Variability Specific to a Closed-Loop Supply Chain with Product Deterioration

Abstract

Environmental issues and increasing global demand have led to calls for sustainable production and consumption. Products deemed insufficiently environmentally friendly are beginning to be removed from the market, and manufacturers must achieve social responsibility and economic benefits. However, in a conventional linear supply chain, an increase in sales volume directly leads to an increase in waste and resource consumption, resulting in a trade-off between the environment and the economy. Closed-loop supply chains resolve trade-offs, achieve corporate social responsibility, and enhance competitiveness. Closed-loop supply chains must recover used products with a high degree of uncertainty. Uncertainty in the quantity, quality, and timing of used products can cause serious problems such as the bullwhip effect in the dynamic behavior of the supply chain. This study aims to analyze the dynamic impact of used product uncertainty on a closed-loop supply chain and propose ways to deal with it. Products deteriorate with their use and eventually become worthless for recovery and remanufacturing. This study confirms that, even when there is no demand variability and lead time, the uncertainty of used products, especially qualitative uncertainty, causes large variability in the closed-loop supply chain. The results of the numerical example using the model proposed in this study show that the policy of limiting the quantity of remanufacturing can mitigate the variability. Furthermore, the appropriate limits vary depending on the characteristics of the product, such as its lifetime. This suggests the need to control the amount of remanufacturing for the sustainability of the closed-loop supply chain rather than remanufacturing as much as possible, to reduce environmental impact.