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Abstract
To quantify the efficiency of decentralized competitive reverse supply chains (RSCs) with quality-dependent price-only contracts, we characterize the worst-case efficiency loss with the price of anarchy (PoA). Several scenarios with unilateral or bilateral horizontal competition under push or pull configurations of RSCs are discussed. Given the uncertainty in the returns of used products, we consider different consumers’ return behaviors and investigate the effect of the quality levels of used products. We clarify the effect of horizontal competition for each scenario and find distinctive features of RSCs that differentiate them from traditional forward activities. Additional managerial insights are provided for discussion.
... Polo et al. [54] • Zhen et al. [55] • Mardan et al. [56] • Yu et al [57] • • • Liao et al. [58] • Zhang et al. [59] • Zeballos et al. [60] • Ondemir et al. [61] • Khatami et al. [62] • • Ma et al. [63] • • W. Chen et al. [64] • Inderfurth et al. [65] • Paydar et al. [66] Planning • Mohammed et al. [67] Production • • Zhou et al. [68] • Tian et al. [69] • Fang et al. [70] • • • Xiao et al. [71] • • • Mota et al. [72] • H. Liao et al. [73] • • Saxena et al. [74] • • Kim et al. [75] • Jiao et al. [76] • • Shi et al. [77] • • Ouaret et al. [78] • Wang et al. [79] • • Liao et al. [80] • Liao & Li [81] • Liao et al. [82] • Liao, Li, et al [83] • Liao et al. [84] • • Liao et al. [85] • Ahmadi & Amin [86] • • Georgiadis et al. [87] • Xie et al. [88] Channel • Heydari et al. [89] coordination • Heydari & Ghasemi [90] • • Zhao et al. [91] • Chari et al. [92] • Ye et al. [93] • Alqahtani et al. [94] • He [95] Contract • B. Liao [96] • As'ad et al. [97] • Ruiz-Torres et al. [98] • Liao et al. [99] • Lieckens et al. [100] • • Singha et al. [101] • Yang et al. [102] • • Diabat et al. [103] • Zhou et al. [104] • Giri et al. [105] • • • Dutta et al. [106] • • Shekarian et al. [107] Inventory • • Oh et al. [108] Management • Simić et al. [109] • Kilic et al. [110] • • Mohammad et al. [111] • Liu et al. [112] • • Dominguez et al. [113] • • Ben-Daya et al. [114] • Giri & Masanta [115] • Kumar et al. [116] • • Gong & Chao [117] • • Shin et al. [118] • Ponte et al. [119] • Dominguez et al. [120] • Das & Dutta [121] Liao & Deng [122] • Özkir et al. [123] • • Mahmoudzadeh et al. [124] • • Xiong et al. [125] • Li et al. [126] • • Chen et al. [127] • Jena et al. [128] Pricing • Yang et al. [129] • • Vafadarnikjoo et al. [130] • Gan et al. [131] • Pi et al. [132] • Xing et al. [133] • Kumar & Sun [134] • • Deng et al. [135] • Amin et al. [136] • Chen et al. [137] • Moghaddam [138] Supplier • Giri et al. [139] Selection • Shakourloo et al. [140] • Rezaei et al. [141] • • • Govindan et al. [142] • ...
... The production of CLSC can also achieve maximum benefit when 3R systems procurement reaches optimal quality coefficient [99]. Apart from that, other links of the contract were established, such as connections between the supplier and manufacturer [98] that determines the capacity of a new component due to unmet demand, and contracts involving the collector and remanufacturer [93] that addresses the return item quality, where a quality subject price contract was used between a two-stage RSC. ...
... The bar chart in Fig. 9 illustrates the various methods considered by the listed authors when dealing with mathematical modelling in CLSC. It is found that stochastic models and MILP are preferable models in CLSC/RL when Economic order quantity (EOQ) [73], [81], [82], [101], [102], [106], [115], [122], [127] Fuzzy EOQ (FEOQ) [77], [107] Fuzzy mixed-integer linear programming model (FMILP) [7], [31], [35] Fuzzy multi-objective model (FMOM) [74], [123] Integer linear programming model (ILPM) [41], [92], [108] Laplace transform (LT) [68] Mixed-integer linear programming (MILP) [26], [27], [60], [66], [111], [29], [30], [36], [38], [39], [42], [43], [51] Mixed-integer model (MIM) [46], [48], [52], [55], [62], [75], [110]; Mixed-integer non-linear model (MINLM) [50], [54], [97], [103], [112], [114], [116], [136] Multi-objective integer linear programming (MOILP) [28], [140] Multi-objective mixed-integer linear programming (MOMILP) [56], [72], [142] Multi-objective mixed-integer nonlinear programming (MOMINLP) [37], [63] Non-linear programming model (NLPM) [69] Quadratic programming model (QPM) [100], [124], [134] Robust optimisation model (ROM) [76] System dynamics (SD) [87], [94] Semi-infinite programming model (SIPM) [109] Stackelberg games model (SG) [93], [95], [129], [131], [133], [137] Stochastic model (SM) [32], [33], [78], [84], [85], [89], [90], [96], [98], [99], [104], [105], [34], [113], [117], [118], [126], [128], [135], [141], [44], [53], [57], [58], [64], [65], [67] Stochastic MILP model (SMILP) [47] Others [40], [61], [70], [71], [79], [80], [83], [91], [119], [120], [125], [130], [132], [138], [139] compared to other modelling types, which recorded precisely 25% and 12% respectively. The interesting point to be highlighted in the graph is the percentage recorded (11%) by other mathematical modelling methods. ...
The consideration of uncertainty in closed loop supply chains (CLSC) is a crucial aspect that has been discussed frequently in recent research. Despite a wealth of literature on CLSC modelling, a recent comprehensive review of remanufacturing models in CLSC incorporating an analysis of uncertainty trends has yet to be undertaken. The primary purpose of this paper is to analyse and review the existing research streams encompassing mathematical modelling and optimisation of remanufacturing systems in the CLSC, specifically in the context of decision-making methods. This paper focuses on reviewing remanufacturing uncertainty such as demand, inventory, cost, return yield, as well as the environment and seeks to clarify solutions to problems, including production planning, network design, channel coordination, contract, pricing, supplier selection, and inventory management for the past eight years. A total of 118 research articles were analysed to discover trends on problems, uncertainty categories, mathematical modelling techniques, and solution approaches, as well as providing research gaps and potential future extensions for researchers of common interest. Results from the analysis show that network design and production planning are the most frequent problems considered by previous authors, while analysis of demand and return yield uncertainties in the remanufacturing cycle are the most preferred studies. Finally, limitations and future research needs for decision-support methods in CLSC were identified such that risk domains can be further explored.
