What is the role of value-added service in a remanufacturing closed-loop supply chain?

Abstract

While the previous literature overlooks value-added service in a closed-loop supply chain (CLSC), we consider new research problems with embedding value-added service into remanufacturing models. In this paper, we mainly study the role of value-added service in a CLSC and investigate how the value-added service influences profits and other decision variables. Then, we evaluate the performance of the CLSC in different service structures, where a manufacturer or a retailer provide the value-added service. Systematic comparisons and numerical studies show that the supply chain is more effective when service is provided by a manufacturer rather than by a retailer. Also, value-added service improves the whole supply chain performance and plays a regulatory role in a CLSC and influences the decisions of supply chain members. We also show that while a service cost-sharing mechanism can only optimise rather than achieve the supply chain coordination, and the degree of optimisation depends on cost-sharing percentage, the two-part tariff contract can be an effective mechanism to coordinate decentralised service scenarios by generating the same supply chain performance in a centralised service architecture model.

Keywords:

• supply chain management
• remanufacturing
• value-added service
• supply chain coordination
• two-part tariff contract

Acknowledgement

The authors sincerely thank the editor and the anonymous reviewers for their constructive and important comments on the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research was supported in part by the NSFC [grant number 71672071; 71620107002], NSSFC[16ZDA013], and the Fundamental Research Funds for the Central Universities [grant number 2662017PY044]. Yeming Gong is supported by Business Intelligence Center at EMLYON.