TY - JOUR

T1 - A vendor–purchaser economic lot size problem with remanufacturing

AU - Pishchulov, Grigory

AU - Dobos, Imre

AU - Gobsch, Barbara

AU - Pakhomova, Nadezhda

AU - Richter, Knut

PY - 2014/7/1

Y1 - 2014/7/1

N2 - In this paper, we study a closed-loop supply chain in which a single purchaser orders a particular product from a single vendor and sells it on the market. A certain fraction of used items return from the market back to the purchaser, who is responsible for collecting and returning them to the vendor. In addition to manufacturing new items, the vendor is able to remanufacture the returns into as-good-as-new items which are subsequently used to serve market demand. Our framework features the conventional joint economic lot size (JELS) model extended to include the return flow of the used items. In line with the assumptions of the JELS model, we assume a deterministic constant demand for the product. The fraction of used items returning from the market is assumed to depend on the purchaser’s collection effort. To stimulate the returns, the vendor may offer the purchaser a transfer payment per item returned. The questions addressed by this study pertain to the optimal centralised control of this closed-loop supply chain, to the individually optimal policies of its members, and to the coordination within this supply chain under a decentralised control. In particular, we show that the transfer payment alone cannot coordinate the supply chain under consideration and may even fail to do so when combined with a two-part tariff—which is otherwise known to coordinate the corresponding forward supply chain. Our numerical study, though, has revealed that the combined contract is capable of substantially reducing the coordination deficit. We also introduce a novel three-part tariff which is shown to enable supply chain coordination in combination with the transfer payment.

AB - In this paper, we study a closed-loop supply chain in which a single purchaser orders a particular product from a single vendor and sells it on the market. A certain fraction of used items return from the market back to the purchaser, who is responsible for collecting and returning them to the vendor. In addition to manufacturing new items, the vendor is able to remanufacture the returns into as-good-as-new items which are subsequently used to serve market demand. Our framework features the conventional joint economic lot size (JELS) model extended to include the return flow of the used items. In line with the assumptions of the JELS model, we assume a deterministic constant demand for the product. The fraction of used items returning from the market is assumed to depend on the purchaser’s collection effort. To stimulate the returns, the vendor may offer the purchaser a transfer payment per item returned. The questions addressed by this study pertain to the optimal centralised control of this closed-loop supply chain, to the individually optimal policies of its members, and to the coordination within this supply chain under a decentralised control. In particular, we show that the transfer payment alone cannot coordinate the supply chain under consideration and may even fail to do so when combined with a two-part tariff—which is otherwise known to coordinate the corresponding forward supply chain. Our numerical study, though, has revealed that the combined contract is capable of substantially reducing the coordination deficit. We also introduce a novel three-part tariff which is shown to enable supply chain coordination in combination with the transfer payment.

KW - Closed-loop supply chain

KW - Coordination

KW - EOQ

KW - Joint economic lot size

KW - Remanufacturing

UR - http://www.scopus.com/inward/record.url?scp=84988230984&partnerID=8YFLogxK

U2 - 10.1007/s11573-014-0731-7

DO - 10.1007/s11573-014-0731-7

M3 - Article

VL - 84

SP - 749

EP - 791

JO - Journal of Business Economics

JF - Journal of Business Economics

SN - 0044-2372

IS - 5

ER -