IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i21p11839-d665260.html
   My bibliography  Save this article

Remanufacturing for Circular Economy: Understanding the Impact of Manufacturer’s Incentive under Price Competition

Author

Listed:
  • Deepak Singhal

    (School of Mechanical Engineering, KIIT Deemed to be University, Bhubaneswar, Odisha 751024, India)

  • Sarat Kumar Jena

    (Operations Management School, Xavier Institute of Management, XIM University, Bhubaneswar, Odisha 751024, India)

  • Satyabrata Aich

    (Wellmatix Co., Ltd., Changwon 51395, Korea)

  • Sushanta Tripathy

    (School of Mechanical Engineering, KIIT Deemed to be University, Bhubaneswar, Odisha 751024, India)

  • Hee-Cheol Kim

    (College of AI Convergence/Institute of Digital Anti-aging Healthcare/u-AHRC, Inje University, Gimhae 50834, Korea)

Abstract

Business organizations all around the globe are looking to expand circular models into their supply chains to harness economic and environmental benefits. Moreover, the act of giving incentives to retailers by the manufacturer is also quite prevalent in the present business environment. These incentives are offered to promote the sales of products of a manufacturer. Therefore, this paper examines the optimal decisions for a dual-retailer closed-loop supply chain (CLSC) in which the manufacturer bestows the credit period to the one retailer (a firm that possesses shallow market penetration and has a higher insistence on the usage of the capital venture), and cash discount to the next retailer (a firm that occupies the market to a greater extent and receives lower thrust on the usage of invested capital) under a non-coordinated system and coordinated systems. This study proposes the mathematical model to determine the optimal decisions of the manufacturer in terms of credit period and cash discount and also compute the optimal decisions of the retailers for their retail prices and order quantities to maximize individual’s profit in the CLSC. Moreover, numerical analysis and sensitivity analysis is performed to get insights into the optimal decisions of the manufacturer and retailers. The results of sensitivity analysis show that credit period and cash discount increases with the rise in price elasticity, and decreases with an increase in cross-price elasticity. The findings also confirm that members of dual-retailer CLSC under coordination and manufacture’s incentive scenario generate higher environmental and economic benefits required to attain sustainability in production and consumption.