... In addition, Hong and Yeh (2012) explore the cooperation between the manufacturer and the third-party collector via a wholesale pricing contract for collecting end-of-life products from consumers. Hong et al. (2008) and Ye et al. (2016) investigate a structure where the remanufacturer interacts with the third party collector to purchase recycled items via a wholesale pricing contract and recovers the remaining value of these products. ...
... They aim to reveal the more efficient one in a competitive environment. Ye et al. (2016) measure the efficiency loss of reverse logistics by comparing three competitive structures with the implementation of a wholesale pricing contract. Both the remanufacturer Stackelberg and the third party collector Stackelberg scenarios are analyzed. ...
... Moreover, many contracts not wellexplored are also of high research relevance and value. For instance, the retailer or the remanufacturer may explore the proper outsourcing contract for the collection function to a third party collector when its capability of handling returns is not enough (Weraikat et al., 2016;Ye et al., 2016). Under this situation, examining how the retailer (or remanufacturer) utilizes a contract to simulate more qualified returns and enhance reverse supply chain performance can be really meaningful. ...
With the growing awareness of environmental sustainability, reverse logistics is a very timely and critical area. Traditionally, the use of supply chain contracts has been proven to be effective in enhancing the performance of logistics systems. However, the current literature on supply chain contracts in reverse logistics is scattered. As a result, we aim to review in this paper the recent state of the art literature (2006–2016) on supply chain contracts with a focus on reverse logistics systems. We explore the popularity of different kinds of supply chain contracts, and identify the most productive researchers in the area. We classify and examine the literature with respect to the supply chain structure (i.e. the involved supply chain links), and channel leaderships (i.e. who acts as the leader). Finally, we identify the research gaps, suggest five major categories of future research directions and discuss the respective research challenges.
... However, such self-centered behaviors may lead to deterioration in performance of the social cost, that is, the sum of cost functions of all players. Specially, some existing studies have yielded valuable insights into the detrimental consequences of selfish behaviors on performance degradation in diverse fields, such as supply chains [10], resource allocation [11], and congestion games [12], [13] by virtue of the metrics of the price of anarchy and the price of stability [14], [15]. A prospective direction of research involves improving social cost while also accommodating the preferences of individual players in noncooperative games. ...
... Set N = 10. For every i ∈ [10], set ci = 4 + i, di = 7 + 2i, ai = 10 + i, λi = 0.1, and r = 1. Moreover, let set constraints Xi = [0, 25] 10 and Θ = [1,3]. ...
This paper proposes a novel optimization problem building on noncooperative games under central regulation, which can be formulated as a bilevel structure. In the low-level, each player competes to minimize its own cost function that depends not only on the strategies of all players, but also on an intervention decision of the central regulator, while the central regulator located at the high-level attempts to achieve the social optimum, that is, to minimize the sum of cost functions of all players through an adjustable intervention decision. In this setting, under the intervention of the central regulator, the low-level players perform in a noncooperative game and aim to seek the Nash equilibrium, which indeed is related with the regulator's decision. Meanwhile, the objective of the regulator is to choose a decision such that the social cost, i.e., the sum of cost functions of all players is minimum. This formulated bilevel social optimization problem is proven to be constrained, nonconvex and nonsmooth. To address this intricate problem, an inexact zeroth-order algorithm is developed by virtue of the smoothing techniques, allowing for the Nash equilibrium of the low-level game to be computed in an inexact manner. Levering the properties of smoothing techniques, it is rigorously shown that the devised algorithm achieves a sublinear convergence rate for computing a stationary point of a related optimization problem with a smoothed objective. Moreover, the sublinear convergence rate in the scenario where the exact equilibrium of the low-level game is available is also discussed. Finally, numerical simulations are conducted to demonstrate the efficiency of theoretical findings.
... Although Gan et al. [26] and Huang et al. [27] have considered the third party collector activities in reverse logistics, they have focused on a single collector and have neglected the impact of competition and coordination among various collectors. Although Zheng et al. [3] and Ye et al. [28] have coordinated the collector's decisions in an RSC, competition has not been addressed in their works. Moreover, these two studies have considered channel coordination in a single-link setting. ...
... In the investigated RSC, due to the competitive third party collectors in reverse channel, there exist multiple links which should be coordinated and thus the proposed coordination contract should be capable of coordinating such multiple links. The proposed MTPT contract which is motivated by a traditional two-part tariff contract is designed to coordinate multiple links of remanufacturercollector. Theoretically, the two-part tariff contract is extensively used to coordinate reverse channels (e.g., [3] and [28]). In terms of practical applications, the two-part tariff contract is successfully conducted in reverse/closed-loop SCs (e.g., [38] and [40]). ...
The proper supply of end-of-life (EOL) items plays a critical role in the success of remanufacturing systems. In many real-world practices, a remanufacturer has multiple links with independent third party collectors, while these links should be simultaneously coordinated. However, most previous studies mainly focus on reverse supply chain (RSC) coordination in a one-to-one setting (single link). Moreover, the competition among third party collectors affects the acquisition of EOL products and this is an important issue. In this paper, an RSC consisting of a single remanufacturer and duopolistic competing third party collectors is explored and a new mechanism is proposed to achieve channel coordination across multiple links. To be specific, we consider the case when the collectors compete on the acquisition prices offered to the consumers and the remanufacturer decides on the pricing and environmental effort decisions with two considerations: 1) increasing return of EOL items and 2) boosting demand of remanufactured products. The optimal decisions of RSC members and performance of RSC are analyzed under different behaviors of competing collectors. Moreover, a multilateral two-part tariff contract is proposed to coordinate the decisions across multiple links. The results indicate that the proposed contract improves not only profits of the remanufacturer and competing collectors but also the collection quantity of EOL items and demand of remanufactured products, which helps improve the environment.
... There is also an excellent opportunity to work with big data for GrSC (Tseng et al., 2019). Again, developing a model with social welfare under uncertain supply and demand in the reverse supply chain in terms of environmental benefits still needs to be solved (Ye et al., 2016). ...
... According to the authors in [117], some symptoms show that returns have become a problem. When returns arrive faster than processing or disposal, difficulties appear. ...
As members of society, companies are exposed to social changes and pressures. Hence, an interest to be more environmentally friendly appears and rises in their core. Therefore, the supply chain management concept became “greener” with the development, among other practices, of reverse logistics programs. Both external pressures and internal factors, such as reducing costs and increasing operational performance, are motivating companies to pay more attention to the reverse flow. Unfortunately, there are still many boundaries that hinder the implementation of reverse logistics. Some of these obstacles include additional costs, the desire for deep collaboration with suppliers and customers, and the belief of some managers that are managing reverse flow that it is not worth the trouble. On the contrary, those who have assimilated its importance and advantages are interested in new and innovative tools that could contribute to more effective and efficient results, including the role of RFID technology.
... A more comprehensive review can be found in review articles (Guide and Luk, 2009;Souza, 2013). Ye et al. (2016) identified the upper bounds of efficiency loss in decentralized reverse supply chains using a systematical analysis. Ma et al. (2019) then examined the upper bounds of efficiency loss in a CLSC. ...
