2004 | R. Canan SAVASKAN, Shantanu BHATTACHARYA, Luk N. VAN WASSENHOVE
This paper examines the impact of different reverse channel structures on the forward channel decisions and used-product return rates in closed-loop supply chains. The authors consider three scenarios: (1) the manufacturer collects used products directly from customers, (2) the manufacturer contracts the collection to a retailer, and (3) the manufacturer contracts the collection to a third party. They model these scenarios as decentralized decision-making systems with the manufacturer as the Stackelberg leader. The study finds that the retailer, being closer to the market, is more effective in collecting used products and can efficiently reflect cost savings from remanufacturing in the final price, thereby optimizing the investment in used-product collection. The manufacturer, facing double marginalization, is less effective in coordinating pricing and return rates. The third-party model is less preferred due to direct costs and reduced profitability. The paper also demonstrates that the manufacturer can improve the profits in the retailer-collecting model by using a single two-part tariff, which coordinates both forward and reverse channel decisions. The findings highlight the importance of channel structure in enhancing profits, market demand, and used-product return rates.This paper examines the impact of different reverse channel structures on the forward channel decisions and used-product return rates in closed-loop supply chains. The authors consider three scenarios: (1) the manufacturer collects used products directly from customers, (2) the manufacturer contracts the collection to a retailer, and (3) the manufacturer contracts the collection to a third party. They model these scenarios as decentralized decision-making systems with the manufacturer as the Stackelberg leader. The study finds that the retailer, being closer to the market, is more effective in collecting used products and can efficiently reflect cost savings from remanufacturing in the final price, thereby optimizing the investment in used-product collection. The manufacturer, facing double marginalization, is less effective in coordinating pricing and return rates. The third-party model is less preferred due to direct costs and reduced profitability. The paper also demonstrates that the manufacturer can improve the profits in the retailer-collecting model by using a single two-part tariff, which coordinates both forward and reverse channel decisions. The findings highlight the importance of channel structure in enhancing profits, market demand, and used-product return rates.