The economics of a closed-loop supply chain with remanufacturing

J. M. Chen, C. I. Chang

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

This study deals with joint decisions on pricing and production lot-sizing in a closed-loop supply chain consisting of manufacturing and remanufacturing operations. This study emphasizes the economic analysis of this hybrid system with substitution between the new and the remanufactured versions of the same product. We develop analytical models under a newsvendor framework bearing the following questions in mind. Can a hybrid system operate cost-effectively? Can it outperform the manufacturing-only system? If yes, to what extent and under what conditions? If not, what are the key factors that cause underperformance? This study formulates a multi-variable optimization problem and performs mathematical and numerical analysis. Results show that the hybrid system does not outperform the manufacturing-only system under a generic setting, but achieves better performance under conditions with a higher degree of substitution and/or a lower remanufacturing cost. In this scenario, participating in remanufacturing is not only an issue of environmental responsibility, but a profit-boosting option.

Original languageEnglish
Pages (from-to)1323-1335
Number of pages13
JournalJournal of the Operational Research Society
Volume63
Issue number10
DOIs
StatePublished - Oct 2012

Keywords

  • closed-loop supply chain
  • decision analysis
  • logistics
  • newsvendor
  • remanufacturing

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