Coordination of closed loop supply chains through buyback contract

Abstract

ABSTRACT This paper focuses on the coordination issues in the context of a CLSC system comprising a manufacturer and a retailer. We develop mathematical models under a buyback contract in the forward supply chain (FSC) with and without Stackelberg gaming. Compared to the case with no contracts, the numerical analysis carried out shows that the proposed models consistently provide better total SC profit, enhance the manufacturer’s profit and, in many cases, improve both players’ profits. For the model without gaming, we derive values for the buyback price that coordinate the SC and further derive ranges for the parameters where both partners are better off profitwise as compared to the no-contract case under the Stackelberg game scenario. The numerical analysis indicates that the non-gaming model always outperforms the gaming one in terms of total SC expected profit and suggests that for higher demand uncertainties, the SC members are better off profitwise at lower values of the buyback price.