Shaping closed-loop supply chain dynamics: Mitigating the bullwhip effect and improving customer satisfaction in production systems with material reuse

Abstract

Modern societies are currently transitioning towards more circular economic models to reduce environmental impacts and leverage economic opportunities. Managing the emerging supply chains, more complex and uncertain, poses a considerable challenge for many organisations. This work examines the dynamic behaviour of these closed-loop systems under different replenishment policies and varying levels of product returns and lead times. We model a generalised multi-level, closed-loop supply chain of a production system with material reuse, drawing inspiration from the real-world operations of cider makers in Spain. We investigate its ability to effectively and efficiently satisfy the consumer through four performance metrics: fill rate, bullwhip ratio, inventory cover, and reuse demand share. Through experimentation techniques, we observe that the highest performance is generally obtained when the retailer applies a pure pull policy while the manufacturer adopts a level scheduling policy. This strategy, built on lean principles, can achieve much lower operational costs while providing similar, or even better, service levels compared to more popular and complex alternatives. Based on our findings, we provide a set of actionable managerial implications that would help supply chain professionals successfully implement and manage these supply chains.