Combined location and routing problems for designing the quality-dependent and multi-product reverse logistics network

With a growing awareness of carbon footprints and their impact on environmental degradation, many firms hope to streamline their reverse logistics (RL) operations involving end‐of‐use products. However, managing end‐of‐use products can be extremely challenging due to inherent complexity involved in the collection, sorting, transhipment, and processing of these products. Despite numerous challenges, the efficient handling of these products can be a source of competitive advantages. In this regard, a plastic recycling industry in Southern India is no exception. This industry often copes with the problem of picking up recyclable plastic bottles using private collecting agents, transferring those bottles to the initial collection points (ICPs), and then transhipping and consolidating them at the centralized return centres (CRCs) for final shipments to the processing centres where these bottles were treated for recycling. This problem can be further complicated with the dilemma of finding the most ideal locations of ICPs and CRCs and the optimal routing of vehicles serving ICPs and CRCs such that the total RL cost is minimized. To aid the industry in dealing with such RL problems, we developed a mathematical model and then evaluated the performances of that model with the actual data obtained from a case study of the Indian company. Given a lack of efforts in combining the location‐routing problem with the balanced allocation problem in the closed‐loop supply chain network, the main contribution of this paper includes the simultaneous consideration of location, allocation, and routing decisions. In addition, this paper is one of the first to consider incentive payments, the quality level of products, and multiple types of products.