Remanufacturing for Circular Economy: Understanding the Impact of Manufacturer’s Incentive under Price Competition

Abstract

Business organizations all around the globe are looking to expand circular models into their supply chains to harness economic and environmental benefits. Moreover, the act of giving incentives to retailers by the manufacturer is also quite prevalent in the present business environment. These incentives are offered to promote the sales of products of a manufacturer. Therefore, this paper examines the optimal decisions for a dual-retailer closed-loop supply chain (CLSC) in which the manufacturer bestows the credit period to the one retailer (a firm that possesses shallow market penetration and has a higher insistence on the usage of the capital venture), and cash discount to the next retailer (a firm that occupies the market to a greater extent and receives lower thrust on the usage of invested capital) under a non-coordinated system and coordinated systems. This study proposes the mathematical model to determine the optimal decisions of the manufacturer in terms of credit period and cash discount and also compute the optimal decisions of the retailers for their retail prices and order quantities to maximize individual’s profit in the CLSC. Moreover, numerical analysis and sensitivity analysis is performed to get insights into the optimal decisions of the manufacturer and retailers. The results of sensitivity analysis show that credit period and cash discount increases with the rise in price elasticity, and decreases with an increase in cross-price elasticity. The findings also confirm that members of dual-retailer CLSC under coordination and manufacture’s incentive scenario generate higher environmental and economic benefits required to attain sustainability in production and consumption.

Sustainability and Circular Economy Business Development

“…This encourages businesses to adopt practices that minimize environmental impact and promote social equity. The CE complements this by advocating for the continuous use of resources through recycling, reusing, and remanufacturing, thereby reducing waste and conserving natural resources [15,16]. When integrated, these approaches help businesses innovate, improve efficiency, and build resilience against resource scarcity and regulatory pressures.…”

Fairness Concern in Remanufacturing Supply Chain—A Comparative Analysis of Channel Members’ Fairness Preferences

“…Our work is related to the stream of literature in CLSC management on remanufacturing that investigates impacts of distinct recycling/remanufacturing entities and market leading pattern [22][23][24], recycling laws and regulations [25,26], multi-channel competition [27,28], stochastic demand [29], remanufacturing license fee [30], consumer preference [31][32][33]. To the best of our knowledge, this stream of literature mainly considers all stakeholders being completely rational and pursuing profit maximization as the sole goal, without analyzing supply chain members' behaviors such as fairness concern.…”