Facility Disruptions in a Closed-loop Supply Chain Featuring Warranty Policy and Quality-based Segmentation of Returns

Abstract

This paper focuses on a closed-loop supply chain that deals with disruptions in the distribution centers, and optimizes the network in two dimensions of sustainability: economic and environmental. Economically, the proposed network maximizes the profits of the customers, manufacturers and distributors. Three avenues for cost minimization are designed for the customer by adding the warranty periods, the reworking options, and the incentives for returning the used items. Non-dominated solutions via the Reservation Level-driven Tchebycheff procedure are found by appropriate choice of facility establishment and suitable allocation links considering the disruption in the distribution centers.Environmentally, the model adopts a zero-waste strategy by embedding various return-segmentation policies and a secondary chain. The backward flow depends on the customers' choice of reworking, the validity of the warranty contract, and the quality of the returns. The test results indicate that due to various revenue options, the manufacturing and distribution centers prefer returns with medium-range quality, while due to the incentives offered for the recyclable items, the customers benefit the most from returning the items with the lowest quality. The tests on the probability of disruptions indicate that establishing a minimum number of the manufacturing and/or distribution sites without disruption leads to better overall performance.