IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1909.11633.html
   My bibliography  Save this paper

Considering pricing and uncertainty in designing a reverse logistics network

Author

Listed:
  • Mohsen Zamani
  • Mahdi Abolghasemi
  • Seyed Mohammad Seyed Hosseini
  • Mir Saman Pishvaee

Abstract

Companies try to maximize their profits by recovering returned products of highly uncertain quality and quantity. In this paper, a reverse logistics network for an Original Equipment Manufacturer (OEM) is presented. Returned products are selected for remanufacturing or scrapping, based on their quality and proportional prices are offered to customers. A Mixed Integer Non-linear Programming (MINLP) model is proposed to determine the location of collection centers, the optimum price of returned products and the sorting policy. The risk in the objective function is measured using the Conditional Value at Risk (CVaR) metric. CVaR measures the risk of an investment in a conservative way by considering the maximum lost. The results are analyzed for various values of the risk parameters ({\alpha}, and {\lambda}). These parameters indicate that considering risk affects prices, the classification of returned products, the location of collection centers and, consequently, the objective function. The model performs more conservatively when the weight of the CVaR part ({\lambda}) and the value of the confidence level {\alpha} are increased. The results show that better profits are obtained when we take CVaR into account.

Suggested Citation

  • Mohsen Zamani & Mahdi Abolghasemi & Seyed Mohammad Seyed Hosseini & Mir Saman Pishvaee, 2019. "Considering pricing and uncertainty in designing a reverse logistics network," Papers 1909.11633, arXiv.org.
  • Handle: RePEc:arx:papers:1909.11633
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1909.11633
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Kaya, Onur, 2010. "Incentive and production decisions for remanufacturing operations," European Journal of Operational Research, Elsevier, vol. 201(2), pages 442-453, March.
    3. Pellerin, Robert & Sadr, Javad & Gharbi, Ali & Malhamé, Roland, 2009. "A production rate control policy for stochastic repair and remanufacturing systems," International Journal of Production Economics, Elsevier, vol. 121(1), pages 39-48, September.
    4. Aras, Necati & Aksen, Deniz, 2008. "Locating collection centers for distance- and incentive-dependent returns," International Journal of Production Economics, Elsevier, vol. 111(2), pages 316-333, February.
    5. Reza Babazadeh & Fariborz Jolai & Jafar Razmi, 2015. "Developing scenario-based robust optimisation approaches for the reverse logistics network design problem under uncertain environments," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 20(4), pages 418-440.
    6. Soleimani, Hamed & Govindan, Kannan, 2014. "Reverse logistics network design and planning utilizing conditional value at risk," European Journal of Operational Research, Elsevier, vol. 237(2), pages 487-497.
    7. Robotis, Andreas & Bhattacharya, Shantanu & Van Wassenhove, Luk N., 2005. "The effect of remanufacturing on procurement decisions for resellers in secondary markets," European Journal of Operational Research, Elsevier, vol. 163(3), pages 688-705, June.
    8. Markus Klausner & Chris T. Hendrickson, 2000. "Reverse-Logistics Strategy for Product Take-Back," Interfaces, INFORMS, vol. 30(3), pages 156-165, June.
    9. Tagaras, George & Zikopoulos, Christos, 2008. "Optimal location and value of timely sorting of used items in a remanufacturing supply chain with multiple collection sites," International Journal of Production Economics, Elsevier, vol. 115(2), pages 424-432, October.
    10. Atalay Atasu & Miklos Sarvary & Luk N. Van Wassenhove, 2008. "Remanufacturing as a Marketing Strategy," Management Science, INFORMS, vol. 54(10), pages 1731-1746, October.
    11. Yau, Sheena & Kwon, Roy H. & Scott Rogers, J. & Wu, Desheng, 2011. "Financial and operational decisions in the electricity sector: Contract portfolio optimization with the conditional value-at-risk criterion," International Journal of Production Economics, Elsevier, vol. 134(1), pages 67-77, November.
    12. Jena, Sarat Kumar & Sarmah, S.P., 2016. "Price and service co-opetiton under uncertain demand and condition of used items in a remanufacturing system," International Journal of Production Economics, Elsevier, vol. 173(C), pages 1-21.
    13. Teunter, Ruud H. & Flapper, Simme Douwe P., 2011. "Optimal core acquisition and remanufacturing policies under uncertain core quality fractions," European Journal of Operational Research, Elsevier, vol. 210(2), pages 241-248, April.
    14. Qiang, Qiang & Ke, Ke & Anderson, Trisha & Dong, June, 2013. "The closed-loop supply chain network with competition, distribution channel investment, and uncertainties," Omega, Elsevier, vol. 41(2), pages 186-194.
    15. Min, Hokey & Jeung Ko, Hyun & Seong Ko, Chang, 2006. "A genetic algorithm approach to developing the multi-echelon reverse logistics network for product returns," Omega, Elsevier, vol. 34(1), pages 56-69, January.
    16. Rockafellar, R. Tyrrell & Uryasev, Stanislav, 2002. "Conditional value-at-risk for general loss distributions," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1443-1471, July.
