Optimal collection and remanufacturing decisions in reverse supply chains with collector’s imperfect sorting

Abstract

We consider a reverse supply chain comprising two independent companies: the collector and the remanufacturer. The collector is responsible for sorting the collected used products and then transporting the ‘remanufacturable’ items to the remanufacturer. As sorting is not perfectly accurate, the misclassification errors affect the optimal decisions in the reverse supply chain. We focus on the optimal collection quantity for the collector and the optimal order quantity for the remanufacturer using game theory under both deterministic and uncertain demand. We characterise the optimal solution and show that under certain conditions, the remanufacturer should allow the collector to transport more ‘remanufacturables’ than the order quantity. We then examine the case where both the collector and the remanufacturer belong to a single company with centralised decision-making and compare the optimal collection quantities under both structures of the reverse supply chain.