Closed-Loop Supply Chain Coordination With Advertising Effect Under Uncertain Demand

Advertising strategy has been widely used in commercial activities, this paper takes advertisement as a new factor of closed-loop supply chain (CLSC) decision. In order to study how the advertising influences CLSC's decision and what the best choice is to coordinate that CLSC, the CLSC model with advertising and uncertain demand is studied.Firstly, a closed-loop supply chain model with advertisement is established when the sales price and wholesale price are fixed. Then, a closed-loop supply chain model with advertisement is studied when the sales price and wholesale price are variable. In each part, three different decision modes, namely centrally coordinated model, decentralized model and advertisement cooperation model, are analyzed by using game theory. The ordering, advertising, pricing, and return rate decision are studied, and the impact of demand fluctuation, advertising effect, pricing effect, and advertising spending sharing on the decision variable, profit and channel operational efficiency of the CLSC system are further analyzed numerically by Lingo.The results show cooperative advertising can effectively stimulate the amount of retail advertising, but can't coordinate the CLSC when pricing are variable. Therefore, franchise contract is studied in this paper, and it is found that the closed-loop supply chain can achieve best performance under it.