2004 | R. Canan Savaskan, Shantanu Bhattacharya, Luk N. Van Wassenhove
This paper examines closed-loop supply chain models with product remanufacturing, focusing on the optimal choice of reverse channel structures for collecting used products. The study considers three options for product collection: (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. The analysis shows that the retailer, being closer to the customer, is the most effective agent for product collection. Simple coordination mechanisms can align the retailer's collection efforts and supply chain profits with those of a centrally coordinated system.
The paper highlights the importance of remanufacturing in sustainable manufacturing and the role of reverse logistics in enabling product reuse. It demonstrates that the retailer has a dual role in closed-loop supply chains, influencing both product pricing and collection efforts. The manufacturer faces challenges in coordinating pricing and return rates due to double marginalization. The third-party model is less preferred as it incurs direct costs and reduces profitability.
The study compares different supply chain models, showing that the centrally coordinated system achieves the highest product return rates and profits. The manufacturer can improve profits in the retailer-collecting model by using a two-part tariff to coordinate forward and reverse channel decisions. The paper also discusses the implications of different reverse channel structures on supply chain performance, emphasizing the importance of aligning incentives and costs.
Key findings include the importance of the retailer's proximity to the market in driving product collection efficiency, the role of coordination mechanisms in aligning supply chain objectives, and the trade-offs between different reverse channel structures. The paper contributes to the understanding of closed-loop supply chain design, highlighting the need for strategic choices in channel structures to optimize sustainability and profitability.This paper examines closed-loop supply chain models with product remanufacturing, focusing on the optimal choice of reverse channel structures for collecting used products. The study considers three options for product collection: (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. The analysis shows that the retailer, being closer to the customer, is the most effective agent for product collection. Simple coordination mechanisms can align the retailer's collection efforts and supply chain profits with those of a centrally coordinated system.
The paper highlights the importance of remanufacturing in sustainable manufacturing and the role of reverse logistics in enabling product reuse. It demonstrates that the retailer has a dual role in closed-loop supply chains, influencing both product pricing and collection efforts. The manufacturer faces challenges in coordinating pricing and return rates due to double marginalization. The third-party model is less preferred as it incurs direct costs and reduces profitability.
The study compares different supply chain models, showing that the centrally coordinated system achieves the highest product return rates and profits. The manufacturer can improve profits in the retailer-collecting model by using a two-part tariff to coordinate forward and reverse channel decisions. The paper also discusses the implications of different reverse channel structures on supply chain performance, emphasizing the importance of aligning incentives and costs.
Key findings include the importance of the retailer's proximity to the market in driving product collection efficiency, the role of coordination mechanisms in aligning supply chain objectives, and the trade-offs between different reverse channel structures. The paper contributes to the understanding of closed-loop supply chain design, highlighting the need for strategic choices in channel structures to optimize sustainability and profitability.