On the dynamics of return collection in closed-loop supply chains

Abstract

The effective operations of closed-loop supply chains (CLSCs) can help companies achieve sustainability goals and boost economic performance. In practice, CLSCs must collect used products, a complex process that is often constrained by collection station capacity. However, how collection station capacity influences the bullwhip effect and the dynamic performance of CLSCs remains unclear. Here, we develop a system dynamics model for CLSCs that integrates traditional manufacturing with remanufacturing and explore the effects of the stochastic capacity constraint of the collection station on the bullwhip effect of CLSCs. We find that, generally speaking, a collection station with looser or more stable capacity constraints tends to reduce bullwhip of CLSCs. However, pertinent interactions emerge between the relevant parameters; in some situations, reducing the capacity level of a collection station may be reasonable and beneficial when the stochastic capacity constraint is very stable, or when customer demand is highly variable. We also consider the partial backlog in return collection, a phenomenon associated with the stochastic capacity constraint of a collection station, and identify a new trade-off between CLSC sustainability and economic performance. Ultimately, our findings provide evidence that will guide managers’ plans for the capacity management of return collection in CLSCs.