Optimal Operation with Flexible Ordering Policy for Closed-Loop Supply Chain Considering the Uncertainties in Product Demand and Collection Quantity of Used Products

• Published in: Industrial Engineering & Management Systems Vol. 17; no. 3; pp. 350 - 372
• Main Authors: Yamaguchi, Shin, Kusukawa, Etsuko
• Format: Journal Article
• Language: English
• Published: 대한산업공학회 01.09.2018
• Subjects: 산업공학; Game Theory; Closed-Loop Supply Chain; Uncertainty in Product Demand; Quality of Recyclable Parts; Flexible Ordering Policy; Uncertainty in Collection Quantity of Used Products
• ISSN: 1598-7248; 2234-6473
• DOI: 10.7232/iems.2018.17.3.350

This paper discusses a closed-loop supply chain (CLSC), which consists of a buyer, a manufacturer, and a recycler,with an operational flow from collection of used products through remanufacturing of them to sales of products producedof the remanufactured parts. In general, CLSCs face (i) the uncertainty in product demand, (ii) the uncertaintyin collection quantity of used products, and (iii) a variety of quality of the parts extracted from used products. To dealwith the uncertainties (i) and (ii), this paper discusses incorporation of a flexible ordering policy (FOP) that the buyer’sorder quantity is between the minimum order quantity and the maximum order quantity with the manufacturer. The optimal decisions for the minimum order quantity, the maximum order quantity, recycling incentive, and lowerlimit of quality level, are made in each of the decentralized CLSC (DCLSC) and the integrated CLSC (ICLSC). DCLSC optimizes the expected profit of each member, while ICLSC optimizes that of the whole system. Numericalanalysis clarifies the effect of FOP by comparing FOP with a traditional ordering policy (TOP). The benefit of supplychain coordination adopting each of Nash bargaining solution and return on investments for shifting from DCLSC toICLSC is shown. KCI Citation Count: 0