Evaluation of Different Product Collection Structures Used in Closed-Loop Supply Chains with Consideration of Inspection Costs and Price-Dependent Demand

This paper aims to study the different structures of collecting products used in the closed-loop supply chain to maximize the profit of the chain members, especially the manufacturer, using the game theory. Therefore, to obtain the equilibrium points of the decision variables of the manufacturer and the retailer, different structures of a collection of used products have been investigated in single-channel, dual-channel and triple-channel.

Design/methodology/approach:

 In this research, pricing in the reverse supply chain has been investigated in terms of different structures of product collection. Three categories of single-channel structure, dual-channel structure and triple-channel structure have been considered. In all structures, there is a manufacturer and a retailer. In the first structure, the manufacturer collects the products. In the second and third structures, the product collection operation has been assigned to the retailer and the third party, respectively. In the fourth, fifth, and sixth structures, the collection of products is done in combination with two separate channels. In the fourth and fifth structures, respectively, the manufacturer together with a retailer and the manufacturer together with a third- party have done the work of collecting the products. In the sixth structure, the responsibility of collecting the products has been assigned to the retailer and the third company simultaneously. In the seventh structure, the manufacturer together with the retailer and the third party carried out the product collection operation. The solution approach has been Stackelberg’s game theory, in which the manufacturer is the leader and the retailer and the third party are the followers. First, the equilibrium values ​​of the decision variables were obtained simultaneously for the retailer and the third party and were placed in the manufacturer's profit function. Then the equilibrium values ​​of the decision variables have been obtained.

The results indicated that in single-channel structures if the basic market demand is lower than the product collection cost factor, it would be better for the manufacturer to collect the used products alone. In two-channel structures, the manufacturer is better off collecting the used products jointly with the retailer or third party. Also, a threshold for the product collection cost coefficient has been determined, above which the producer will benefit from using the three-channel structure.

Research limitations/implications: 

Government interference, the lack of knowledge of a suitable collection structure, etc., are major challenges to managers in choosing the appropriate collection approach. Therefore, one of the important decisions faced by manufacturing companies is how to design a proper structure for collecting used products.  For future work, more manufacturers and retailers can be used. It is also possible to outsource the inspection work to a retailer or a third party. Also, other structures can be examined, for example, in a structure where there are several manufacturers and several retailers, structures with more than triple channels can be considered.

Practical implications: 

Comparing the mathematical and parametric analysis in a supply chain where the manufacturer plays the main role, it would be better for the manufacturer to collect the products himself. But if it is to be outsourced. It would be better for him and the retailer to do the collection. Also, if the manufacturer is supposed to work with a retailer and a third party, he prefers to outsource the work to the retailer and the third party rather than doing it with the third party.Social implications - There are many reasons why recycling and collecting used products are important. It can help reduce carbon footprint, save energy, prevent pollution, reduce greenhouse gases, and more.

Originality/value: 

In this research, in addition to examining single-channel and dual-channel structures, the triple-channel structure was studied and their results were analysed. In this research, due to the product inspection cost, it was observed that in single-channel structures, the first structure (the structure in which, the manufacturer collects products) creates the most profit for the manufacturer and the supply chain compared to other single-channel structures. In similar studies, the second structure (the retailer is a collector's member) creates the most profit for the manufacturer and the supply chain. Also, in this research, for the first time, all the collection structures were analysed and investigated to distinguish the known structures based on mathematical and parametric analysis.