Bullwhip effect in closed-loop supply chains with multiple reverse flows: a simulation study

Abstract

Due to the complex nature of some products and the different quality of returns, in closed-loop supply chains there might be different types of reverse processes and reverse flows, including repaired, refurbished, remanufactured, or recycled goods. These reprocessed goods return to different echelons of the supply chain according to their quality, and the volume of each type of reverse flow (i.e. the returns share) may significantly vary between different supply chains, affecting the dynamic behaviour of the entire system. The aim of this work is to explore the impact of the volume of returns among multiple reverse flows in a closed-loop supply chain where each member can have its own reverse flow. We analyse a four-echelon closed-loop supply chain, where a collector is in charge of collecting and inspecting the returns and sending them to the different echelons depending on their quality. An agent-based simulation model considering different return rates, coefficient of variations for the forward lead times, and returns share is developed and evaluated in terms of bullwhip effect. We observe that considerable volume and medium–low quality of the returns enable bullwhip effect reduction in systems where returns are shared among all the members of the supply chain. However, in single reverse flow closed-loop supply chains, moderate volume and high quality of the returns are preferable to gain improvements both in terms of order and inventory variability. From a managerial point of view, we provide useful recommendations for companies adopting closed-loop.