Optimizing a Reverse Logistics System by Considering Quality of Returned Products

Abstract

Coordination is one of the critical issues in remanufacturing systems that can persuade supply chain parties to make optimal centralized decisions leading to higher profits. Accordingly, this paper aims to examine a reverse logistics system, including one manufacturer along with a collector who collects used products based on the consumers' willingness to return such products. Consumers’ willingness is dependent on the take-back price, which is adjusted based on various quality levels affecting the processing cost of the collected items. This study developed mathematical models under both decentralized and centralized scenarios. Besides, to align the interests of both members and better profit-sharing, a cost-sharing contract is implemented. According to the results, in the coordination model, the take-back price of the high-quality level is increased compared to the decentralized model while the take-back price of the low-quality level is decreased. Hence, it suggests collecting and repairing higher-quality products to achieve higher profits for the whole system. Besides, the paper provides valuable suggestions for managers to resolve the conflicts of interest among participants of reverse logistics systems in an efficient manner.