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Acquisition pricing and remanufacturing decisions in a closed-loop supply chain

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  • He, Yuanjie

Abstract

This paper models a closed-loop supply chain (CLSC) with a manufacturer and its supply channels – recycle channel and reliable supply channel. We assume that the manufacturer may reuse the recycled main product component and remanufacture the product. The recycle channel shows stochastic recovery rate. Both the centralized (integrated) recycle channel CLSC and the decentralized recycle channel CLSC are studied. The optimal production decision and the optimal acquisition pricing decision are obtained for both the deterministic demand and the stochastic demand cases. Further, the paper discusses the supply chain inefficiency in this CLSC. It is shown that under decentralized recycle channel structure, the optimal acquisition price is always lower than the optimal acquisition price under centralized recycle channel structure, causing reduced recycle quantity and lower remanufactured quantity, which is similar to the effect of double marginalization in the normal forward supply chain. The cost difference between the two supply channels also increases such double marginalization impact. In order to reduce such supply chain inefficiency, two contracts (complete compensation and partial compensation) are proposed. It is shown that under certain conditions, both contracts are Pareto improving for the decentralized supply chain and can be used to coordinate the CLSC. Numerical examples are used to illustrate the results. The numerical examples show the different preferences of supply chain parties on different risk reductions in the decentralized system. In general, the interests on demand risk reduction is aligned between the recycle channel supplier and the manufacturer with the manufacturer showing higher motivation; on the other hand, recycle channel supplier and the manufacturer may have conflict of interests in supply risk reduction when the supply risk is low, and their interests are aligned when the supply risk is high.

Suggested Citation

  • He, Yuanjie, 2015. "Acquisition pricing and remanufacturing decisions in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 163(C), pages 48-60.
  • Handle: RePEc:eee:proeco:v:163:y:2015:i:c:p:48-60
    DOI: 10.1016/j.ijpe.2015.02.002
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    References listed on IDEAS

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    Cited by:

    1. Gan, Shu-San & Pujawan, I. Nyoman & Suparno, & Widodo, Basuki, 2017. "Pricing decision for new and remanufactured product in a closed-loop supply chain with separate sales-channel," International Journal of Production Economics, Elsevier, vol. 190(C), pages 120-132.
    2. Hsieh, Chung-Chi & Lai, Hsing-Hua, 2017. "Capacity allocation with differentiated product demands under dual sourcing," International Journal of Production Economics, Elsevier, vol. 193(C), pages 757-769.
    3. Wang, Wenyuan & Wang, Yue & Mo, Daniel & Tseng, Mitchell M., 2017. "Managing component reuse in remanufacturing under product diffusion dynamics," International Journal of Production Economics, Elsevier, vol. 183(PB), pages 551-560.
    4. Aydin, R. & Kwong, C.K. & Ji, P., 2015. "A novel methodology for simultaneous consideration of remanufactured and new products in product line design," International Journal of Production Economics, Elsevier, vol. 169(C), pages 127-140.
    5. Liu, Zhuojun & Chen, Jing & Diallo, Claver, 2018. "Optimal production and pricing strategies for a remanufacturing firm," International Journal of Production Economics, Elsevier, vol. 204(C), pages 290-315.
    6. Fu, Lingxian & Meng, Fanyong, 2020. "A human disease transmission inspired dynamic model for closed-loop supply chain management," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 134(C).
    7. Genc, Talat S. & De Giovanni, Pietro, 2018. "Optimal return and rebate mechanism in a closed-loop supply chain game," European Journal of Operational Research, Elsevier, vol. 269(2), pages 661-681.
    8. Yanting Huang & Zongjun Wang, 2017. "Dual-Recycling Channel Decision in a Closed-Loop Supply Chain with Cost Disruptions," Sustainability, MDPI, Open Access Journal, vol. 9(11), pages 1-28, November.
    9. Pietro Giovanni & Georges Zaccour, 2019. "A selective survey of game-theoretic models of closed-loop supply chains," 4OR, Springer, vol. 17(1), pages 1-44, March.
    10. Cannella, Salvatore & Bruccoleri, Manfredi & Framinan, Jose M., 2016. "Closed-loop supply chains: What reverse logistics factors influence performance?," International Journal of Production Economics, Elsevier, vol. 175(C), pages 35-49.
    11. Wang, Qifei & Li, Jianbin & Yan, Hong & Zhu, Stuart X., 2016. "Optimal remanufacturing strategies in name-your-own-price auctions with limited capacity," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 113-129.
    12. Wenbin Wang & Shuya Zhou & Meng Zhang & Hao Sun & Lingyun He, 2018. "A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism," Sustainability, MDPI, Open Access Journal, vol. 10(7), pages 1-31, June.
    13. Wu, Cheng-Han, 2015. "Strategic and operational decisions under sales competition and collection competition for end-of-use products in remanufacturing," International Journal of Production Economics, Elsevier, vol. 169(C), pages 11-20.
    14. He, Yuanjie, 2017. "Supply risk sharing in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 39-52.
    15. Wang, Yacan & Hazen, Benjamin T., 2016. "Consumer product knowledge and intention to purchase remanufactured products," International Journal of Production Economics, Elsevier, vol. 181(PB), pages 460-469.
    16. Hong, Xianpei & Xu, Lei & Du, Peng & Wang, Wenjuan, 2015. "Joint advertising, pricing and collection decisions in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 167(C), pages 12-22.
    17. Maryam Esmaeili & Ghazaleh Allameh & Taraneh Tajvidi, 2016. "Using game theory for analysing pricing models in closed-loop supply chain from short- and long-term perspectives," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 2152-2169, April.
    18. Weisheng Deng, 2019. "Does Remanufacturing Always Benefit the Manufacturer and Hurt the Supplier?," Sustainability, MDPI, Open Access Journal, vol. 11(6), pages 1-13, March.
    19. Chen, Daqiang & Ignatius, Joshua & Sun, Danzhi & Zhan, Shalei & Zhou, Chenyu & Marra, Marianna & Demirbag, Mehmet, 2019. "Reverse logistics pricing strategy for a green supply chain: A view of customers' environmental awareness," International Journal of Production Economics, Elsevier, vol. 217(C), pages 197-210.
    20. Raffaele Isernia & Renato Passaro & Ivana Quinto & Antonio Thomas, 2019. "The Reverse Supply Chain of the E-Waste Management Processes in a Circular Economy Framework: Evidence from Italy," Sustainability, MDPI, Open Access Journal, vol. 11(8), pages 1-19, April.
    21. Michael Krapp & Johannes B. Kraus, 2019. "Coordination contracts for reverse supply chains: a state-of-the-art review," Journal of Business Economics, Springer, vol. 89(7), pages 747-792, September.
    22. Ye, Yu-Sen & Ma, Zu-Jun & Dai, Ying, 2016. "The price of anarchy in competitive reverse supply chains with quality-dependent price-only contracts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 86-107.
    23. Hu, Shu & Dai, Ying & Ma, Zu-Jun & Ye, Yu-Sen, 2016. "Designing contracts for a reverse supply chain with strategic recycling behavior of consumers," International Journal of Production Economics, Elsevier, vol. 180(C), pages 16-24.

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