Incentive strategies for an optimal recovery program in a closed-loop supply chain

Giovanni, Pietro De; Reddy, Puduru Viswanadha; Zaccour, Georges

doi:10.1016/j.ejor.2015.09.021

Cited by 151 publications

(69 citation statements)

References 42 publications

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“…(1) There is no difference between newly manufactured products and remanufactured products [2,3,5,20]. (2) c r < c n represents that unit production cost c n is more than unit remanufacturing cost c r [2,20,21].…”

Section: Assumptionsmentioning

confidence: 99%

“…They also designed some simple coordination mechanisms so that the retailer's collection effort and the CLSC profit are achieved at the same level as in a centrally coordinated system. Giovanni et al [3] developed a dynamic CLSC model consisting of one manufacturer and one retailer, with both players participating in a product recovery program to increase the collection rate of used products. Hammond and Beullens [4] developed a CLSC network model in which the manufacturers and consumer markets engage in a Cournot game with complete information.…”

Section: Introductionmentioning

confidence: 99%

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A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism

et al. 2018

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Abstract:We investigate a closed-loop supply chain (CLSC) where the retailer and the third-party recycler compete against each other to collect waste electrical and electronic equipment (WEEE) given that collection effort is their private information. Using the principle-agent theory, we develop a CLSC model with dual collection channel without the government's reward-penalty mechanism (RPM). An information screening contract is designed for the manufacturer to attain real information on collection effort levels; meanwhile, the optimal decision-making results of other decision variables are derived. Next, we take RPM into account to further examine the efficacy of the government's guidance mechanism in improving collection rate and profits of CLSC members. Our results indicate that (i) the collection competition reduces the total collection quantity and the expected profits of all the CLSC members without RPM; (ii) all CLSC members' expected profits are improved if both two collection agents select a high collection effort level without and with RPM; (iii) RPM increases buyback price, collection price, collection quantity, and franchise fee but decreases wholesale price and retail price; with the reward-penalty intensity increasing, the manufacturer's expected profit first decreases and then increases, while the expected profits of H-type retailer and H-type third-party recycler continue to increase. We find that RPM may ultimately stimulate the collection agents to collect more WEEEs, while the intense collection competition reduces the profits of CLSC members.

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Section: Assumptionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism

et al. 2018

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“…De Giovanni et al. () prove that two‐sided incentives allow independent members in a decentralized channel to implement the pricing and product‐recovery program investments at their channel‐coordinating levels. Product‐recovery programs used in closed‐loop supply chains are intended to increase products' return rate, which results in an increase in demand and a decrease in manufacturer's production costs.…”

Section: Literature Reviewmentioning

confidence: 99%

Incentive mechanisms for price and advertising coordination in dynamic marketing channels

Taboubi

2017

Int Trans Operational Res

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This paper examines the issue of price and advertising coordination in bilateral monopolies from a dynamic perspective. Its main objectives are to design incentive mechanisms that the manufacturer can use in order to reduce double marginalization, and to investigate whether these mechanisms can be implemented by the manufacturer and accepted by the retailer. I consider a differential game where a manufacturer controls its wholesale price and its national advertising effort. The carry‐over effects of national advertising build up brand goodwill, which represents the model's state variable. The retailer controls the product's retail price and the local advertising effort, which affect consumer demand, in conjunction with the brand goodwill. I compute strategies and outcomes under three scenarios: (a) a fully coordinated scenario where channel members act as if the channel was vertically integrated; (b) a noncoordinated scenario, considered as the status quo, where the channel is decentralized; and (c) a scenario where incentive mechanisms are offered by the manufacturer. The main results indicate that two incentive mechanisms, namely, a retail‐price incentive and an advertising allowance offered by the manufacturer to the retailer can mitigate the double‐marginalization problem. With these incentives, and an appropriate choice of the channel‐coordinating wholesale price, the manufacturer can induce the retailer to fix its control variables at their channel‐coordinating levels without committing to implement the channel‐coordinating level of national advertising. Our results highlight the role of the channel‐coordinating wholesale price level on the Pareto‐optimality and the implementation of the incentives. I compute the values for the channel‐coordinating wholesale price that can be used as benchmarks by channel members in order to evaluate if the incentives should be implemented or not. I illustrate our results with numerical simulations indicating the channel‐coordinating wholesale price values where we observe an increase in both channel members' individual profits when the incentives are implemented (i.e., with respect to the status quo). These results can be explained by the decrease in retail price and the increase in local and national advertising. Both effects explain the increase in brand goodwill and demand when the incentives are implemented.

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“…For the past two years, studies in this field have sought to resolve basic issues in the supply chain to establish the foundation of a CLSC [15]. Most studies on CLSCs have focused on problems from an operational perspective, determining effective reserve-channel designs, finding the optimal price, and collaboration among supply chain participants [16][17][18][19][20][21][22][23][24][25][26][27][28][29].…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Strategy in a Closed Loop Supply Chain: The Case of a Market with Competition between Two Retailers

Yoon

Jeong

2017

Sustainability

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Abstract:To survive in the ceaseless cycle of competition, businesses have developed strategies to become sustainable. These strategies include reusing products, which can lead not only to the creation of economic benefits but also to improvements in a corporation's social and environmental responsibility. Product reuse can also increase the profit earned on new products by compensating customers who bring in old products to buy new ones, as the ensuing remanufacturing process allows for the reuse of materials and thus drives down costs. As businesses have come to recognize these values, the marketing competition to retrieve used products from customers has intensified. This research focuses on identifying effective compensation strategies to determine the appropriate advertising investment and trade-in value in a market where two homogeneous retailers compete. Retailers advertise to secure more customers to trade in their used products and to generate more trade-in sales than competitors do. A retailer's results may vary according to its competitor's investment strategy, which makes it useful to employ information on past competitor investment patterns to plan future investment strategies. However, as competitors using one another's information may intensify the competition, better investment results could be obtained by ignoring competitor investment information. Therefore, this study suggests four competition strategies that determine the advertisement costs and trade-in allowance spent by retailers and discusses the difference in the profits obtained by the retailers under each of the four strategies.

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Incentive strategies for an optimal recovery program in a closed-loop supply chain

Cited by 151 publications

References 42 publications

A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism

A Closed-Loop Supply Chain with Competitive Dual Collection Channel under Asymmetric Information and Reward–Penalty Mechanism

Incentive mechanisms for price and advertising coordination in dynamic marketing channels

Investment Strategy in a Closed Loop Supply Chain: The Case of a Market with Competition between Two Retailers

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