Study of the Coordination Mechanism of a Wood Processing Residue-based Reverse Supply Chain

Abstract

A revenue-sharing contract was introduced into a three-echelon wood processing residue-based reverse supply chain model to maximize the supply chain profit and realize a win-win situation for all participants. The optimal expected supply chain profits under different decision policies and the acceptable range of revenue-sharing coefficients were analyzed. Finally, the model was applied in a case study where sawdust was recycled to produce black fungus. Results showed that revenue-sharing can effectively enable supply chain coordination. Within the domain of the revenue-sharing coefficients, the production cost decreased by 5.91% and the corresponding demand increased by 16.09%, resulting in an increase of 7.73% in the supply chain profit. A comparison was made between the three-echelon and a two-echelon supply chains, and the results showed that the two-echelon supply chain would become less competitive than the three-echelon supply chain with the increase of recycling cost. Additionally, the profit shares of all parties in the three-echelon supply chain depended mainly on the revenue-sharing coefficients, which were determined by the positions of the parties and their bargaining power.