Integrated product and packaging decisions with secondary packaging returns and protective packaging management

Abstract

The generation of packaging waste has fast become a supply chain management concern, especially with the growth of e-commerce. This calls for an integrated understanding of the product-packaging-supply chain system, which is currently nascent in the research literature. The present study considers a two-stage, profit-oriented supply chain that employs disposable primary packaging, disposable protective packaging, and returnable secondary packaging in supplying the product to a price-conscious consumer. With a special emphasis on the return of last-mile packaging, an analytical model is developed to examine the integrated lot-sizing and pricing decisions for the product and its secondary packaging. The model is developed for a decentralized channel with a Retailer-Stackelberg power structure and a centralized channel. In both the channels, it is shown that the retail price not only drives the equilibrium decisions and profits but also the total waste generated across different packaging types. It is found that the decentralized channel produces lower channel profits, however, it also generates lesser packaging waste when compared to a centralized channel. The study identifies the economic improvements in reverse channel operations that can encourage channels to adopt the take-back of secondary packaging in the last-mile for reuse. The findings also support the intuitive understanding that channels that adopt larger sized products can reduce packaging waste. Additionally, penalizing protective packaging in the last-mile is shown to have the potential to reduce total packaging waste by inducing the channels to supply larger products. Scope for contracts and regulatory mechanisms are identified, along with future research directions.