Research On Issues Of Closed-loop Supply Chain Coordination With Contracts

The importance of the environmental performance in sustainable manufacturing and service operations is being widely recognized, which leads many enterprises to focus on the value of their end-of-life (EOL) products by remanufacturing. The reason for remanufacturing lies not only in the environmental policy, but also in the fact that more and more manufacturers have found it could help them decrease cost and increase profit. However, like the traditional supply chains, there is the moral hazard and incentive conflict in closed-loop supply chains (CLSCs), which may lead to bad performance and decreased profit. Therefore, based on industrial organizational theory, principal-agent theory and contract theory, this paper particularly analyzes the issues of coordination mechanisms (based on no differentiation and vertical differentiation), the screening and signalling mechanisms of CLSCs by combined qualitative and quantitative analysis with game theory and optimization method as tools. The work is of much value in theory and real life because on the one hand it explains the behavior of CLSC members in different circumstances, and on the other hand it makes suggestions for realization of coordination and enhancement of CLSC competitive advantage.Main research works and achievements of this paper:1. In bilateral monopoly with complete information, the price in CLSCs is lower than in the traditional supply chains without remanufacturing, which enhances social welfare. At the same time, the profit of the members and the system in CLSCs is higher. So the enterprises and the customers can achieve win-win outcome.2. Like in traditional supply chains, there is also forward double marginalization in CLSCs. Besides, there is reverse double marginalization from the collection price to the return transfer price in the CLSCs under the third-party logistics (3PL) collection channels (i.e. MRCTM & MCTM). But under the retailer distribution and retailer collection channel (i.e. MRCRM), the manufacturer can eliminate the reverse double marginalization by integrating the distribution channel with the collection channel, transferring all cost saving to the return transfer price. 3. In screening private information of the 3PL, the manufacturer can contract with the retailer based on the choice of 3PL. The retailer will gain his reservation profit for no information advantage. However, the 3PL will gain more than his reservation profit for information advantage especially if the manufacturer does not screen. At the same time, the manufacturer can improve his profit and the rate of system profit by separating contracts with the 3PL's self-selection.4. When manufacturers have their private information, the high type manufacturer will show his type to the retailer and the 3PL through the signalling mechanisms, in order to avoid the reverse selection, enhance profit and promote the realization of CLSCs'target.5. This paper studies the status of differentiation between new product and remanufactured product. The CLSCs is better than the traditional supply chains for both the enterprises and the consumers. Further, the new product's price in the CLSCs is equal to the price in the traditional supply chains, which means the manufacturer and the retailer can maximize profit by only deciding the remanufactured product's price referring to the cost of the new and the remanufactured products, the acceptability of remanufactured products, collection channel and collection cost coefficient.6. The manufacturer and the retailer have incentive to collect the EOL product when their collection cost coefficient is same based on the product vertical differentiation, because the profit with collection is higher than non-collection.7. Both the two-part tariff contracts and the revenue-and-cost-sharing contracts can coordinate the decentralized CLSCs (no matter who sells the product, no matter who collects the EOL product and no matter whether there is differentiation between the new product and the remanufactured product), which improves profit of both the members and the system.Main innovations of this paper:1. Considering social environment consciousness, this paper describes the pricing models, particularly discusses the characteristic and application of the 5 type CLSCs in a bilateral monopoly. At the same time, the paper designs the coordination mechanisms to solve the profit conflict in the decentralized CLSCs through the two-part tariff contracts and the revenue-and-cost-sharing contracts.2. This paper shows how the manufacturers select the CLSC model referring to the relation between the manufacturer's profit and collection cost coefficient under the different collection channels. Furthermore, it also considers how the collection effort influences upon the CLSCs.3. This paper proposes the screening and signalling mechanisms in a given CLSC (i.e. under retailer distribution and 3PL collection channel). Firstly, when the 3PL has the private information about the social environment consciousness, the manufacturing can screen the 3PL's type through a menu of separating contracts, and then provide the right contract to the retailer. Secondly, when there are two types of manufacturer (i.e. high type and low type), the high type manufacturer can disclose his type by least-cost principle to avoid the retailer and the 3PL's reverse selection and enhance profit.4. This paper provides the pricing models and coordination mechanisms based on the vertical differentiation between new products and remanufactured products. In addition, the decision about the quality of remanufactured products made by the manufacturer is quantitatively analyzed. At last, coordination mechanisms are designed to solve the profit conflict in the decentralized CLSCs through the two-part tariff contracts and the revenue-and-cost-sharing contracts.