Reverse channel choice in a closed-loop supply chain with new and differentiated remanufactured goods

ABSTRACT

This study deals with the problem of manufacturer’s choice of alternative reverse channel structures for collecting end-of-use products from consumers. We consider a two-echelon supply chain with one manufacturer and one retailer, based on which three reverse channel formats are proposed: an integrated model, manufacturer collection model, and retailer collection model. The main reason behind developing the models is to investigate how the wholesale price, the retail price, the collection rate, and the total channel profits are affected by the choice of the reverse channel structure. The three models are formulated as supply-constrained multi-variated optimization models and solved by using Lagrangian relaxation scheme. Our research findings suggest that the manufacturer tends to choose the direct collection system for a lower remanufacturing cost and a higher discount valuation of the remanufactured goods and to choose the indirect collection system for a lower collecting cost by the retailer.

KEYWORDS:

• Supply chain management
• channel design
• reverse logistics
• remanufacturing
• pricing
• Lagrangian relaxation

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research was partially supported by the Ministry of Science and Technology, Taiwan [105-2410-H-008-047-MY2, 104-2410-H-008-042-MY3].

Notes on contributors

Jen-Ming Chen

Jen-Ming Chen is a professor in the Institute of Industrial Management at the National Central University (Taiwan). He received a B.S. in Industrial Management Science from the National Cheng Kung University (Taiwan) in 1983, an M.S. in Industrial Engineering from the University of Arizona in 1988, and a Ph.D. in Industrial Engineering from the Pennsylvania State University in 1992. His research interests include inventory and supply chain management, channel coordination, and pricing and yield management. He is an active member of several professional organizations, including Informs, DSI, and IIE. Dr. Chen is the recipient of the George B. Dantzig Dissertation Award from the Informs and the recipient of the IIE Doctorial Dissertation Award, both in 1994.

Chu-Yu Chi

Chu-Yu Chi received an M.S. in the Graduate Institute of Industrial Management at National Central University, Taiwan, 2013. Her research interests include supply chain management, closed loop supply chain management, and remanufacturing.