This study considers an original equipment manufacturer (OEM) who (a) relies on a contract manufacturer (CM) to produce its new products, and (b) engages the CM again or an independent remanufacturer (IR) to perform the remanufacturing operations of branded patented products through either authorization or outsourcing. This study chiefly investigates the optimal remanufacturing engagement strategy (i.e., engage a CM or an IR) and remanufacturing mode (i.e., authorization and outsourcing) that should be taken by an OEM. This paper derives the optimal responses of the three parties (i.e., OEM, CM, and IR) by comparing the outcomes of different remanufacturing engagement strategies and remanufacturing modes under two settings, depending on whether the wholesale price is exogenously or endogenously given. The results suggest that the OEM is better off adopting the authorization remanufacturing mode by either working with the CM or the IR when the wholesale price is exogenously given. When the wholesale price is endogenously determined by the CM, the best strategy for the OEM is to work with the IR using the outsourcing approach. The CM and the IR also show different preferences between the two modes. The IR or CM that engages in remanufacturing always prefers the outsourcing mode than the authorization mode in the two settings. However, when the CM does not engage in remanufacturing, it is better off adopting the authorization mode when the wholesale price is exogenously given or when the remanufacturing cost is relatively low in the endogenized wholesale price setting.
... Therefore, in many cases, the remanufacturers expect the collectors to pretreat (i.e. sort, separate, and grade) the collected items and achieve an acceptable quality level for transferred items (Ye et al., 2016). To this end, the collectors should adopt pretreatment technologies to improve the quality of returned products transferred to the remanufacturer. ...
A coordination model in a reverse supply chain (RSC) considering product acquisition management and competition of third-party collectors is developed. Motivated by a case study of plastic recycling, collectors not only compete on the return incentives paid to consumers but also control the quality level of returned products delivered to the remanufacturer. A tri-party two-part tariff mechanism is introduced to coordinate the links between competing collectors and the remanufacturer. We analyze the retail and acquisition prices, and the quality level decisions under decentralized, centralized, and coordination systems. The results demonstrate that the coordination model not only significantly enhances both the quantity and quality of items received by the remanufacturer but also provides a win-win-win situation for members.
... For example, in the doctoral work in Ding (2017), they compare centralised and decentralised organisation models in a warehouse shared by multi-retailers. Ye et al. (2016) study reverse supply chain and they employ PoA to measure the efficiency of two collectors under centralised or decentralised competitive environment. Some studies focus on vertical supplier-clients dyadic relations in supply chain. ...
Centralisation and decentralisation are the two common organisations in freight transport. The first relies on a central authority who optimises and establishes transport plans for all carriers for global-interest, while the second lets carriers optimise their own transport plans for their self-interest. The outcome - efficiency and effectiveness - could be different. This paper aims to use the concept of Price of Anarchy (PoA) to compare the outcome of the two organisations. Due to the complexity of actual freight transport market, this paper adapts the gamification methodology to investigate the two organisations. A freight transport game was developed for simulation. The outcome of the two simulated organisations -centralisation or decentralisation - are then compared. The results show that the centralisation outperforms in terms of global efficiency and effectiveness; while decentralisation is better individual incentive. However, the PoA varies depending on information revealed.
... For example, in the doctoral work in Ding (2017), they compare centralised and decentralised organisation models in a warehouse shared by multi-retailers. Ye et al. (2016) study reverse supply chain and they employ PoA to measure the efficiency of two collectors under centralised or decentralised competitive environment. Some studies focus on vertical supplier-clients dyadic relations in supply chain (Perakis and Roels, 2007). ...
... Kwon et al. [2016] discussed the quality and financial improvement in healthcare supply chain management and strategic areas were confirmed to improve the quality of care in terms of reducing readmission rate. Ye et al. [2016] analyzed the price of anarchy (PoA) in decentralized competitive reverse supply chains (RSCs) in accordance with quality-dependent price-only contracts. Jeihoonian et al. [2017] developed a case of durable products so as to explore the effect of uncertain quality on the closed-loop supply chain network through a two-stage stochastic mixed-integer programming model. ...
Motivated by the Silk Road Economic Belt and the 21st-Century Maritime Silk Road project, i.e. the Belt and Road (B&R), more goods will flow around the world. With this trading platform, people can buy products at relatively cheap prices, and it is easier for people to buy various goods. The quality and quantity of products thus attract more and more attention in the supply chains. This paper discusses the quantity decision by considering the product quality in parallel supply chains where two manufacturers produce substitute products and then sell them to their downstream retailers separately. In terms of the changing quantity, as well as the different quality, this paper establishes a dynamic game model to explore the dynamic behavior when the optimal profits of two retailers have been calculated. The dynamic behaviors of the system, such as stable region, bifurcation and chaos, strange attractors and the largest Lyapunov exponents (LLE) are analyzed. The effect of the quantity adjustment parameter on the stability of the supply chain system is investigated through numerical simulations. Furthermore, a dynamic game model is established based on the quality delay decision, to investigate the influence of the quality delay parameter on the dynamic game model and the profits. Finally, the optimal decisions are obtained and analyzed.
... Liu, Zhang, and Tang (2015) analysed joint dynamic pricing and investment strategy for perishable foods where the demand is price-quality dependent. Ye, Ma, and Dai (2016) studied quality-dependent price-only contracts and found out the price of anarchy in a competitive reverse supply chain set up. This paper's contribution to the existing literature are as follows: Firstly, this paper analyzes multi-manufacturer brand differentiation where demand is dependent on the retail price as well as the quality of the product. ...
In this paper, we consider a supply chain in which multiple manufacturers sell a single product through a common retail channel. The demand at the retailer’s end depends on the retail price and quality of the product. Each manufacturer customizes his/her product to differentiate it from the other manufacturers’ products. Manufacturers compete with each other over price and quality in the presence of brand differentiation. In this set up, we consider two scenarios: (i)(i) when customers do not have the facility of return and refund, and (ii)(ii) when customers do have the facility of return and get full refund. We analyze the pricing and quality management strategies of the manufacturers and the retailer in each scenario for centralized and decentralized systems. Through our study we find that brand differentiation increases retail price and quality of the product. We also see that, to make full refund policy more profitable than no return, reservation price has to be set higher. Using revenue sharing mechanism, we coordinate the decentralized system and make it a win-win situation for each party involved. Finally, through a numerical example, we analyze the effect of various parameter-values on the decision making strategies of our model.
