Coordination strategies in a three-echelon reverse supply chain for economic and social benefit

Abstract

• The four coordination strategies of a three-echelon reverse supply chain are studied. • Optimal coordination policies in four models are compared. • The completely centralized model maximizes the total channel profit as well as the recycle quantity. • The utilization ratio of used products as well as the magnitude of market size could significantly affects the optimal policy. In addition to seeking profit maximization, reverse supply chains should further seek to maximize social benefit. Consequently, this paper investigates the coordination strategies among different parties in a three-echelon reverse supply chain consisting of a single collector, a single remanufacturer, and two retailers with complete information sharing. Additionally, this paper discusses four coordination strategies and performs a detailed comparative analysis on the optimal decisions of different models. Three numerical analyses are performed to show how the potential market demand of remanufactured products and the utilization ratio of used products affect the optimal total channel profit, recycle quantity and retail prices among four models in a reverse supply chain. The results indicate that optimal total channel profit and recycle quantity in a reverse supply chain are maximized in a centralized model. With the same potential market demand of remanufactured products and utilization ratio of used products, a centralized model maximizes the economic and social benefit compared to the other three models.