Reverse supply chain systems optimization with dual channel and demand disruptions: Sustainability, CSR investment and pricing coordination

Abstract

In the information age, demand disruptions are challenging for supply chain (SC) systems. This study explores a reverse supply chain (RSC) system dealing with demand disruptions in its online channel. The disruptions hurt the company's revenue since a fraction of the online channel demand will be lost. It is also important to determine the level of investment in sustainability to meet both the cap-and-trade rule imposed by the government on the company and the customers' expectations about the sustainability level of products. In the reverse channel, the company collects the used products through a collector whose efforts increase the collection volume. Since the earnings of the reverse channel highly depend on the collection volume, finding an effective strategy to entice the collector to collect a desirable number of used products is critically important for the company. In order to find a proper strategy for resolving these challenges, we analytically develop an RSC model and derive the optimal pricing, sustainability level, and corporate social responsibility (CSR) decisions under demand disruptions for both the decentralized and centralized RSCs. We then propose a combination scheme by using the combined two-part-tariff (CTPT) contract. We find that the proposed coordination scheme is efficient because it not only improves the profits of the RSC and its members but also enhances the environment. Moreover, the CTPT contract can properly allocate the SC surplus among the RSC members based on their bargaining powers.