Optimal operational and financing portfolio strategies for a capital-constrained closed-loop supply chain with supplier-remanufacturing

Abstract

Due to the high technical complexity of key components, their remanufacturing is often carried out by the supplier of those key components. Moreover, remanufacturing of end-of-use key components may be constrained by the limited initial capital of supply chain members. Hence, in this paper, we consider a closed-loop supply chain (CLSC) comprising a supplier providing new and remanufactured key components and an original equipment manufacturer (OEM) with capital constraint. Three financing strategies are available to the OEM, that is, pure bank loan (PBL), full delay-in-payment with bank loan (FDP-with-BL) and partial delay-in-payment with bank loan (PDP-with-BL). Then, we study the optimal operational and financing portfolio strategies for the capital-constrained CLSC. The results show that when the return rate of used key components is higher or the remanufacturing cost savings are greater, supplier is more inclined to provide full delay-in-payment, and even if supplier still chooses to provide only partial delay-in-payment, the prepaid ratio required by supplier would also decline. We also find that the supplier-remanufacturing quantity under FDP-with-BL strategy is always the highest, which reflects the incentive effect of trade credit financing on supplier-remanufacturing. Additionally, the supply chain members have conflict in the choice of financing strategies, but PDP-with-BL strategy can realize the coordination of the capital-constrained CLSC.