Coordinating a socially responsible closed-loop supply chain with product recycling

Abstract

This paper analyzes the effects of corporate social responsibility (CSR) and explores channel coordination in a socially responsible manufacturer-retailer closed-loop supply chain (CLSC) by considering two areas – profit maximization and social responsibility through product recycling. The manufacturer is socially responsible and exhibits it by recycling of used product that it collects through the retailer using the reverse channel. It is found that the channel's non-profit maximizing motive through CSR practice generates higher profit margin than the profit maximizing objective and revenue sharing contract resolves channel conflict. Recycling is a key factor for the wholesale price and hence pure profit of the manufacturer because variation of it may lead to decrement or increment even negative wholesale price. Thus, there must be a limit of recycling for optimal benefit. For best channel performance the manufacturer provides the retailer all revenues that it generates through recycling in the form of reward. Thus, CSR is purely a costly endeavor to the manufacturer. Moreover, unlike the pure profit maximizing supply chain CSR has the ability to vary surplus profit share.