Tons of hazardous pharmaceutical waste is introduced to the environment each year, showing the significance of medicines reverse channels. Meanwhile, establishing a pharmaceutical reverse channel is complex and costly, and therefore misestimation of uncertainty in waste collection operations can lead to severe financial losses. As conventional methods for uncertainty often fail to mitigate the risk and protect the system, we propose a central robust approach, inspired by scenario-based robust optimization and supply chain coordination concepts, which can significantly reduce waste management costs in the face of uncertainty. We study the profitability in a two-layer reverse channel, where the initial number of unwanted medications is subject to discrete uncertainty. Then, we extend our problem, assuming that the customer willingness to return the items is subject to random uncertainty. A non-linear programming model, a flexible transfer price agreement, and the Nash-bargaining game model are developed to optimize and coordinate the system performance. The analytical results provide reliable insights for industry owners to manage uncertainty in the collection process. We illustrate that implementing the proposed model boosts the return quantity, leads to a remarkable improvement in the profitability of the entire chain, and improves the system adaptability with respect to changing significant market parameters or revenue fluctuations.
The Physical Internet is meant to dynamically route hundreds of thousands of loads a day all over the world. Each time a load arrives at a node that is not its destination, a next node, a carrier, and a price should be jointly selected to get the load closer to its destination.
The dynamic nature of the routing system and the large number of loads to process in short periods of time are problematic for standard optimization processes. Fast and easy to run protocols, like those we see employed in the Digital Internet, must be designed. Using a game theoretic approach, we design a protocol whose core component is an auctioning process run each time a load arrives at a new node different from its destination. The protocol promises to be fast, reliable, and resilient, and aims to minimize the price of the total routing process by using concepts like administrative distance as used in Digital Internet routers.
If the behaviors of the carriers are rational, then the proposed auction, when played only one time, is Incentive Compatible, Allocatively Efficient, Budget Balanced, and respects Individual Rationality. The final protocol, however, involves three intelligent agents – shippers, nodes, and carriers – whose action space and interactions are too complex for pen and paper analysis.
As a first step to understand the performance of such a new system, we simulate an environment with only Full-Truck-Loads in a market composed of single truck companies. We assume simple behaviors for shippers, and we use a learning process for nodes and carriers. We show that the usage of such a protocol is extremely efficient for it significantly reduces total delivery costs as well as empty mileage.
The level of reservation profit is one of the important factors affecting the efficiency of supply chain. Consider a two-tier supply chain system consisting of a manufacturer and a retailer to study the effects of reservation profit levels of different supply chain members on the feasibility and efficiency of wholesale price contract and agency selling contract. The results show that if the unit production cost is sufficiently low, the agency selling contract is more efficient (less efficient) than the wholesale price contract when the reservation profit level of the retailer is below (above) a certain threshold. However, if the unit production cost is sufficiently high, the wholesale price contract is always superior to the agency selling contract in efficiency. For the feasibility of the two types of contracts, we find that when the unit production cost is sufficiently high, the feasibility range of the wholesale price contract is wider than that of the agency selling contract.
Purpose
Reverse supply chain (RSC) is one of the ways to handle product returns efficiently. Recovery of residual value from product returns also helps in achieving sustainability. Its successful implementation requires coordination among all the channel members involved in the activities, from the acquisition to collection to the disposition of returned products. This article aims to review the literature about coordination issues in the RSC.
Design/methodology/approach
A systematic literature review of 151 articles published during 2004–2021 is carried out. Theory, context and methodology (TCM) framework of the literature review is used to identify the research gaps for future research directions.
Findings
This study identifies the characteristics of RSC coordination. It includes channel structures; coordination mechanisms; performance measuring parameters; the methodology applied and explored industries. The review shows that game-theoretical modeling in RSC coordination is the most commonly used method to coordinate the channels. It was found that issues like disruption, fairness and corporate social responsibility are not explored in-depth and offer much potential for future research.
Originality/value
There are very limited studies on coordination issues in the RSC. The proposed articles add value by considering RSC issues from different strategic, government, consumers' behavior and functionality decision-making point of view.
In this paper, we study the competitive and sustainable supply chain network design problem. We consider the chain-to-chain competition between two supply chains. The problem is divided into two stages. The retail price and carbon emission equilibrium at the competition stage are studied. Then, the equilibrium results of the competition stage are substituted into the network design stage as constraints. To address the computational complexity of large-scale problems, a Benders decomposition algorithm is proposed. Through computational studies we find that (1) considering carbon emission competition in the supply chain lowers both the total optimized cost and carbon emission; (2) the carbon emissions of the total supply chain network increases with the probability of capacity satisfaction; (3) the proposed Benders decomposition algorithm outperforms CPLEX for large scale problems.
This paper measures the worst‐case efficiency of price‐only contracts in closed‐loop supply chains (CLSCs) with the price of anarchy (PoA). We model a single‐period Stackelberg game in which a manufacturer sells new products to a retailer and collects used products with exogenous retail price and collection price via three alternative reverse channels: (a) the manufacturer collects directly from customers, (b) the retailer collects for the manufacturer, and (c) a third party is awarded a collection subcontract from the manufacturer. We carry out a comprehensive investigation under push–pull configurations to observe how reverse channel structures with different gaming sequences of CLSC members influence the worst‐case performance when the demand distribution is over the set of increasing generalized failure rate distributions. From our PoA analysis, we find that the pull system does not always outperform the push system, especially when the retailer is the leader, in contrast to the results for forward supply chains. While the PoA of the push system is dramatically sensitive to the quality condition of used products, the pull system has a constant efficiency loss that is independent of the quality condition. Instead, the PoA of the pull system solely changes with the gaming sequence of the manufacturer. We also find that manufacturer's direct collection is a better reverse channel choice compared to retailer's collection. Additional managerial insights are summarized for discussion.
This study considers a fresh produce supply chain consisting of one supplier and multiple retailers with a quantity discount contract in two scenarios—independent procurement and joint procurement. The supplier’s optimal pricing decision and the retailers’ optimal procurement decisions under the quantity discount contract are investigated. Furthermore, the impact of the deterioration rate on the profit of supply chains is examined. The results show that joint procurement is more profitable than independent procurement and guarantees a win-win outcome. More importantly, retailers will be motivated to form a grand coalition when the total profit can be rationally allocated among them.
In a supply chain with one risk neutral manufacturer and one risk averse supplier, we propose a risk diversification contract under which the manufacturer shares the losses of excess capacity and inadequate capacity with the supplier, and a side payment is transferred from the supplier to the manufacturer. Under the Conditional Value-at-Risk (CVaR) criterion, risk diversification contract has a Pareto improvement and can allocate system performance appropriately in both symmetrical and asymmetrical demand information. In addition, this contract can coordinate supply chain and has a larger market than an option, capacity reservation, payback, revenue-sharing contract under the symmetrical demand information.
Under the coexistence of “trade old for new” (TON) and “trade old for remanufactured” (TOR) programs, we study a firm’s optimal pricing decisions and identify the thresholds that determine whether the firm should offer TON and TOR simultaneously. The result shows that adopting two kinds of trade-ins simultaneously does not necessarily benefit the firm and that the firm should use different trade-in schemes under different conditions. Moreover, we extend the model to the case with budget constraints on the TOR subsidy. The result shows that the firm’s profit decreases when the actual TOR quantity exceeds the upper limit.
