Choosing reverse logistics channel structures for the return of end-of-life products
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Choosing reverse logistics channel structures for the return of end-of-life products Flora M. Hofmann1 · Stephan E. Visagie1 Received: 28 May 2019 / Accepted: 21 May 2020 / © Springer Nature B.V. 2020
Abstract In this paper game theory is applied to maximise profit by identifying the optimal channel to collect and remanufacture used products in an electronic equipment retail network context. Without a detailed method to compute reverse logistics cost, the most profitable channel may not be chosen. Therefore, the main aim of the paper is to realistically model manufacturer, retailer and third-party as three different collection channel options to compete over return rates. A more realistic and detailed method to compute the reverse logistics cost is introduced because it is crucial in determining the most profitable channel. In the non-cooperative and cooperative version of the game the manufacturer gains the highest and the retailer the second highest payoff, since both players benefit from selling new products. Furthermore, the third-party can turn the collection of used products into a successful business by using synergy effects between different clients within the logistics network. There is consistency between the results of the non-cooperative and the cooperative version of the game. Moreover, if fines are imposed externally (for example by legislation), the best option is to cooperate in the grand coalition. Subcontracting the third-party yields the highest payoffs due to their lowest reverse logistics cost. Keywords Non-linear and discontinuous logistics payoff functions · Closed-loop supply chains · Reverse logistics · Game theory
Introduction The rising efficiency within production and supply chains leads to an increase in supply and expansion of markets. An increasing demand is the result of products becoming more affordable to a larger share of the population. This increase in consumption unfortunately cause an enormous stream of waste. A more holistic view of a product’s life cycles may
Stephan E. Visagie
[email protected] Flora M. Hofmann [email protected] 1
Department of Logistics, Stellenbosch University, Stellenbosch, South Africa
Journal of Remanufacturing
address this problem. It also changes the perception of logistic flows in a single direction, namely that of a manufacturer transforming raw material into products that flow though a supply network to customers or end users. The philosophy of a product life cycle has to be incorporated into a companies’ processes. The design of a production plant thus have to include remanufacturing facilities, and not only manufacturing. Also, the possibilities of recovery has to be embedded in the design of the product itself as well as the logistics network. In this context, reverse logistics (RL) is introduced to extend traditional forward logistics. While the process flows of raw materials being turned into products and distributed to customers in forward logistics, the flow of information and material from the customer back to the companies’ re
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