Two-period Closed-loop Supply Chain Research Articles

Pricing decisions in a two-period closed-loop supply chain game under asymmetric information and uncertainty

AbstractStrategies to increase sustainability are of growing relevance for supply chains and especially for the management of production processes. In this paper, we build on existing literature in closed-loop supply chain management and consider a two-period game-theoretic model in which product returns are reused in the manufacturing process. In all scenarios, we assume that the return rate of used products is random and not known to the players at the beginning of the planning horizon, thus, they have to deal with uncertainty in period 1. In contrast to existing literature, we will also address the circumstance that the players’ level of information in period 2, after the returns have been realized, can be linked to the collection mode in the supply chain. In Scenario A, the retailer is involved in the collection of the used products and transfers them to the manufacturer, so that symmetric information is available. In Scenario B, on the other hand, the used products reach the manufacturer directly from the customer, so that the manufacturer has an information advantage over the retailer. By comparing these scenarios and a vertically integrated supply chain benchmark case, it becomes clear that, depending on the actual return rate, the presence of private information can be either beneficial or detrimental to the manufacturer. The retailer, on the other hand, can compensate for information disadvantages in most cases over the multi-period planning period due to its position as a Stackelberg leader. Regardless of the amount of a transfer payment offered to it by the manufacturer, it prefers the collection of the goods by the manufacturer itself. These findings contribute to literature on symmetric information, where, for example, a retailer-led collection is preferred (Savaskan et al. Manage Sci 50(2):239–252, 2004) or the decision depends on the amount of the transfer payment (Modak et al. J Clean Prod 171:512–528, 2018). However, we show that cooperation between the players leads to the best results not only economically but also from an ecological point of view.

Pricing and quality improvement strategies in a closed-loop supply chain with dual collection channel

This paper presents two-period closed-loop supply chain (CLSC) models considering demand with and without replacement sales. A manufacturer produces a new product using raw materials in the first period, and the manufacturer and a third party compete to collect used products in the second period. Further, the manufacturer produces an improved version of the new product using raw materials and returned-used products in the second period. The product is sold through a retailer in both periods. We propose a two-period Stackelberg game with the manufacturer as a leader to investigate the product’s pricing strategy and quality improvement level. It is shown that the quality improvement level improves with an increase in the sensitivity of return to the competitor’s acquisition price but deteriorates with an increase in sensitivity of return to the collector’s acquisition price. Finally, we implement a cross-shareholding coordination mechanism and observe an improvement in the quality level and profits of the manufacturer and the retailer.

Optimal product quality and pricing strategy for a two-period closed-loop supply chain under return policy

This article considers a two-period closed-loop supply chain (CLSC) model, where a manufacturer and a retailer are trading one product. The retailer’s demand rate for each period is dependent on the selling price, product quality, and refund price. The first period’s product quality has an impact on the second period’s demand rate. In the first period, returned products are remanufactured and sold through the retailer with the new products in the second period. The manufacturer is the leader of the Stackelberg game who declares wholesale price(s) and quality of the product to the retailer who follows the manufacturer’s decision and sets his selling prices for two consecutive periods. The manufacturer implements two pricing policies: (I) sets the same wholesale price for both periods (II) sets different wholesale prices for two different periods. The present research’s main aim is to find the optimal strategies for lower pricing and high-quality products. Under these circumstances, four different decision strategies between the manufacturer and the retailer are developed and compared these strategies analytically and numerically. The effects of different decision strategies on the optimal supply chain results are developed with a numerical example. An optimal solution for all four strategies is obtained using Mathematica 9. In addition, graphical analyses are developed to determine under what circumstances a particular decision strategy is dominant over others. Numerical analysis suggests that fast-acting strategies produce dominant results, but adopting strategies with advanced notice can produce higher quality products.

Channel Strategies for the Two-Period Closed-Loop Supply Chain with E-Commerce

The aim of this paper is to choose the effective selling channel and reverse channel for a closed-loop supply chain (CLSC) with the e-commerce. The authors formulated six single-selling and dual-selling channel two-period CLSC models in which the manufacturer manufactures new products in the first period and then collects used products by itself, outsourcing to or cooperating with the retailer in the second period. Some interesting and new insights obtained from comparison analysis and numerical experiments are as follows: (1) The leading manufacturer ought to add e-commerce channel, and customers’ e-commerce preference can increase the market demand, collecting rate, and manufacturer’s profit. (2) With the e-commerce channel and the retail channel, dual-collecting channel is the best for the manufacturer and system while the manufacturer collecting channel becomes the best when the collecting competition is relatively large. When the collecting competition exists, retailer collecting channel is the best for the retailer. (3) The market demand, collecting rate, the profits of all members and system will rise by increasing the remanufacturing level and discount coefficient.

