Closed-loop supply chain models with product recovery and donation

Abstract

Besides economic profits, environmental and social concerns are attracting more and more attention. In this paper, we introduce the environmental responsibility through the product recovery and the social responsibility through the product donation. On the premise that the manufacturer undertakes the product recycling, we consider three distinct donation subjects, viz, the centralized system's donation, the manufacturer's donation and the retailer's donation, and develop a manufacturer-retailer supply chain model to analyze the effect of the product recovery and the donation on the operations management. The results show the product donation under the subsidy incentive expands the demand for the product and increases the collection rate. In terms of two decentralized systems, the members who bear the responsibility of the product donation can obtain more profits. And that the manufacturer undertakes the product donation is a better choice from environmental and social perspectives. From the view of economic profit, that the retailer undertakes the product donation is a better choice only when the collection cost is high and the donation subsidy is low. All decisions in the centralized system are better than those in the other decentralized systems. Thus, we present a two-part tariff contract with bargaining and a retailer-led revenue sharing contract to coordinate two decentralized systems, respectively. The optimal bargaining factor and the revenue-sharing proportion are determined to verify that the two kinds of contracts are feasible.