Abstract
Closed-loop supply chains are complex systems as they involve the seamless backward and forward flow of products and information. With the advent of e-commerce and online shopping, there has been a growing interest in product returns and the associated impact on inventory variance and the bullwhip effect. In this paper, a novel four-echelon closed-loop supply chain model is presented, where base-stock replenishment policies are modelled by means of a proportional controller. A stochastic state-space model is implemented, initially to capture the supply chain dynamics while the model is analysed under stationarity conditions with the aid of a covariance matrix. This allows the bullwhip effect to be expressed as a function of replenishment policies and product return rates. Next, an optimisation method is introduced to study the impact of the Internet of Things on inventory variance and the bullwhip effect. The results show that the Internet of Things can reduce costs associated with inventory fluctuations and eliminate the bullwhip effect in closed-loop supply chains.
Highlights
Modern supply chains have started transforming from integrated networks to dynamic systems to cope with rising customer expectations
In contrast to the common information sharing methods, this paper considers that product return rates and replenishment policies are shared with the aid of an Internet of Things (IoT) infrastructure between two neighbouring closed-loop supply chains (CLSC) echelons
This article presents a model for analysing the effect on product return rates with continuous replenishment polices based on a four-echelon series closed-loop supply chain structure
Summary
Modern supply chains have started transforming from integrated networks to dynamic systems to cope with rising customer expectations. At the same time it provides detailed information on the interaction between the various CLSC key variables (i.e., inventory levels, order and product flows, replenishment policies, product return rates). In contrast to the traditional information sharing solutions proposed in supply chain literature, this paper considers IoT technology as a well-established interoperable infrastructure beyond ERP/IT/IS architecture This allows supply chain participants to share real-time complex information by utilising cloud computing technology for the data stored in ERP systems, GPS position tracking of transport fleets, RFID based shipment tracking at warehouses and last but not least a middleware which communicates and integrates all individual devices with a very high level of encryption and security. A further contribution of this paper is to investigate whether a centralised approach - reinforced by an integrated CLSC infrastructure based on Internet of Things - can effectively suppress the bullwhip effect
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