Comparison of Cooperation Modes in a Two-Period Closed-Loop Supply Chain System considering Green Manufacturing

In order to improve the efficiency of collection and green manufacturing level in a closed-loop supply chain (CLSC) system, the manufacturer invests green manufacturing efforts in product design and production process and intends to cooperate with other CLSC members to achieve excellent performance. In a two-period CLSC system consisting of one manufacturer, one retailer, and one third-service provider, a game-theoretical approach is adopted to compare the optimal decisions and profits of the three green manufacturing cooperation modes, namely, the manufacturer cooperates with the retailer and third-service provider, respectively, and the noncooperation mode is a benchmark. Moreover, the impact of different cooperation modes on CLSC decision-making is analyzed as well. The results indicate that the influence of difference among cooperation modes on CLSC decision is significant, and cooperation is always better than noncooperation. From the perspective of consumers as well as recycling and profit, although the collection rate of used products is not the highest when the manufacturer cooperates with the retailer, the price of product is the lowest and the green property of product is the most obvious; thus, this is regarded as the suitable cooperation mode after a comprehensive analysis. Besides, a coordination mechanism is designed to solve the inefficiency caused by double marginalization. Finally, numerical examples are presented to intuitively observe the relationships between decisions and profits and the impact of different parameters on them in the three modes, and some management inspirations are proposed ultimately.

Pricing and used product collection strategies in a two-period closed-loop supply chain under greening level and effort dependent demand

This article presents a two-period closed-loop green supply chain model with a single manufacturer and a single retailer to investigate the impact of green innovation, marketing effort and collection rate of used products on the supply chain decisions. The market demand of the green product is assumed to be dependent on the selling price, greening level and marketing effort. In the first period, the manufacturer produces new product from fresh raw materials while in the second period, besides manufacturing new products, he also collects and remanufactures used products. The centralized model and three decentralized models (depending on the manufacturer’s collection option of used products) are considered. A cost sharing contract is also employed to address the coordination issue. The optimal results are obtained, and the effect of key model-parameters on the optimal decisions are investigated through sensitivity analysis. It is observed that the supply chain gives better response when both the manufacturer and the retailer collect used products simultaneously, and the performance of the supply chain can be improved by instigating either green innovation or marketing effort or both.

Quality, buyback and technology licensing considerations in a two-period manufacturing–remanufacturing system: a closed-loop and sustainable supply chain

Technology licensing affects both welfare and financial concepts. In the literature, while the effects of different licensing mechanisms on the decision variables of a manufacturing system are thoroughly investigated, relationships between licensing scenarios and production quantities on a closed-loop supply chain (CLSC) have not been examined completely. To fill out this gap we study three most common types of licensing mechanisms; fixed-fee, royalty cost and two-part tariff licensing scenarios with the quality level of collected second-hand items in a two-period CLSC. The proposed model consists of one manufacturer and one remanufacturer who is permitted to engage in the remanufacturing process just in the second period of the planning horizon. Our main assumption is that a constant demand is to be satisfied within a two-period CLSC. Consumer demand is satisfied in the first period by manufacturing the raw materials and in the second period, both manufacturing and remanufacturing processes are possible due to the demand quantities and quality level of the collected second-hand items. A numerical example and sensitivity analysis are presented along with analytical conclusions to provide insights into the performance of the CLSC parties in each licensing scenario. The findings prove the applicability of the proposed model.

