Optimal Strategy for a Closed-Loop Supply Chain Considering Recycling and Warranty Channels

Abstract

In this paper, four closed-loop supply chain (CLSC) game models with different recycling channels and warranty channels are proposed: (a) manufacturer recycling and warranty model, (b) manufacturer recycling and retailer warranty model, (c) retailer recycling and manufacturer warranty model and (d) retailer recycling and warranty model. The impacts of different recycling channels and warranty channels on the manufacturer, retailer and entire supply chain system are systematically analyzed from the perspective of the consumers, CLSC members and environment. The optimal strategies for remanufacturing systems under different channels are discussed and two contracts are proposed to coordinate supply chain members. By comparing and analyzing the optimal equilibrium solutions for different scenarios, the following conclusions are obtained: (1) The retailer recycling and warranty mode ( $$R-R$$ ) not only extends the warranty period of the product, but also improves the recovery rate of the CLSC system. (2) Under certain sharing ratios, the revenue-sharing contract and cost-sharing contract can effectively coordinate the manufacturer and retailer in the worst scenario. (3) Compared with the manufacturer recycling mode, the optimal profit of each CLSC member under the retailer recycling mode is significantly higher. Eventually, a set of numerical examples is provided to verify the above conclusions and conduct the sensitivity analysis on the optimal decisions in the proposed four different remanufacturing scenarios.