Closed-loop supply chains with complementary products

In this paper, we search for the best configuration for a closed-loop supply chain (CLSC) dealing with complementary goods. In our model, a manufacturer sells two complementary goods to a retailer, which sells both products in the market. When the products reach their end-of-use stage, the manufacturer has several options for the CLSC: (i) Collect both products (exclusive collection), (ii) collect only one product while outsourcing the other product collection to the retailer (partial outsourcing), and (iii) fully outsource the collection process to the retailer (full outsourcing). Our findings demonstrate that the presence of complementary products makes the CLSC selection extremely difficult. For instance, we demonstrate that the CLSC structure with maximum returns does not necessarily possess the minimum or the maximum wholesale price. Analogously, the minimum retail price (i.e., maximum sales) and maximum return rate often occur in different collection options. We also show that the best collection option for the manufacturer seldom leads to the maximum profit for the retailer. Moreover, often the CLSC option that maximizes the manufacturer’s profit leads to lower returns. Therefore, the presence of complementary products entails several trade-offs among collection performance, prices, and profits.