Pricing and warranty decisions in a two-period closed-loop supply chain

For a two-period closed-loop supply chain (CLSC) consisting of a manufacturer and a retailer, Stackelberg game analyses are conducted to examine pricing and warranty decisions under two warranty models depending on who offers warranty for new and remanufactured products and the corresponding benchmark models with a warranty for new products only. Next, we identify the conditions under which warranty for remanufactured products is offered and investigate how this warranty affects the CLSC operations. Subsequently, comparative studies are carried out to examine equilibrium decisions, profitability and consumer surplus of the CLSC between the two warranty models. Analytical results show that offering warranty for remanufactured products does not affect new product pricing in period 2, but influences the pricing of new products in period 1 and remanufactured products in period 2, thereby enhancing remanufacturing, individual and channel profitability, and consumer surplus. Compared to the retailer warranty for remanufactured products, the manufacturer warranty can attain a more equitable profit distribution. If the warranty cost advantage of the manufacturer (retailer) is significant relative to that of the retailer (the manufacturer), the manufacturer (retailer) arises as a natural choice to offer warranty for remanufactured products as this decision enhances both profitability and consumer surplus.

Analysis for recycling and remanufacturing strategies in a supply chain considering consumers’ heterogeneous WTP

Empirical and theoretical research has shown that consumers’ willingness to pay (WTP) has a significant impact on manufacturers’ decisions. Based on these findings, we establish models for multiple remanufacturing modes considering WTP heterogeneity or different remanufactured products, in one-period and two-period closed-loop supply chain (CLSC) scenarios, to identify the optimal recycling and remanufacturing decisions of manufacturers. We find that manufacturers should participate in remanufacturing in one-period or two-period settings to earn more profits. In the one-period scenario, hybrid remanufacturing is better for the manufacturer than single remanufacturing, and the manufacturer chooses its remanufacturing partner based on the lower remanufacturing cost. In the two-period scenario, when the WTP ratio is above a certain threshold, the manufacturer chooses the third party as its joint recycling partner to obtain higher consumer surplus, a higher recycling rate, and higher profits. If the WTP ratio is high enough, hybrid remanufacturing is better for the manufacturer. The manufacturer does not authorize the distributor to engage in remanufacturing, for this choice yields the lowest profits for the manufacturer independent of WTP ratio. These results have policy implications from the perspective of CLSC cooperative recycling and remanufacturing.

Optimal product quality and pricing strategy for a two-period closed-loop supply chain with retailer variable markup

In this paper, we consider a two-period closed-loop supply chain which is comprised of a single manufacturer and a single retailer for trading a single product. At the retailer, the demand in the first period depends on the selling price, product quality and refund price, whereas in the second period, it depends on the selling price and the product quality. The retailer sets the selling prices with variable markups on the wholesale prices of the manufacturer and offers a return policy (immediate return and used product return) limited to the first period only. The immediate return is dependent on the refund price and the product quality, and the amount of returned used items is a fraction of the first period’s demand. The retailer sends the returned items to the manufacturer who reproduces/repairs those items and sells in the second period. We assume that the manufacturer acts as the Stackelberg leader and the retailer as the follower. We study the impacts of return policy, product quality and pricing strategy on the optimal decisions under two decision strategies (I and II). In the decision strategy I, both the players optimize their total profits over the entire selling season, whereas in the decision strategy II, they optimize each period’s profit sequentially. With the help of a numerical example we explore that the decision strategy I gives better result than the decision strategy II in terms of all decision variables except the product quality. We also investigate the effects of key model-parameters on the optimal decisions.

考虑参考价格效应的两期闭环供应链Nash均衡博弈

考虑参考价格效应的两期闭环供应链Nash均衡博弈

Reward-penalty mechanism for a two-period closed-loop supply chain

This paper examines the benefit of the reward-penalty mechanism (RPM) in a two-period closed-loop supply chain (TPCLSC) where a manufacturer sells new products in the first period, and then commits the collector to collect used products and conducts remanufacturing in the second period. Game-theoretic models are developed to explore and compare the following scenarios, i.e., the TPCLSC with RPM and without RPM. The equilibrium decisions are derived under both cases. The results show that: (i) the government's RPM not only decreases the selling prices in both periods, but also raises the collection rate; (ii) the RPM always results in a profit increase to the collector; (iii) the manufacturer prefers remanufacturing with RPM if the target collection rate is below a threshold; but if the target collection rate is too high, the RPM does harm to the manufacturer regardless of the reward-penalty intensity. Then we examine the differences between a conventional single-period model and our TPCLSC model. The results indicate that: (i) the RPM has a greater effect on the manufacturer in TPCLSC than in a single-period CLSC, particularly in the case of higher reward-penalty intensity; (ii) it is necessary for the government to adopt the RPM to motivate the manufacturer and the collector by setting a reasonable target collection rate and raising the reward-penalty intensity. Our work extends prior research that has only examined CLSC with either RPM or two-period model.

