Dual-channel closed loop supply chains: forward channel competition, power structures and coordination

Abstract

This paper examines the effect of forward channel competition and power structure on dual-channel closed loop supply chains (CLSC), which consists of a manufacturer, a retailer and a collector. The manufacturer can either wholesale products to the retailer or directly sell them to the market, the collector undertakes the collection activity of used products. Under different channel power structures, a centralised and three decentralised models are explored under symmetric and asymmetric relative status between direct and retail channels. Through a comprehensive comparison among these models, the result shows that each channel member has an incentive to play the channel leader’s role. Meanwhile, from the total channel system’s perspective, we find that the manufacturer-led or retailer-led model can either be the most effective CLSC under symmetric relative channel status, which depends on the channel substitution rate between two channels. While under asymmetric relative channel status, the numerical result shows that the whole CLSC should select collector-led, manufacturer-led and retailer-led CLSC model in turn with the retail channel’s relative status becoming stronger. Finally, with the benchmark of the centralised decision-making system, we design modified two-part tariff contracts to coordinate dual-channel CLSCs under different channel power structures.