Integrated manufacturer-retailer closed-loop inventory system with price-sensitive return and demand rates

• Published in: Journal of industrial and production engineering Vol. 36; no. 3; pp. 134 - 145
• Main Authors: Yu, Jonas C.P., Yang, P.C., Lai, X.C.
• Format: Journal Article
• Language: English
• Published: Abingdon Taylor & Francis 03.04.2019; Taylor & Francis Ltd
• Subjects: closed-loop system; Cost analysis; Demand; Inventory; Inventory management; price-sensitive demand rate; price-sensitive return rate; recycled component; Recycling; Sensitivity analysis
• ISSN: 2168-1015; 2168-1023
• DOI: 10.1080/21681015.2019.1645049

This study developed a relationship that contains one manufacturer and one retailer in a closed-loop inventory system with price-sensitive return and demand rates. The demand rate is price-sensitive to the selling price, and the return rate depends on the return price of a recycled component. This paper considered four scenarios regarding integration and recycling with different strategies and solution procedures. The purpose of this study was to optimize the product selling price, component return price, the lot sizes of new and returned components, and the lot size of finished products delivered to the retailer. A numerical example was provided to illustrate the proposed model. Sensitivity analyses on the return price, selling price, purchase cost, and other parameters were conducted. In addition, a comparison on the differences between considering and not considering recycling and/or integration was presented.