Suggested Citation

  • Deepak Singhal & Sarat Kumar Jena & Satyabrata Aich & Sushanta Tripathy & Hee-Cheol Kim, 2021. "Remanufacturing for Circular Economy: Understanding the Impact of Manufacturer’s Incentive under Price Competition," Sustainability, MDPI, vol. 13(21), pages 1-19, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:21:p:11839-:d:665260
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/21/11839/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/21/11839/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chen, Jen-Ming & Chang, Chia-I, 2013. "Dynamic pricing for new and remanufactured products in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 146(1), pages 153-160.
    2. Zhi Li & Yangyang Xu & Fumin Deng & Xuedong Liang, 2017. "Impacts of Power Structure on Sustainable Supply Chain Management," Sustainability, MDPI, vol. 10(1), pages 1-10, December.
    3. Ravi Subramanian & Ramanath Subramanyam, 2012. "Key Factors in the Market for Remanufactured Products," Manufacturing & Service Operations Management, INFORMS, vol. 14(2), pages 315-326, April.
    4. Yanting Huang, 2018. "A Closed-Loop Supply Chain with Trade-In Strategy under Retail Competition," Mathematical Problems in Engineering, Hindawi, vol. 2018, pages 1-16, January.
    5. Xiaoli Wang & Zhiyong Zhang & Lei Yang & Jun Zhao, 2021. "Price and capacity decisions in a telemedicine service system under government subsidy policy," International Journal of Production Research, Taylor & Francis Journals, vol. 59(17), pages 5130-5143, September.
    6. Tsao, Yu-Chung & Sheen, Gwo-Ji, 2012. "A multi-item supply chain with credit periods and weight freight cost discounts," International Journal of Production Economics, Elsevier, vol. 135(1), pages 106-115.
    7. K. Nageswara Reddy & Akhilesh Kumar, 2021. "Capacity investment and inventory planning for a hybrid manufacturing – remanufacturing system in the circular economy," International Journal of Production Research, Taylor & Francis Journals, vol. 59(8), pages 2450-2478, April.
    8. Cai, Gangshu (George) & Zhang, Zhe George & Zhang, Michael, 2009. "Game theoretical perspectives on dual-channel supply chain competition with price discounts and pricing schemes," International Journal of Production Economics, Elsevier, vol. 117(1), pages 80-96, January.
    9. Jiafu Su & Chi Li & Sang-Bing Tsai & Hui Lu & Aijun Liu & Quan Chen, 2018. "A Sustainable Closed-Loop Supply Chain Decision Mechanism in the Electronic Sector," Sustainability, MDPI, vol. 10(4), pages 1-15, April.
    10. Tetiana Shevchenko & Kirsi Laitala & Yuriy Danko, 2019. "Understanding Consumer E-Waste Recycling Behavior: Introducing a New Economic Incentive to Increase the Collection Rates," Sustainability, MDPI, vol. 11(9), pages 1-20, May.
    11. Kumar Jena, Sarat & Sarmah, S.P, 2014. "Price competition and co-operation in a duopoly closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 156(C), pages 346-360.
    12. Kirchherr, Julian & Reike, Denise & Hekkert, Marko, 2017. "Conceptualizing the circular economy: An analysis of 114 definitions," Resources, Conservation & Recycling, Elsevier, vol. 127(C), pages 221-232.
    13. Marcos Ferasso & Tatiana Beliaeva & Sascha Kraus & Thomas Clauss & Domingo Ribeiro‐Soriano, 2020. "Circular economy business models: The state of research and avenues ahead," Business Strategy and the Environment, Wiley Blackwell, vol. 29(8), pages 3006-3024, December.
    14. 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.
    15. 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.
    16. Abad, P. L. & Jaggi, C. K., 2003. "A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive," International Journal of Production Economics, Elsevier, vol. 83(2), pages 115-122, February.
    17. Mitra, Supriya & Webster, Scott, 2008. "Competition in remanufacturing and the effects of government subsidies," International Journal of Production Economics, Elsevier, vol. 111(2), pages 287-298, February.
    18. 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.
    19. Choi, Dae-Won & Hwang, Hark & Koh, Shie-Gheun, 2007. "A generalized ordering and recovery policy for reusable items," European Journal of Operational Research, Elsevier, vol. 182(2), pages 764-774, October.
    20. Omar Alhawari & Usama Awan & M. Khurrum S. Bhutta & M. Ali Ülkü, 2021. "Insights from Circular Economy Literature: A Review of Extant Definitions and Unravelling Paths to Future Research," Sustainability, MDPI, vol. 13(2), pages 1-22, January.
    21. R. Canan Savaskan & Shantanu Bhattacharya & Luk N. Van Wassenhove, 2004. "Closed-Loop Supply Chain Models with Product Remanufacturing," Management Science, INFORMS, vol. 50(2), pages 239-252, February.
    22. X Li & Y Li & K Govindan, 2014. "An incentive model for closed-loop supply chain under the EPR law," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 65(1), pages 88-96, January.
    23. Wu, Cheng-Han, 2012. "Price and service competition between new and remanufactured products in a two-echelon supply chain," International Journal of Production Economics, Elsevier, vol. 140(1), pages 496-507.
    24. Benjamin T. Hazen & Diane A. Mollenkopf & Yacan Wang, 2017. "Remanufacturing for the Circular Economy: An Examination of Consumer Switching Behavior," Business Strategy and the Environment, Wiley Blackwell, vol. 26(4), pages 451-464, May.
    25. van der Laan, Erwin & Salomon, Marc, 1997. "Production planning and inventory control with remanufacturing and disposal," European Journal of Operational Research, Elsevier, vol. 102(2), pages 264-278, October.
    26. Cheng Che & Xiaoguang Zhang & Yi Chen & Liangyan Zhao & Zhihong Zhang, 2021. "A Model of Waste Price in a Symbiotic Supply Chain Based on Stackelberg Algorithm," Sustainability, MDPI, vol. 13(4), pages 1-25, February.