    17. Pokharel, Shaligram & Liang, Yijiong, 2012. "A model to evaluate acquisition price and quantity of used products for remanufacturing," International Journal of Production Economics, Elsevier, vol. 138(1), pages 170-176.
    18. Ferrer, Geraldo & Swaminathan, Jayashankar M., 2010. "Managing new and differentiated remanufactured products," European Journal of Operational Research, Elsevier, vol. 203(2), pages 370-379, June.
    19. V. Daniel R. Guide, Jr. & Ruud H. Teunter & Luk N. Van Wassenhove, 2003. "Matching Demand and Supply to Maximize Profits from Remanufacturing," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 303-316, October.
    20. Benati, Stefano, 2003. "The optimal portfolio problem with coherent risk measure constraints," European Journal of Operational Research, Elsevier, vol. 150(3), pages 572-584, November.
    21. Wu, Cheng-Han, 2013. "OEM product design in a price competition with remanufactured product," Omega, Elsevier, vol. 41(2), pages 287-298.
    22. V. Daniel R. Guide & Luk N. Van Wassenhove, 2009. "OR FORUM---The Evolution of Closed-Loop Supply Chain Research," Operations Research, INFORMS, vol. 57(1), pages 10-18, February.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Gan, Shu-San & Pujawan, I Nyoman & Suparno, & Widodo, Basuki, 2018. "Pricing decisions for short life-cycle product in a closed-loop supply chain with random yield and random demands," Operations Research Perspectives, Elsevier, vol. 5(C), pages 174-190.
    3. Xue, Dongmei & Teunter, Ruud H. & Zhu, Stuart X. & Zhou, Weihua, 2021. "Entering the high-end market by collecting and remanufacturing a competitor’s high-end cores," Omega, Elsevier, vol. 99(C).
    4. Gernot Lechner & Marc Reimann, 2013. "The effect of active used product acquisition on manufacturing and remanufacturing strategies," Working Paper Series, Social and Economic Sciences 2013-01, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    5. Govindan, Kannan & Soleimani, Hamed & Kannan, Devika, 2015. "Reverse logistics and closed-loop supply chain: A comprehensive review to explore the future," European Journal of Operational Research, Elsevier, vol. 240(3), pages 603-626.
    6. 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.
    7. Xiong, Yu & Zhou, Yu & Li, Gendao & Chan, Hing-Kai & Xiong, Zhongkai, 2013. "Don’t forget your supplier when remanufacturing," European Journal of Operational Research, Elsevier, vol. 230(1), pages 15-25.
    8. Rafael Diaz & Erika Marsillac, 2017. "Evaluating strategic remanufacturing supply chain decisions," International Journal of Production Research, Taylor & Francis Journals, vol. 55(9), pages 2522-2539, May.
    9. Gan, Shu San & Pujawan, I. Nyoman & Suparno, & Widodo, Basuki, 2015. "Pricing decision model for new and remanufactured short-life cycle products with time-dependent demand," Operations Research Perspectives, Elsevier, vol. 2(C), pages 1-12.
    10. 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.
    11. Mitra, Subrata, 2016. "Models to explore remanufacturing as a competitive strategy under duopoly," Omega, Elsevier, vol. 59(PB), pages 215-227.
    12. Pokharel, Shaligram & Liang, Yijiong, 2012. "A model to evaluate acquisition price and quantity of used products for remanufacturing," International Journal of Production Economics, Elsevier, vol. 138(1), pages 170-176.
    13. Wenyuan Wang & Daniel Y. Mo & Yue Wang & Mitchell M. Tseng, 2019. "Assessing the cost structure of component reuse in a product family for remanufacturing," Journal of Intelligent Manufacturing, Springer, vol. 30(2), pages 575-587, February.
    14. Bagheri Hosseini, Mozhde & Dehghanian, Farzad & Salari, Majid, 2019. "Selective capacitated location-routing problem with incentive-dependent returns in designing used products collection network," European Journal of Operational Research, Elsevier, vol. 272(2), pages 655-673.
    15. Huang, Yanting & Wang, Zongjun, 2017. "Information sharing in a closed-loop supply chain with technology licensing," International Journal of Production Economics, Elsevier, vol. 191(C), pages 113-127.
    16. Ehsan Shekarian & Simme Douwe Flapper, 2021. "Analyzing the Structure of Closed-Loop Supply Chains: A Game Theory Perspective," Sustainability, MDPI, Open Access Journal, vol. 13(3), pages 1-32, January.
    17. Li, Gendao & Reimann, Marc & Zhang, Weihua, 2018. "When remanufacturing meets product quality improvement: The impact of production cost," European Journal of Operational Research, Elsevier, vol. 271(3), pages 913-925.
    18. 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.
    19. Das, Kanchan & Chowdhury, Abdul H., 2012. "Designing a reverse logistics network for optimal collection, recovery and quality-based product-mix planning," International Journal of Production Economics, Elsevier, vol. 135(1), pages 209-221.
    20. Wenyuan Wang & Daniel Y. Mo & Yue Wang & Mitchell M. Tseng, 0. "Assessing the cost structure of component reuse in a product family for remanufacturing," Journal of Intelligent Manufacturing, Springer, vol. 0, pages 1-13.

    More about this item

    Statistics

    Access and download statistics

    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:arx:papers:1909.11633. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators). General contact details of provider: http://arxiv.org/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.