An integrated contract for coordinating a three-stage green forward and reverse supply chain under fairness concerns

Abstract

Today’s competitive business environment implies the integration of industrial and environmental policies leading to greener supply chains. This paper considers an integrated three-stage forward and reverse supply chain, which provides new and remanufactured green products to a green conscious market. Both the manufacturer and the remanufacturer invest on green manufacturing processes. Our research problem is the coordination of this integrated green supply chain through contracts. We develop an integrated two-part tariff contract so that all supply chain members act rationally according to the centralized solution. Along with its coordination ability, we also develop a mathematical model to determine the contract parameters so that the contract is fair and each supply chain member benefits from the contract almost evenly. The results denote that as the consumers become more sensitive to the greening levels of new and remanufactured products, the manufacturer and the remanufacturer determine higher greening levels; also the demands for both types of green products increase; and the overall supply chain earns more profit. As more green products are sold, collector becomes more sufficient to collect used products from the market, which also increases the remanufacturer’s greening level, the demand for remanufactured products, and the profit of the overall supply chain. Thus, a greening initiative has a positive impact on the others; and this leads to a more successful supply chain both in environmental and economic dimensions.