This paper is on production planning and inventory control in systems where manufacturing and remanufacturing operations occur simultaneously. Typical for these hybridsystems is, that both the output of the manufacturing process and the output of the remanufacturing process can be used to fulfill customer demands. Here, we consider a relatively simple hybrid system, related to a single component durable product. For this system, we present a methodology to analyse a PUSH control strategy (in which all returned products are remanufactured as early as possible) and a PULL control strategy (in which all returned products are remanufactured as late as is convenient). The main contributions of this paper are (i) to compare traditional systems without remanufacturing to PUSH and to PULL controlled systems with remanufacturing, and (ii) to derive managerial insights into the inventory related effects of remanufacturing.
In this paper, we quantify the efficiency of decentralized supply chains that use price-only contracts. With a price-only contract, a buyer and a seller agree only on a constant transaction price, without specifying the amount that will be transferred. It is well known that these contracts do not provide incentives to the parties to coordinate their inventory/capacity decisions. We measure efficiency with the price of anarchy (PoA), defined as the largest ratio of profits between the integrated supply chain (that is, fully coordinated) and the decentralized supply chain. We characterize the efficiency of various supply chain configurations: push or pull inventory positioning, two or more stages, serial or assembly systems, single or multiple competing suppliers, and single or multiple competing retailers.
It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many (possibly competing) retailers. We find that some key conclusions from those market structures do not apply in our setting, where multiple manufacturers sell through a single retailer. We allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms. More importantly, they allow the manufacturer to extract rents from the retailer, in theory allowing the manufacturer to leave the retailer with only her reservation profit. However, we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale-price contracts, and this may leave them worse off and the retailer substantially better off. In other words, although in a serial supply chain a retailer may have just cause to fear quantity discounts and two-part tariffs, a retailer may actually prefer those contracts when offered by competing manufacturers. We conclude that the properties a contractual form exhibits in a one-manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer.
Contingency planning is the first stage in developing a formal set of production planning and control activities for the reuse of products obtained via return flows in a closed‐loop supply chain. The paper takes a contingency approach to explore the factors that impact production planning and control for closed‐loop supply chains that incorporate product recovery. A series of three cases are presented, and a framework developed that shows the common activities required for all remanufacturing operations. To build on the similarities and illustrate and integrate the differences in closed‐loop supply chains, Hayes and Wheelwright’s product–process matrix is used as a foundation to examine the three cases representing Remanufacture‐to‐Stock (RMTS), Reassemble‐to‐Order (RATO), and Remanufacture‐to‐Order (RMTO). These three cases offer end‐points and an intermediate point for closed‐loop supply operations. Since they represent different positions on the matrix, characteristics such as returns volume, timing, quality, product complexity, test and evaluation complexity, and remanufacturing complexity are explored. With a contingency theory for closed‐loop supply chains that incorporate product recovery in place, past cases can now be reexamined and the potential for generalizability of the approach to similar types of other problems and applications can be assessed and determined.
We consider Cournot competition in the presence of congestion effects. Our model consists of several service providers with differentiated services, each competing for users who are sensitive to both price and congestion. We distinguish two types of congestion effects, depending on whether spillover costs exist, that is, where one service provider's congestion cost increases with the other providers' output level. We quantify the efficiency of an unregulated oligopoly with respect to the optimal social welfare with tight upper and lower bounds. We show that, when there is no spillover, the welfare loss in an unregulated oligopoly is limited to 25% of the social optimum, even in the presence of highly convex costs. On the other hand, when spillover cost is present, there does not exist a constant lower bound on the efficiency of an unregulated oligopoly, even with affine cost. We show that the efficiency depends on the relative magnitude between the marginal spillover cost and the marginal benefit to consumers.
This paper was accepted by Christian Terwiesch, operations management.
The business values of product remanufacturing have been well-recognized in the literature. Companies have also increasingly realized the importance of coordinating the closed-loop supply chains (CLSCs) with both manufacturing and re-manufacturing processes. In this paper, we investigate a CLSC which consists of a retailer, a collector, and a manufacturer, and examine the performance of different CLSC under different channel leadership. Through a systematic comparison, we find that the retailer-led model gives the most effective CLSC. Moreover, we analytically reveal that the remanufacturing system's efficiency is highly related to a supply chain agent's proximity to the market. Counter-intuitively, we show that the collector-led model is not the most effective model for collecting the used-product. We finally illustrate how both the serial and parallel CLSCs can be coordinated by using different kinds of practical contracts.
This paper models a closed-loop supply chain (CLSC) with a manufacturer and its supply channels - recycle channel and reliable supply channel. We assume that the manufacturer may reuse the recycled main product component and remanufacture the product. The recycle channel shows stochastic recovery rate. Both the centralized(integrated) recycle channel CLSC and the decentralized recycle channel CLSC are studied. The optimal production decision and the optimal acquisition pricing decision are obtained for both the deterministic demand and the stochastic demand cases. Further, the paper discusses the supply chain inefficiency in this CLSC. It is shown that under decentralized recycle channel structure, the optimal acquisition price is always lower than the optimal acquisition price under centralized recycle channel structure, causing reduced recycle quantity and lower remanufactured quantity, which is similar to the effect of double marginalization in the normal forward supply chain. The cost difference between the two supply channels also increases such double marginalization impact. In order to reduce such supply chain inefficiency, two contracts (complete compensation and partial compensation) are proposed. It is shown that under certain conditions, both contracts are Pareto improving for the decentralized supply chain and can be used to coordinate the CLSC. Numerical examples are used to illustrate the results. The numerical examples show the different preferences of supply chain parties on different risk reductions in the decentralized system. In general, the interests on demand risk reduction is aligned between the recycle channel supplier and the manufacturer with the manufacturer showing higher motivation; on the other hand, recycle channel supplier and the manufacturer may have conflict of interests in supply risk reduction when the supply risk is low, and their interests are aligned when the supply risk is high.
In this paper, we study the role of capacity on the efficiency of a two-tier supply chain with two suppliers (leaders, first tier) and one retailer (follower, second tier). The suppliers compete via pricing (Bertrand competition) and, as one would expect in practice, are faced with production capacity. We consider a model with differentiated substitutable products where the suppliers are symmetric differing only by their production capacity. We characterize the prices, production amounts and profits in three cases: (1) the suppliers compete in a decentralized Nash equilibrium game, (2) the suppliers “cooperate” to optimize the total suppliers’ profit, and (3) the two tiers of the supply chain are centrally coordinated. We show that in a decentralized setting, the supplier with a lower capacity may benefit from restricting her capacity even when additional capacity is available at no cost. We also show that the loss of total profit due to decentralization cannot exceed 25 % of the centralized chain profits. Nevertheless, the loss of total profit is not a monotonic function of the “degree of asymmetry” of the suppliers’ capacities. Furthermore, we provide an upper bound on the supplier profit loss at equilibrium (compared with the cooperation setting) that depends on the “market power” of the suppliers as well as their market size. We show that there is less supplier profit loss as the asymmetry (in terms of their capacities) increases between the two suppliers. The worst case arises when the two suppliers are completely symmetric.
