A closed-loop supply chain operation decision under life cycle: Ecological design, service design and recycling effort perspectives

Abstract

The commercial, environmental and social value of closed-loop supply chain (CLSC) has been widely recognised in the literature. Enterprises are increasingly aware of the importance of product life cycle management; that is, enterprises conduct CLSC management of the production, use and recycling of products. Existing research lacks research on CLSC operation decision under product life cycle. This paper introduces ecological design, service design and recycling into a CLSC with the manufacturer, retailer and recycler. Stackelberg models considering different leadership structures and service design providers are constructed using game theory, and we use backward induction to solve the game in different cases. Results show that from the system-operating efficiency and total profits maximisation perspectives, the recycler-led is always the most effective. However, for the selection of the optimal service design provider, when the manufacturer (retailer) is the leader, the retailer (manufacturer) providing the service design should be the dominant strategy. When the recycler is the leader, the effect is the same no matter who provides the service design. Finally, we find an interesting conclusion that in the case of retailer provides service design, supply chain members do not always achieve the highest profits under their own leadership structure. The numerical analysis shows that when the consumer’s preference for service design is greater than 6.3, the manufacturer can obtain greater profits under the recycler-led structure, and when consumer’s preference for ecological design is greater than 7.1, the retailer can gain greater profits under the recycler-led structure.