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The impact of product returns and remanufacturing uncertainties on the dynamic performance of a multi-echelon closed-loop supply chain

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  • Zhou, Li
  • Naim, Mohamed M.
  • Disney, Stephen M.

Abstract

We investigate a three-echelon manufacturing and remanufacturing closed-loop supply chain (CLSC) constituting of a retailer, a manufacturer and a supplier. Each echelon, apart from its usual operations in the forward SC (FSC), has its own reverse logistics (RL) operations. We assume that RL information is transparent to the FSC, and the same replenishment policies are used throughout the supply chain. We focus on the impact on dynamic performance of uncertainties in the return yield, RL lead time and the product consumption lead time. Two outcomes are studied: order rate and serviceable inventory. The results suggest that higher return yield improves dynamic performance in terms of overshoot and risk of stock-out with a unit step response as input. However, when the return yield reaches a certain level, the classic bullwhip propagation normally associated with the FSC does not always hold. The longer remanufacturing and product consumption lead times result in a higher overshoot and a longer time to recover inventory, as well as more oscillation in the step response at the upstream echelons. We also study bullwhip and inventory variance when demand is a random variable. Our analysis suggests that higher return yield contributes to reduced bullwhip and inventory variance at the echelon level but for the CLSC as a whole the level of bullwhip may decrease as well as increase as it propagates along the supply chain. The reason for such behaviour is due to the interaction of the various model parameters and should be the subject of further analytical research. Furthermore, by studying the three-echelon CLSC, we produce a general equation for eliminating inventory offsets in an n-echelon CLSC. This is helpful to managers who wish to maintain inventory service levels in multi-echelon CLSCs.

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  • Zhou, Li & Naim, Mohamed M. & Disney, Stephen M., 2017. "The impact of product returns and remanufacturing uncertainties on the dynamic performance of a multi-echelon closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 183(PB), pages 487-502.
  • Handle: RePEc:eee:proeco:v:183:y:2017:i:pb:p:487-502
    DOI: 10.1016/j.ijpe.2016.07.021
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    9. Yanting Huang & Zongjun Wang, 2017. "Dual-Recycling Channel Decision in a Closed-Loop Supply Chain with Cost Disruptions," Sustainability, MDPI, vol. 9(11), pages 1-28, November.
    10. Ponte, Borja & Naim, Mohamed M. & Syntetos, Aris A., 2019. "The value of regulating returns for enhancing the dynamic behaviour of hybrid manufacturing-remanufacturing systems," European Journal of Operational Research, Elsevier, vol. 278(2), pages 629-645.
    11. Lubna El-Sheikh & Rebeka Kovačič Lukman, 2022. "Developing a Framework for Closed-Loop Supply Chain and Its Impact on Sustainability in the Petrochemicals Industry," Sustainability, MDPI, vol. 14(6), pages 1-15, March.
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    14. Ponte, Borja & Cannella, Salvatore & Dominguez, Roberto & Naim, Mohamed M. & Syntetos, Aris A., 2021. "Quality grading of returns and the dynamics of remanufacturing," International Journal of Production Economics, Elsevier, vol. 236(C).
    15. Lin, Junyi & Zhou, Li & Spiegler, Virginia L.M. & Naim, Mohamed M. & Syntetos, Aris, 2022. "Push or Pull? The impact of ordering policy choice on the dynamics of a hybrid closed-loop supply chain," European Journal of Operational Research, Elsevier, vol. 300(1), pages 282-295.
    16. Bowei Xu & Junjun Li & Yongsheng Yang & Huafeng Wu & Octavian Postolache, 2019. "Model and Resilience Analysis for Handling Chain Systems in Container Ports," Complexity, Hindawi, vol. 2019, pages 1-12, July.
    17. Ponte, Borja & Framinan, Jose M. & Cannella, Salvatore & Dominguez, Roberto, 2020. "Quantifying the Bullwhip Effect in closed-loop supply chains: The interplay of information transparencies, return rates, and lead times," International Journal of Production Economics, Elsevier, vol. 230(C).
    18. Xiaodong Zhu & Lingfei Yu & Ji Zhang & Chenliang Li & Yizhao Zhao, 2018. "Warranty Decision Model and Remanufacturing Coordination Mechanism in Closed-Loop Supply Chain: View from a Consumer Behavior Perspective," Sustainability, MDPI, vol. 10(12), pages 1-21, December.
    19. Niu, Baozhuang & Li, Qiyang & Mu, Zihao & Chen, Lei & Ji, Ping, 2021. "Platform logistics or self-logistics? Restaurants’ cooperation with online food-delivery platform considering profitability and sustainability," International Journal of Production Economics, Elsevier, vol. 234(C).
    20. Hosoda, Takamichi & Disney, Stephen M. & Zhou, Li, 2021. "The yield rate paradox in closed-loop supply chains," International Journal of Production Economics, Elsevier, vol. 239(C).
    21. Qiao, Haike & Su, Qin, 2021. "Distribution channel and licensing strategy choice considering consumer online reviews in a closed-loop supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 151(C).
    22. Duong, Quang Huy & Zhou, Li & Meng, Meng & Nguyen, Truong Van & Ieromonachou, Petros & Nguyen, Duy Tiep, 2022. "Understanding product returns: A systematic literature review using machine learning and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 243(C).
    23. Centobelli, Piera & Cerchione, Roberto & Esposito, Emilio & Passaro, Renato & Shashi,, 2021. "Determinants of the transition towards circular economy in SMEs: A sustainable supply chain management perspective," International Journal of Production Economics, Elsevier, vol. 242(C).
    24. Dominguez, Roberto & Cannella, Salvatore & Barbosa-Póvoa, Ana P. & Framinan, Jose M., 2018. "OVAP: A strategy to implement partial information sharing among supply chain retailers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 110(C), pages 122-136.

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