Products that are not recycled at the end of their life increasingly damage the environment. In a collection – remanufacturing scheme, these end-of-life products can generate new profits. Designed on the personal computers industry, this study defines an analytical model used to explore the implications of recycling on the reverse supply chain from an efficiency perspective for all participants in the process. The cases considered for analysis are the two- and three-echelon supply chains, where we first look at the decentralized reverse setting followed by the coordinated setting through implementation of revenue sharing contract. We define customer willingness to return obsolete units as a function of the discount offered by the retailer in exchange for recycling devices with a remanufacturing value. The results show that performance measures and total supply chain profits improve through coordination with revenue sharing contracts on both two- and three-echelon reverse supply chains.
Assembly and kitting operations, as well as jointly sold products, are rather basic yet intriguing A decentralized supply chains, where achieving coordination through appropriate incentives is very important, especially when demand is uncertain. We investigate two very distinct types of arrangements between an assembler/retailer and its suppliers. One scheme is a vendor-managed inventory with revenue sharing, and the other a wholesale-price driven contract. In the VMI case, each supplier faces strategic uncertainty as to the amounts of components, which need to be mated with its own, that other suppliers will deliver. We explore the resulting components' delivery quantities equilibrium in this decentralized supply chain and its implications for participants' and system's expected profits. We derive the revenue shares the assembler should select in order to maximize its own profits. We then explore a revenue-plus-surplus-subsidy incentive scheme, where, in addition to a share of revenue, the assembler also provides a subsidy to component suppliers for their unsold components. We show that, by using this two-parameter contract, the assembler can achieve channel coordination and increase the profits of all parties involved. We then explore a wholesale-price-driven scheme, both as a single lever and in combination with buybacks. The channel performance of a wholesale-price-only scheme is shown to degrade with the number of suppliers, which is not the case with a revenue-share-only contract.
We consider a competitive version of the classical newsboy problem – in which a firm must choose an inventory or production level for a perishable good with random demand, and the optimal solution is a fractile of the demand distribution – and investigate the impact of competition upon industry inventory. A splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory. We examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium. Our most general result is that if all excess demand is reallocated, i.e., there is perfect substitutability, then competition never leads to a decrease in industry inventory.
In this paper, we quantify the efficiency of price-only contracts in supply chains with demand distributions by imposing prior knowledge only on the support, namely, those distributions with support [a, b] for 0 < a ≤ b < +∞. By characterizing the price of anarchy (PoA) under various push supply chain configurations, we enrich the application scope of the PoA concept in supply chain contracts along with complemen-tary managerial insights. One of our major findings is that our quantitative analysis can identify scenarios where the price-only contract actually maintains its efficiency, namely, when the demand uncertainty, measured by the relative range b/a, is relatively low, entailing the price-only contract to be more attractive in this regard.
In this paper, we examine how customer returns influence the retailer's ordering decision, the manufacturer's wholesale price decision, and the profits of the manufacturer and the retailer, in a single-period, stochastic demand (newsvendor) setting. When the manufacturer is a Stackelberg leader and the retailer is the follower, we also examine how to contract a buyback policy, where the manufacturer buys back both unsold inventory and customer-returned products, so that both the manufacturer and the retailer are more profitable than if they operate independently. We also show how this work can be generalized to the case of multiple retailers.
We present a two-period model of remanufacturing in the face of competition. In our model, an original equipment manufacturer (OEM) competes with a local remanufacturer (L) under many reverse logistics configurations for the returned items. After establishing the Nash Equilibrium in the second period sub-game, we use numerical experiments for comparative statics. OEM wants to increase L'S remanufacturing cost. Surprisingly, while L competes in the sales market, she has incentives to reduce oem's remanufacturing cost. A social planner who wants to increase remanufacturing can give incentives to the OEM to increase the fraction available for remanufacturing, or reduce his remanufacturing costs.
We consider a simple supply-chain contract in which a manufacturer sells to a retailer facing a newsvendor problem and the lone contract parameter is a wholesale price. We develop a mild restriction satisfied by many common distributions that assures that the manufacturer's problem is readily amenable to analysis. The manufacturer's profit and sales quantity increase with market size, but the resulting wholesale price depends on how the market grows. For the cases we consider, we identify relative variability (i.e., the coefficient of variation) as key: As relative variability decreases, the retailer's price sensitivity decreases, the wholesale price increases, the decentralized system becomes more efficient (i.e., captures a greater share of potential profit), and the manufacturer's share of realized profit increases. Decreasing relative variability, however, may leave the retailer severely disadvantaged as the higher wholesale price reduces his profitability. We explore factors that may lead the manufacturer to set a wholesale price below that which would maximize her profit, concentrating on retailer participation in forecasting and retailer power. As these and other considerations can result in a wholesale price below what we initially suggest, our base model represents a worst-case analysis of supply-chain performance.
Forecast sharing is studied in a supply chain with a manufacturer that faces stochastic demand for a single product and a supplier that is the sole source for a critical component. The following sequence of events occurs: the manufacturer provides her initial forecast to the supplier along with a contract, the supplier constructs capacity (if he accepts the contract), the manufacturer receives an updated forecast and submits a final order. Two contract compliance regimes are considered. If the supplier accepts the contract under forced compliance then he has little flexibility with respect to his capacity choice; under voluntary compliance, however, he maintains substantial flexibility. Optimal supply chain performance requires the manufacturer to share her initial forecast truthfully, but she has an incentive to inflate her forecast to induce the supplier to build more capacity. The supplier is aware of this bias, and so may not trust the manufacturer's forecast, harming supply chain performance. We study contracts that allow the supply chain to share demand forecasts credibly under either compliance regime.
This paper considers the pricing decision faced by a producer of a commodity with a short shelf or demand life. A hierarchical model is developed, and the results of the single period inventory model are used to examine possible pricing and return policies. The paper shows that several such policies currently in effect are suboptimal. These include those where the manufacturer offers retailers full credit for all unsold goods or where no returns of unsold goods are permitted. The paper also demonstrates that a policy whereby a manufacturer offers retailers full credit for a partial return of goods may achieve channel coordination, but that the optimal return allowance will be a function of retailer demand. Therefore, such a policy cannot be optimal in a multi-retailer environment. It is proven, however, that a pricing and return policy in which a manufacturer offers retailers a partial credit for all unsold goods can achieve channel coordination in a multi-retailer environment. This article was originally published in , Volume 4, Issue 2, pages 166–176, in 1985.
