Investigating the effect of circularity index on a closed loop supply chain with multi-shipment policy

Abstract

Environmental sustainability has emerged as a crucial aspect for every business, as the wastage of used products greatly contributes to greenhouse gas emissions and environmental hazards. Adopting the circular economy concept is essential to address this problem. This approach prioritizes reliability and re-manufacturability, aiming to simultaneously reduce waste and enhance sustainability and profitability. In this context, the proposed model introduces a sustainable closed-loop supply chain model wherein the manufacturer oversees the production process and delivers requested batches to the retailer under the single order and multi-shipment policy. The model incorporates the notion of circularity, quantified by a circularity index representing the degree to which the product's circularity level. The level of product circularity can be enhanced by material choice, supplier selection, and innovative design while manufacturing. The model being presented aims to maximize the total integrated profit of the closed-loop supply chain system by optimizing the number of shipments as well as the circularity index. It is evident from the analysis that the circularity index significantly influences profits and environmental sustainability by increasing product demand and extending product life cycles. Notably, the numerical example provided in the model illustrates that accounting for the effects of the circularity index results in an optimal profit up to 5% higher compared to scenarios where such effects are not considered.