Dynamics approach , 2008 .

[4]  K. Inderfurth.  Impact of uncertainties on recovery behavior in a remanufacturing environment , 2005 .

[5]  Onur Kaya,et al.  Incentive and production decisions for remanufacturing operations , 2010, Eur. J. Oper. Res..

[6]  L. V. Wassenhove,et al.  MANAGING PRODUCT RETURNS FOR REMANUFACTURING , 2001 .

[7]  Kannan Govindan,et al.  Reverse logistics and closed-loop supply chain: A comprehensive review to explore the future , 2015, Eur. J. Oper. Res..

[8]  Jayashankar M. Swaminathan,et al.  Product Take-Back Legislation and Its Impact on Recycling and Remanufacturing Industries , 2012 .

[9]  Kevin J. Gaudette,et al.  Remanufacturing: The next great opportunity for boosting US productivity , 2003 .

[10]  Erwin van der Laan,et al.  Quantitative models for reverse logistics: A review , 1997 .

[11]  Pankaj Dutta,et al.  Performance analysis of a closed-loop supply chain with incentive-dependent demand and return , 2016 .

[12]  Govindan Kannan,et al.  A genetic algorithm approach for solving a closed loop supply chain model: A case of battery recycling , 2010 .

[13]  Luk N. Van Wassenhove,et al.  So What If Remanufacturing Cannibalizes My New Product Sales? , 2010 .

[14]  Luk N. Van Wassenhove,et al.  Closed - Loop Supply Chain Models with Product Remanufacturing , 2004, Manag. Sci..

[15]  David Z. Zhang,et al.  An integrated production and inventory model for a whole manufacturing supply chain involving reverse logistics with finite horizon period , 2013 .

[16]  Turan Paksoy,et al.  Interactive fuzzy programming approaches to the strategic and tactical planning of a closed-loop supply chain under uncertainty , 2014 .

[17]  A. Ravindran,et al.  A multiobjective chance constrained programming model for supplier selection under uncertainty , 2011 .

[18]  Muris Lage Junior,et al.  Production planning and control for remanufacturing: literature review and analysis , 2012 .

[19]  Pankaj Dutta,et al.  Design and analysis of a closed-loop supply chain in presence of promotional offer , 2015 .

[20]  Gerald W. Evans,et al.  A genetic algorithm-based heuristic for the dynamic integrated forward/reverse logistics network for 3PLs , 2007, Comput. Oper. Res..

[21]  M. Fleischmann.  Erim Report Series Research in Management Reverse Logistics Network Structures and Design Bibliographic Data and Classifications , 2022 .

[22]  Ali Çetin Suyabatmaz,et al.  Hybrid simulation-analytical modeling approaches for the reverse logistics network design of a third-party logistics provider , 2014, Comput. Ind. Eng..

[23]  Zheng Wang,et al.  Reverse logistics network: A review , 2010, 2010 IEEE International Conference on Industrial Engineering and Engineering Management.

[24]  Robert W. Grubbström,et al.  Optimal production opportunities in a remanufacturing system , 2006 .

[25]  Augusto Q. Novais,et al.  An optimization model for the design of a capacitated multi-product reverse logistics network with uncertainty , 2007, Eur. J. Oper. Res..

[26]  I. Litvinchev,et al.  Multiperiod and stochastic formulations for a closed loop supply chain with incentives , 2014 .

[27]  Jacqueline M. Bloemhof-Ruwaard,et al.  THE IMPACT OF PRODUCT RECOVERY ON LOGISTICS NETWORK DESIGN , 2001 .

[28]  Vedat Verter,et al.  Designing the Reverse Logistics Network , 2010 .

[29]  Pietro De Giovanni.  Environmental collaboration in a closed-loop supply chain with a reverse revenue sharing contract , 2014, Ann. Oper. Res..

[30]  Charles J. Corbett,et al.  Contracting and Coordination in Closed-Loop Supply Chains , 2001 .

[31]  Anton Ovchinnikov,et al.  Revenue and Cost Management for Remanufactured Products , 2011 .

[32]  Jonathan D Linton,et al.  Offering branded remanufactured/recycled products: at what price? , 2014 .