    27. He, Peng & He, Yong & Xu, Henry, 2019. "Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy," International Journal of Production Economics, Elsevier, vol. 213(C), pages 108-123.
    28. Leonidas Milios & Mitsutaka Matsumoto, 2019. "Consumer Perception of Remanufactured Automotive Parts and Policy Implications for Transitioning to a Circular Economy in Sweden," Sustainability, MDPI, vol. 11(22), pages 1-15, November.
    29. Shah, Nita H. & Cárdenas-Barrón, Leopoldo Eduardo, 2015. "Retailer’s decision for ordering and credit policies for deteriorating items when a supplier offers order-linked credit period or cash discount," Applied Mathematics and Computation, Elsevier, vol. 259(C), pages 569-578.
    30. R. Canan Savaskan & Luk N. Van Wassenhove, 2006. "Reverse Channel Design: The Case of Competing Retailers," Management Science, INFORMS, vol. 52(1), pages 1-14, January.
    31. Gan Wan & Gang Kou & Tie Li & Feng Xiao & Yang Chen, 2020. "Pricing Policies in a Retailer Stackelberg O2O Green Supply Chain," Sustainability, MDPI, vol. 12(8), pages 1-16, April.
    32. Xiaochen Sun & Yancong Zhou & Yongjian Li & Kannan Govindan & Xiaonan Han, 2020. "Differentiation competition between new and remanufactured products considering third-party remanufacturing," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 71(1), pages 161-180, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xuemei Zhang & Jian Cao & Yang Zhao & Jiansha Lu, 2022. "Fairness Concern in Remanufacturing Supply Chain—A Comparative Analysis of Channel Members’ Fairness Preferences," Sustainability, MDPI, vol. 14(7), pages 1-23, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ehsan Shekarian & Simme Douwe Flapper, 2021. "Analyzing the Structure of Closed-Loop Supply Chains: A Game Theory Perspective," Sustainability, MDPI, vol. 13(3), pages 1-32, January.
    2. Pietro De Giovanni & Georges Zaccour, 2022. "A selective survey of game-theoretic models of closed-loop supply chains," Annals of Operations Research, Springer, vol. 314(1), pages 77-116, July.
    3. Lijun Meng & Qiang Qiang & Zuqing Huang & Baoyou Zhang & Yuxiang Yang, 2020. "Optimal Pricing Strategy and Government Consumption Subsidy Policy in Closed-Loop Supply Chain with Third-Party Remanufacturer," Sustainability, MDPI, vol. 12(6), pages 1-29, March.
    4. 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.
    5. Kumar Jena, Sarat & Sarmah, S.P, 2014. "Price competition and co-operation in a duopoly closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 156(C), pages 346-360.
    6. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    7. Usama Awan & Robert Sroufe & Karoly Bozan, 2022. "Designing Value Chains for Industry 4.0 and a Circular Economy: A Review of the Literature," Sustainability, MDPI, vol. 14(12), pages 1-20, June.
    8. He, Peng & He, Yong & Xu, Henry, 2019. "Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy," International Journal of Production Economics, Elsevier, vol. 213(C), pages 108-123.
    9. Matsui, Kenji, 2023. "Dual-recycling channel reverse supply chain design of recycling platforms under acquisition price competition," International Journal of Production Economics, Elsevier, vol. 259(C).
    10. Jena, Sarat Kumar & Meena, Purushottam, 2022. "Competitive sustainable processes and pricing decisions in omnichannel closed-up supply chains under different channel power structures," Journal of Retailing and Consumer Services, Elsevier, vol. 69(C).
    11. He, Qidong & Wang, Nengmin & Browning, Tyson R. & Jiang, Bin, 2022. "Competitive collection with convenience-perceived customers," European Journal of Operational Research, Elsevier, vol. 303(1), pages 239-254.
    12. Maiti, T. & Giri, B.C., 2017. "Two-way product recovery in a closed-loop supply chain with variable markup under price and quality dependent demand," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 259-272.
    13. Taleizadeh, Ata Allah & Sadeghi, Razieh, 2019. "Pricing strategies in the competitive reverse supply chains with traditional and e-channels: A game theoretic approach," International Journal of Production Economics, Elsevier, vol. 215(C), pages 48-60.
    14. Hui Li & Chuanxu Wang & Meng Shang & Wei Ou, 2017. "Pricing, Carbon Emission Reduction, Low-Carbon Promotion and Returning Decision in a Closed-Loop Supply Chain under Vertical and Horizontal Cooperation," IJERPH, MDPI, vol. 14(11), pages 1-26, November.
    15. Hong, Xianpei & Govindan, Kannan & Xu, Lei & Du, Peng, 2017. "Quantity and collection decisions in a closed-loop supply chain with technology licensing," European Journal of Operational Research, Elsevier, vol. 256(3), pages 820-829.
    16. Wang, Nengmin & He, Qidong & Jiang, Bin, 2019. "Hybrid closed-loop supply chains with competition in recycling and product markets," International Journal of Production Economics, Elsevier, vol. 217(C), pages 246-258.
    17. Ma, Peng & Gong, Yeming & Mirchandani, Prakash, 2020. "Trade-in for remanufactured products: Pricing with double reference effects," International Journal of Production Economics, Elsevier, vol. 230(C).
    18. Ghosh, Debabrata & Gouda, Sirish & Shankar, Ravi & Swami, Sanjeev & Thomas, Vinu Cheruvil, 2018. "Strategic decision making under subscription-based contracts for remanufacturing," International Journal of Production Economics, Elsevier, vol. 200(C), pages 134-150.
    19. Kai Liu & Chunfa Li & Runde Gu, 2021. "Pricing and Logistics Service Decisions in Platform-Led Electronic Closed-Loop Supply Chain with Remanufacturing," Sustainability, MDPI, vol. 13(20), pages 1-28, October.
    20. Shizhen Bai & Ling Ge & Xuelian Zhang, 2022. "Platform or direct channel: government-subsidized recycling strategies for WEEE," Information Systems and e-Business Management, Springer, vol. 20(2), pages 347-369, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:21:p:11839-:d:665260. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.