Strategy Analysis of Recycling and Remanufacturing by Remanufacturers in Closed-Loop Supply Chain

The paper investigates interactions in a two-period closed-loop supply chain consisting of a single manufacturer and a single remanufacturer. In the context of recycling and remanufacturing by the remanufacturer, the manufacturer and remanufacturer choose different production strategies. By comparing the costs, profits and equilibrium quantity of supply chain members in decentralized and centralized models, we focus on the conditions under which the remanufacturer chooses to sell the remanufactured products and compete with the manufacturer. Different cooperative strategies can affect closed-loop supply chain decision-making. The article analyzes the impact of each cost and recycling rate on the productions and profits of the manufacturer and remanufacturer, and compares the total profits of members between two models. The sensitivity analysis of the models shows that the centralized model can be an effective way of achieving greater efficiency in terms of the overall supply chain. This study provides insights into the remanufacturing theory, which might guide remanufacturing operations and strategies.

Trade-in and save: A two-period closed-loop supply chain game with price and technology dependent returns

Consumers evaluate the convenience of changing their products according to the price paid as well as the technology (quality) level. When the consumers wish to capitalize the products residual value, they should return them as early as possible. Accordingly, we develop a model of Closed-loop Supply Chain (CLSC) where consumers seek to gain as much as possible from their returns and the return rate is a function of both price and quality. We model a two-period Stackelberg game to capture the dynamic aspects of a CLSC, where the manufacturer is the channel leader. We investigate who, namely, manufacturer or retailer, should collect the products in the market. Thus, we identify the best CLSC structure to adopt when the return rate is both price- and quality-dependent. Our results demonstrate that it is always worthwhile for companies to collect products and adopt an active return approach for returns. We investigate the effect of retail competition in both forward and backward channels and show the impact of eliminating the double marginalization on market outcomes.

Quantity and collection decisions in a closed-loop supply chain with technology licensing

Industry practice has shown that technology licensing has an important effect on the remanufacturing of patented products by third parties. Different licensing methods significantly impact a supply chain member's production and collection decisions, and they also have influential effects on reverse channel performance. However, there is scant literature investigating the decision on technology licensing and its impact on a supply chain member's production and collection decisions. To address this gap, we consider a manufacturer, as the patent holder, who produces new and remanufactured products and, simultaneously, he and a remanufacturer (as the licensee, who by law can only produce remanufactured products) competitively collects used products from the market in a two-period closed-loop supply chain (CLSC). We investigate two licensing patterns, fixed fee versus royalty, within the CLSC in a Cournot duopoly model. We find that royalty licensing is dominated by fixed fee licensing from the viewpoints of both the consumer surplus and environmental protection. Our result also shows that the manufacturer's optimal licensing strategy is determined by a threshold of the fixed fee: when the fixed fee is below a threshold, it is better for the manufacturer to use a royalty licensing, whereas fixed-fee licensing should be used when the fixed fee is higher than a threshold.

The closed-loop supply chain network with competition and design for remanufactureability

In this paper, a two-period closed-loop supply chain network is investigated, with manufacturers as decentralized decision makers who compete for market share. In the first period, each manufacturer decides on the production quantity and level of remanufactureability, which has impact on the cost of both new and remanufactured products. In period two, manufacturers can manufacture and/or remanufacture products, taking into account that consumers have different valuations of new and remanufactured products. We derive the optimality conditions and establish that the governing equilibrium conditions can be formulated as a finite-dimensional variational inequality problem. Through a series of case studies, we answer several important research questions, such as the impact of remanufactureability design and the consumers' perception of the remanufactured product on profitability and market share.

A two-period game of a closed-loop supply chain

We consider a two-period closed-loop supply chain (CLSC) game where a remanufacturer appropriates of the returns’ residual value and decides whether to exclusively manage the end-of-use product collection or to outsource it to either a retailer or a third-service provider (3P). We determine that the manufacturer outsources the product collection only when an outsourcee performs environmentally and operationally better. On the outsourcees side there is always an economic convenience in managing the product returns process exclusively, independently of returns rewards and operational performance. When outsourcing is convenient, a manufacturer always chooses a retailer if the outsourcees show equal performance. Overall, the manufacturer is more sensitive to environmental performance than to operational perfomance. Finally, there exists only a small region inside which outsouring the collection process contributes to the triple bottom line.