Groupe d’études et de recherche en analyse des décisions

Coop program in closed-loop supply chain with incentives

Pietro De Giovanni Chargé de cours, ESSEC, Grande École de Commerce, France

We consider a Closed-loop Supply Chain (CLSC) with a single manufacturer and a single retailer. Under non-cooperative scenario, the manufacturer invests in green activities to increase the product return rate and the retailer controls the price. Under cooperative scenario the retailer supports the manufacturer’s green activities and receives an economic incentive as counterpart that depends on the contract scheme adopted. Reverse revenue sharing contract (RSC) and returned wholesale price contract (WPC) are used to coordinate the chain. We address the question whether cooperation in CLSC is environmentally sustainable and economically convenient. Our results show that a cooperative program is successful if the efficiency in remanufacturing is high. The retailer prefers always cooperation either by implementing a returned WPC with very low discounted wholesale price and high remanufacturing efficiency, or by reverse RSC with intermediate efficiency and adequate incentive. The manufacturer prefers cooperation by returned WPC since he retains all the economic advantages of remanufacturing, while he prefers not to cooperate for low level of remanufacturing efficiency.