We consider the effect of the so-called second-best tolls on the price of anarchy of the traffic equilibrium problem where there are multiple classes of users with a discrete set of values of time. We derive several bounds of the price of anarchy for this problem when the tolls are considered and not considered as part of the system cost, with the time-based criterion and the cost-based criterion, respectively. All the bounds give us useful information on the effect of the tolls, which can be used to design network toll schemes.
Manufacturers' returns policies are a common feature in the distribution of many products. The obvious rationale for returns policies is insurance. Practitioners, not surprisingly, have a different perspective and view returns as a cost of doing business. In this paper, we study the strategic effect of returns policies on retail competition and highlight its profitability implications for a manufacturer. The setting for our research is the distribution of products with uncertain demand, limited shelf lives, and retail competition. Our objective is to provide a better understanding of when manufacturers should adopt returns policies. The insights are obtained with a model based on the economics of strategy and decision making under uncertainty.
We show that when retailing is competitive and there is no uncertainty in demand, a returns policy subtly induces retailers to compete more intensely. The provision of a returns policy reduces retail prices without affecting wholesale prices, thereby reducing retailer margins and improving manufacturer profitability. The intuition is that with a returns policy, Cournot-like levels of retail stocks cannot be sustained. Each retailer will order stocks so that it will not be constrained by stocks, and so, intensifying retail competition.
When, however, demand is uncertain and there is a single retailer, a returns policy encourages the retailer to over-stock, and so decreases (upstream) manufacturer profits. While the provision of a returns policy leads to lower retail margins, the optimality of returns policy depends on the overall uncertainty and marginal cost. A returns policy reduces the dispersion in retail prices between the high and low states of demand and the range of retail prices in the returns case is contained within the range of retail prices for the no-returns case.
In the general setting, when there are competing retailers and demand is uncertain, there is a trade-off for the manufacturer between the benefits (more intense retail competition) and the costs (excessive stocking) of a returns policy. We find that a manufacturer should accept returns when the marginal production cost is sufficiently low and demand uncertainty is not too great.
To validate the results of our theory, we conduct an empirical test with data from a major U.S. retailer. The tests confirm our prediction that a returns policy intensifies retail competition and reduces retailer margins. Our theory and empirical test should interest practitioners and researchers in distribution, especially those concerned with managing retail competition.
This paper deals with remanufacturing in a reverse logistics chain with one original equipment manufacturer (OEM) and one
remanufacturer. Toner cartridge industry is a typical example of remanufacturing. The OEM sells new products under the “take-back
requirement” and takes the responsibility by paying corresponding penalties if the take-back quota for the end-of-use products
is breached. Once the lifetime of products ends, they are bought back by the remanufacturer and released to the market after
remanufacturing process. In this study, the optimal pricing policies of OEM and remanufacturer are studied under two cases,
competition and cooperation, through the development of mathematical models with the objective of profit maximization. The
first case is solved with the repeated game model and the second one with a search procedure. Also, sensitivity analysis is
conducted to analyze the interactions between the two parties.
KeywordsRemanufacturing–OEM–EPR–Pricing policy
Contingency planning is the first stage in developing a formal set of production planning and control activities for the reuse of products obtained via return flows in a closed-loop supply chain. The paper takes a contingency approach to explore the factors that impact production planning and control for closed-loop supply chains that incorporate product recovery. A series of three cases are presented, and a framework developed that shows the common activities required for all remanufacturing operations. To build on the similarities and illustrate and integrate the differences in closed-loop supply chains, Hayes and Wheelwright’s product–process matrix is used as a foundation to examine the three cases representing Remanufacture-to-Stock (RMTS), Reassemble-to-Order (RATO), and Remanufacture-to-Order (RMTO). These three cases offer end-points and an intermediate point for closed-loop supply operations. Since they represent different positions on the matrix, characteristics such as returns volume, timing, quality, product complexity, test and evaluation complexity, and remanufacturing complexity are explored. With a contingency theory for closed-loop supply chains that incorporate product recovery in place, past cases can now be reexamined and the potential for generalizability of the approach to similar types of other problems and applications can be assessed and determined.
In this study, we analyze decentralized collection and processing operations for end-of-life products in durable goods industries. We consider a durable end-of-life product from which a particular part can be dismantled and remanufactured, and the remainder of the product can be further processed for part and/or material recovery. Both the quantity of end-of-life products available and the demand for remanufactured parts are price-sensitive. We develop models to determine the optimal acquisition price of the end-of-life products and the selling price of the remanufactured parts in centralized as well as remanufacturer- and collector-driven decentralized channels. We discuss how the decentralized channels can be coordinated to attain the end-of-life product collection rate that can be achieved in the centralized channel. In the presence of environmental regulations that require an original equipment manufacturer (OEM) of durable goods to collect and process its end-of-life products, we identify when and why the OEM would prefer a remanufacturer- or a collector-driven channel, i.e., outsource the processing or the collection activity, respectively. From a practical perspective, we show that the OEM should prefer a collector-driven channel to increase the collection rate, when end-of-life products are homogenous. However, we also show that the OEM would prefer a remanufacturer-driven channel under certain conditions. We also examine how the OEM can increase the quantity of used products collected, when the collection rate in the preferred channel setting falls short of the collection rate mandated by the environmental regulation. When end-of-life products are heterogeneous, we observe that the collection rate for all quality groups can be positive in a remanufacturer-driven channel, whereas the collection rate for some quality groups may be zero. This indicates that the OEM must pay more attention to its outsourcing decision in this case, if the environmental regulation in effect specifies target collection rates for individual quality groups.
While every firm in a supply chain bears supply risk (the cost of insufficient supply), some firms may, even with wholesale price contracts, completely avoid inventory risk (the cost of unsold inventory). With a push contract there is a single wholesale price and the retailer, by ordering his entire supply before the selling season, bears all of the supply chain’s inventory risk. A pull contract also has a single wholesale price, but the supplier bears the supply chain’s inventory risk because only the supplier holds inventory while the retailer replenishes as needed during the season. (Examples include Vendor Managed Inventory with consignment and drop shipping.) An advance-purchase discount has two wholesale prices: a discounted price for inventory purchased before the season, and a regular price for replenishments during the selling season. Advance-purchase discounts allow for intermediate allocations of inventory risk: The retailer bears the risk on inventory ordered before the season while the supplier bears the risk on any production in excess of that amount. This research studies how the allocation of inventory risk (via these three types of wholesale price contracts) impacts supply chain efficiency (the ratio of the supply chain’s profit to its maximum profit). It is found that the efficiency of a single wholesale price contract is considerably higher than previously thought as long as firms consider both push and pull contracts. In other words, the literature has exaggerated the value of implementing coordinating contracts (i.e., contracts that achieve 100 % efficiency, such as buy-backs or revenue sharing) because coordinating
We study the efficiency of oligopoly equilibria in congested markets. The motivating examples are the allocation of network flows in a communication network or of traffic in a transportation network. We show that increasing competition among oligopolists can reduce efficiency, measured as the difference between users' willingness to pay and delay costs. We characterize a tight bound of 5/6 on efficiency in pure strategy equilibria. This bound is tight even when the number of routes and oligopolists is arbitrarily large. We also study the efficiency properties of mixed strategy equilibria.
