Development of cores acquisition model with two switching mechanisms in a retailer-oriented closed-loop supply chain system

Evi Yuliawati,Oyong Novareza,Sugiono Sugiono,Pratikto Pratikto

doi:10.15587/1729-4061.2021.225147

Abstract

Retailer-Oriented Closed-Loop Supply Chain (ROCLSC) is an integration of forward and reverse supply chains with retailer taking charge of the remanufacturing, distribution, and collecting activities. This type of mechanism is quite effective, since the majority of product returns management is performed by the retailer. However, in practical industries, the implementation of ROCLSC is still limited. In this study, we investigate a ROCLSC system that involves an Original Equipment Manufacturer (OEM) and a retailer. OEM plays a role as a producer of new products, while the retailer is in charge of remanufacturing, collecting, as well as selling and distributing both newly manufactured and remanufactured products. We develop a mathematical model to maximize the profit of each party. Although several studies have developed models for cores acquisition, here we apply a different cores switching mechanism. We introduced the fixed rate and flat rate mechanisms used in the business-to-business (B2B) system, where product functions are very important to consumers. In addition, this research focuses on ROCLSC where most of the existing cores acquisition models are Manufacturer-Oriented Closed-Loop Supply Chain (MOCLSC). The result of this study shows that the retailer will get higher profits when the product returns are acquired through the fixed rate mechanism, rather than the flat rate mechanism. Therefore, determining the optimal amount of cores collected through the fixed rate mechanism will increase the retailer’s profit, as well as joint profit of both parties. From the results, we also point out an interesting note that the retailer should increase efforts to sell new products along with the increasing proportion of consumer Willingness to Pay (WTP) for remanufactured products. Hence, both OEM and retailer profits can be increased consecutively

Highlights

The concept of Closed-Loop Supply Chain (CLSC) or reverse supply chain emerged as an effort to overcome issues related to sustainability
The concept of reverse supply chain began to thrive after there were findings that impacts on these aspects can no longer be resolved by the forward supply chain [1], especially the management of product returns
The focus of this research is a Retailer-Oriented Closed-loop Supply Chain (ROCLSC) system consisting of OEM, who act as producers of new products, and retailers, who act as remanufacturers, distributors, and collectors;

Summary

Introduction

The concept of Closed-Loop Supply Chain (CLSC) or reverse supply chain emerged as an effort to overcome issues related to sustainability. The RL practices they carried out have resulted in a significant increase in its market share, since several consumers were unable to afford new products The challenge facing this industry is how to manage complex reverse flows, and how to get cores from consumers [5]. With the B2B model, where consumers consider the function of the product very important [2], whenever consumers find their product units are faulty, they have to be prepared to replace it immediately This encourages the construction machinery remanufacturing industry to develop a strategy for cores acquisition, in order to maintain the sustainable performance of the existing RL system. Exploration in this area can provide additional insight for CLSC/Reverse logistics players regarding the different leaders in reverse logistics channels

Literature review and problem statement

The aim and objectives of the study

Materials and methods

Findings

Result of ROCLSC profit maximization model