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The economics of a closed-loop supply chain with remanufacturing

Author

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  • J-M Chen

    (National Central University, Jhongli City, Taiwan, R.O.C.)

  • C-I Chang

    (National Central University, Jhongli City, Taiwan, R.O.C.)

Abstract

This study deals with joint decisions on pricing and production lot-sizing in a closed-loop supply chain consisting of manufacturing and remanufacturing operations. This study emphasizes the economic analysis of this hybrid system with substitution between the new and the remanufactured versions of the same product. We develop analytical models under a newsvendor framework bearing the following questions in mind. Can a hybrid system operate cost-effectively? Can it outperform the manufacturing-only system? If yes, to what extent and under what conditions? If not, what are the key factors that cause underperformance? This study formulates a multi-variable optimization problem and performs mathematical and numerical analysis. Results show that the hybrid system does not outperform the manufacturing-only system under a generic setting, but achieves better performance under conditions with a higher degree of substitution and/or a lower remanufacturing cost. In this scenario, participating in remanufacturing is not only an issue of environmental responsibility, but a profit-boosting option.

Suggested Citation

  • J-M Chen & C-I Chang, 2012. "The economics of a closed-loop supply chain with remanufacturing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(10), pages 1323-1335, October.
    • Handle: RePEc:pal:jorsoc:v:63:y:2012:i:10:p:1323-1335
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    Citations

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    Cited by:

    1. Jen-Ming Chen & Chia-I Chang, 2012. "The economics of hybrid manufacturing systems in a closed-loop supply chain," Netnomics, Springer, vol. 13(2), pages 79-91, July.
    2. 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.
    3. He, Yuanjie, 2017. "Supply risk sharing in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 39-52.
    4. Jianbin Li & Qifei Wang & Hong Yan & Stuart X. Zhu, 2016. "Optimal Remanufacturing and Pricing Strategies Under Name-Your-Own-Price Auctions and Stochastic Demand," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(01), pages 1-22, February.
    5. Luttiely Santos Oliveira & Ricardo Luiz Machado, 2021. "Application of optimization methods in the closed-loop supply chain: a literature review," Journal of Combinatorial Optimization, Springer, vol. 41(2), pages 357-400, February.
    6. Mitra, Subrata, 2016. "Models to explore remanufacturing as a competitive strategy under duopoly," Omega, Elsevier, vol. 59(PB), pages 215-227.
    7. Zongbao Zou & Fan Wang & Xiaofan Lai & Jingxian Hong, 2019. "How Does Licensing Remanufacturing Affect the Supply Chain Considering Customer Environmental Awareness?," Sustainability, MDPI, vol. 11(7), pages 1-23, March.
    8. 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.
    9. 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.

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