Closed-loop supply chain models with product remanufacturing

Closed-loop supply chain models with product remanufacturing

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Article ID: iaor20073288
Country: United States
Volume: 50
Issue: 2
Start Page Number: 239
End Page Number: 252
Publication Date: Feb 2004
Journal: Management Science
Authors: , ,
Keywords: remanufacturing
Abstract:

The importance of remanufacturing used products into new ones has been widely recognized in the literature and in practice. In this paper, we address the problem of choosing the appropriate reverse channel structure for the collection of used products from customers. Specifically, we consider a manufacturer who has three options for collecting such products: (1) she can collect them herself directly from the customers, (2) she can provide suitable incentives to an existing retailer (who already has a distribution channel) to induce the collection, or (3) she can subcontract the collection activity to a third party. Based on our observations in the industry, we model the three options described above as decentralized decision-making systems with the manufacturer being the Stackelberg leader. When considering decentralized channels, we find that ceteris paribus, the agent, who is closer to the customer (i.e., the retailer), is the most effective undertaker of product collection activity for the manufacturer. In addition, we show that simple coordination mechanisms can be designed such that the collection effort of the retailer and the supply chain profits are attained at the same level as in a centrally coordinated system.

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