Warranty Period Decision and Coordination in Closed-Loop Supply Chains Considering Remanufacturing and Consumer Behavior

Wei Li,Lingfei Yu,Xiaodong Zhu

doi:10.3390/su11154237

Wei Li, Lingfei Yu + Show 1 more

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https://doi.org/10.3390/su11154237

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Abstract

The closed-loop supply chain management model is an effective way to promote sustainable economic development and environmental protection. Increasing the sales volume of remanufactured products to stimulate green growth is a key issue in the development of closed-loop supply chains. By designing an effective warranty strategy, customer’s perceived value can be enhanced and market demand can be stimulated. This study cuts through the warranty period of closed-loop supply chain products. Based on the perspective of consumer behavior, game theory is used to construct the optimal decision-making model for closed-loop supply chains. The optimal warranty decision making for new products and remanufactured products under centralized and decentralized decision-making models is discussed. Further, the impact of the closed-loop supply chain system with warranty services and the design of contract coordination is also shown. We show that consumer preference has a positive impact on the sales of remanufactured products and the profits of enterprises; with the extension of the new product and remanufacturing warranty period, the profit of the supply chain system first increases and then decreases, and the value is maximized at the extreme point in the manufacturer-led decision-making model. Furthermore, the leader gains higher profits with bargaining power, but the profit of the supply chain system under decentralized decision model is less than that of the centralized decision model, reflecting the double marginalization effect. The revenue sharing contract and the two-charge contract designed in this study coordinate the closed-loop supply chain system with warranty services, so that the member companies in the supply chain can achieve Pareto improvement.

Highlights

Technological advances and increased market demand have led to an accelerated entry of new products into the market, while generating a large number of used products
Using game theory and consumer behavior perspective, this study constructs a closed-loop supply chain system consisting of a single manufacturer and a single retailer, focusing on centralized decision making (Model C) and decentralized decision making (Models D1 and D2)
The warranty service model studies the impact of the closed-loop supply chain warranty term factor with warranty services on the supply chain operation decision making and performance

Summary

Introduction

Technological advances and increased market demand have led to an accelerated entry of new products into the market, while generating a large number of used products. EOL products promote environmental sustainability and green growth through the valuable and recyclable raw materials they provide (Song et al.; Tseng et al [1,2]). Many relevant regulations and directives, such as the European Union’s Waste Electrical and Electronic Equipment Directive, explicitly require manufacturers to assume responsibility for the proper recovery and disposal of EOL products, recycle the residual value of the product, and increase resource utilization. These policies are intended to regulate market entities as much as possible. Constructing and improving the recycling system of waste products is an inevitable choice in achieving sustainable resource management

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