Collective Recycling Responsibility in Closed-Loop Fashion Supply Chains with a Third Party: Financial Sharing or Physical Sharing?

Abstract

We develop three closed-loop supply chain models where manufacturers can utilize financial or physical support to push a third party to collect the used fashion product for remanufacturing. We first examine two strategies for the collective recycling responsibility (CRR), namely, the financial sharing (FS) and the physical sharing (PS), using the model with no CRR as a benchmark. After that, we conduct a detailed comparison among the three models in terms of the retail price, demand, return rate, and the profits received by the supply chain members. With this study, we find the following. (i) The FS or PS support offered by the manufacturer to the third party will result in a lower retail price and a higher demand. (ii) The optimal return rate with PS scheme is always higher than that without the CRR, and the one with FS scheme is at least as high as that without the CRR. (iii) All the members in the closed-loop supply chain can always benefit from the CRR. In addition, (iv) which scheme of the FS, PS, or no CRR is the best for the supply chain members will depend heavily on the transfer price of the used product.