[33]  N. Aras,et al.  Design and analysis of government subsidized collection systems for incentive-dependent returns , 2009 .

[34]  Necati Aras,et al.  Optimal Prices and Trade-in Rebates for Durable, Remanufacturable Products , 2005, Manuf. Serv. Oper. Manag..

[35]  Mehmet Ali Ilgin,et al.  Environmentally conscious manufacturing and product recovery (ECMPRO): A review of the state of the art. , 2010, Journal of environmental management.

[36]  Kannan Govindan,et al.  Selection of third party reverse logistics provider using Fuzzy extent analysis , 2011 .

[37]  Otto Rentz,et al.  Modeling reverse logistic tasks within closed-loop supply chains: An example from the automotive industry , 2006, Eur. J. Oper. Res..

[38]  Pietro De Giovanni,et al.  State- and Control-Dependent Incentives in a Closed-Loop Supply Chain with Dynamic Returns , 2016, Dyn. Games Appl..

[39]  Patroklos Georgiadis,et al.  A system dynamics model for dynamic capacity planning of remanufacturing in closed-loop supply chains , 2007, Comput. Oper. Res..

[40]  Chwen Sheu,et al.  A model for reverse logistics entry by third-party providers , 2002 .

[41]  Saman Hassanzadeh Amin,et al.  A proposed mathematical model for closed-loop network configuration based on product life cycle , 2012 .

[42]  Pankaj Dutta,et al.  A system dynamics framework for integrated reverse supply chain with three way recovery and product exchange policy , 2013, Comput. Ind. Eng..

[43]  Grit Walther,et al.  Negotiation-based coordination in product recovery networks , 2008 .

[44]  Necati Aras,et al.  Locating collection centers for distance- and incentive-dependent returns , 2008 .

[45]  A. Charnes,et al.  Chance-Constrained Programming , 1959 .

[46]  Samir K. Srivastava,et al.  Green Supply-Chain Management: A State-of-the-Art Literature Review , 2007 .

[47]  Ruud H. Teunter,et al.  Matching Demand and Supply to Maximize Profits from Remanufacturing , 2003, Manuf. Serv. Oper. Manag..

[48]  Peter Schuur,et al.  On a medium term product recovery and disposal strategy for durable assembly products , 1998 .

[49]  Elif Akçali,et al.  Quantitative models for inventory and production planning in closed-loop supply chains , 2011 .

[50]  J.A.E.E. van Nunen,et al.  Designing and Evaluating Sustainable Logistics Networks , 2006 .

[51]  Moutaz Khouja,et al.  Analysis of free gift card program effectiveness , 2011 .

[52]  Adem Orsdemir,et al.  Competitive Quality Choice and Remanufacturing , 2014 .

[53]  Vildan Özkir,et al.  Multi-objective optimization of closed-loop supply chains in uncertain environment , 2013 .

[54]  L. N. Van Wassenhove,et al.  Concurrent product and closed-loop supply chain design with an application to refrigerators , 2003 .

[55]  Govindan Kannan,et al.  Issues in reverse supply chain, part III: classification and simple analysis , 2009 .

[56]  Hokey Min,et al.  THE DYNAMIC DESIGN OF A REVERSE LOGISTICS NETWORK FROM THE PERSPECTIVE OF THIRD-PARTY LOGISTICS SERVICE PROVIDERS , 2008 .

[57]  V. Daniel R. Guide,et al.  OR FORUM - The Evolution of Closed-Loop Supply Chain Research , 2009, Oper. Res..

[58]  Elif Akçali,et al.  Benders decomposition with alternative multiple cuts for a multi‐product closed‐loop supply chain network design model , 2007 .

[59]  Mir Saman Pishvaee,et al.  A memetic algorithm for bi-objective integrated forward/reverse logistics network design , 2010, Comput. Oper. Res..

[60]  Otto Rentz,et al.  Integrated planning of transportation and recycling for multiple plants based on process simulation , 2010, Eur. J. Oper. Res..

[61]  Marcus Brandenburg,et al.  Quantitative models for sustainable supply chain management: Developments and directions , 2014, Eur. J. Oper. Res..