We study competition in a supply chain where multiple manufacturers compete in quantities to supply a set of products to multiple risk-averse retailers who compete in quantities to satisfy the uncertain consumer demand. For the symmetric supply chain, we give closed-form expressions for the unique equilibrium. We find that, provided there is a sufficiently large number of manufacturers and retailers, the supply chain efficiency (the ratio of the aggregate utility in the decentralized and centralized chains) can be raised to 1 by inducing the right degree of retailer differentiation. Also, risk aversion results in triple marginalization: retailers require a strictly positive margin to distribute even when they are perfectly competitive, because otherwise they are unwilling to undertake the risk associated with the uncertainty in demand. For the asymmetric supply chain, we show how numerical optimization can be used to compute the equilibria, and we find that the supply chain efficiency may drop sharply with the asymmetry of either manufacturers or retailers. We also find that the introduction of asymmetric product assortment reduces the degree of competition among retailers and thus has an effect similar to that of reducing the number of retailers. We show that, unlike in the symmetric chain, the asymmetric chain efficiency depends on product differentiation and risk aversion because of the interaction between these features and the asymmetry of manufacturers and retailers.
Distributions with an increasing generalized failure rate (IGFR) have useful applications in pricing and supply chain contracting problems. We provide alternative characterizations of the IGFR property that lead to simplify verifying whether the IGFR condition holds. We also relate the limit of the generalized failure rate and the moments of a distribution. Subject classifications: probability distributions. Area of review: Manufacturing, Service, and Supply Chain Operations. History: Received December 2003; revision received April 2005; accepted April 2005.
Increasing generalized failure rate (IGFR) distributions were introduced as a tool in the study of contracting mechanisms in supply chains. In this note, we compare and contrast the closure-and the lack thereof-of IGFR and increasing failure rate (IFR) distributions with respect to standard operations on random variables. Some implications of these results for the use of IGFR distributions in supply chain models are noted.
We provide sharp lower and upper bounds on the ratio of decentralized to centralized profits when multiproduct firms offering differentiated products engage in price competition. The bounds depend on the demand sensitivity matrix but are independent of marginal costs.
We consider the impact of partial positive externalities (imperfect complementarity) among downstream retailers on supply chain performance. We show that double marginalization may fail to exist in a decentralized setting when some retailers carry multiple imperfect complements. By giving a precise characterization on the degree of complementarity, we prove that a decentralized supply chain loses at least 25% of the optimal profit and that its performance degrades rapidly with the complementarity effect.
This paper presents and critically analyses the current waste electrical and electronic equipment (WEEE) management practices in various countries and regions. Global trends in (i) the quantities and composition of WEEE; and (ii) the various strategies and practices adopted by selected countries to handle, regulate and prevent WEEE are comprehensively examined. The findings indicate that for (i), the quantities of WEEE generated are high and/or on the increase. IT and telecommunications equipment seem to be the dominant WEEE being generated, at least in terms of numbers, in Africa, in the poorer regions of Asia and in Latin/South America. However, the paper contends that the reported figures on quantities of WEEE generated may be grossly underestimated. For (ii), with the notable exception of Europe, many countries seem to be lacking or are slow in initiating, drafting and adopting WEEE regulations. Handling of WEEE in developing countries is typified by high rate of repair and reuse within a largely informal recycling sector. In both developed and developing nations, the landfilling of WEEE is still a concern. It has been established that stockpiling of unwanted electrical and electronic products is common in both the USA and less developed economies. The paper also identifies and discusses four common priority areas for WEEE across the globe, namely: (i) resource depletion; (ii) ethical concerns; (iii) health and environmental issues; and (iv) WEEE takeback strategies. Further, the paper discusses the future perspectives on WEEE generation, treatment, prevention and regulation. Four key conclusions are drawn from this review: global amounts of WEEE will continue unabated for some time due to emergence of new technologies and affordable electronics; informal recycling in developing nations has the potential of making a valuable contribution if their operations can be changed with strict safety standards as a priority; the pace of initiating and enacting WEEE specific legislation is very slow across the globe and in some cases non-existent; and globally, there is need for more accurate and current data on amounts and types of WEEE generated.
Recovery of used products is receiving much attention recently due to growing environmental concern. Efficient implementation requires appropriate logistics structures to be set up for the arising goods flow from users to producers. We investigate the design of such logistics networks. As a basis for our analysis we review recent case studies on logistics network design for product recovery in different industries. We identify general characteristics of product recovery networks and compare them with traditional logistics structures. Moreover, we derive a classification scheme for different types of recovery networks.
This paper develops a multi-attribute competition model for procurement of short life cycle products. In such an environment, the buyer installs dedicated production capacity at the suppliers before the demand is realized. Final production orders are decided after demand materializes. Of course, the buyer is reluctant to bear all the capacity and inventory risk, and thus signs flexible contracts with several suppliers. We model the suppliers' offers as option contracts, where each supplier charges a reservation price per unit of capacity, and an execution price per unit of delivered supply. These two parameters illustrate the trade-off between total price and flexibility of the contract, and are both important to the buyer. We model the interaction between the suppliers and the buyer as a game in which the suppliers are the leaders and the buyer is the follower. Specifically, suppliers compete to provide supply capacity to the buyer and the buyer optimizes its expected profit by selecting one or more suppliers. We characterize the suppliers' equilibria in pure strategies for a class of customer demand distributions. In particular, we show that this type of interaction gives rise to cluster competition. That is, in equilibrium, suppliers tend to be clustered in small groups of two or three suppliers each, such that within the same group all suppliers use similar technologies and offer the same type of contract. Finally, we show that in equilibrium, the supply chain inefficiencies, i.e., the loss of profit due to competition, are in general at most 25% of the profit of a centralized supply chain, for a wide class of demand distributions.
Ever more companies are recognizing the benefits of closed-loop supply chains that integrate product returns into business operations. IBM has been among the pioneers seeking to unlock the value dormant in these resources. We report on a project exploiting product returns as a source of spare parts. Key decisions include the choice of recovery opportunities to use, the channel design, and the coordination of alternative supply sources. We developed an analytic inventory control model and a simulation model to address these issues. Our results show that procurement cost savings largely outweigh reverse logistics costs and that information management is key to an efficient solution. Our recommendations provide a basis for significantly expanding the usage of the novel parts supply source, which allows for cutting procurement costs.