Impacts of demand disruption and government subsidy on closed-loop supply chain management: A model based approach

Abstract

Since manufacturing enterprises consume a lot of resources in the production process, in order to alleviate environmental pollution and resource shortages, manufacturers are mandated by the government to conduct closed-loop management and be responsible for the entire life cycle of their products. At the same time, manufacturers have to face the impacts of various emergencies on the supply chain. Without government assistance, closed-loop supply chain management will be difficult to carry out. Therefore, based on government subsidies and demand disruption, this paper constructs six mathematical models for three government subsidy modes, namely, the government subsidizes the manufacturer, retailer and consumer respectively, to analyze a closed-loop supply chain composed of a manufacturer and a retailer. The optimal decisions and profits of the closed-loop supply chain members in each model are compared by adopting a game-theoretical approach. The results show that the closed-loop supply chain members will make corresponding decision-making adjustments according to changes in demand, and there is a positive correlation between government subsidies, demand disruption and the members’ decisions and profits. Besides, different objects of government subsidies have different impacts on the operation of closed-loop supply chain. From a comprehensive perspective, when the government subsidizes the retailer, the price is lower, the recovery level and the profits are the highest, which can bring the greatest economic and environmental benefits to the entire closed-loop supply chain. • Three subsidy modes are compared in a closed-loop supply chain with and without demand disruption. • The supply chain members’ strategic adjustments under demand disruption are investigated. • The economic and environmental benefits are optimal when subsidizing the retailer. • The impacts of demand disruption and government subsidies are analyzed.