Reverse Supply Chain Coordination Strategy Based On Option Contracts

With the development of society, science and the level of people’s lives, consumers pursue various and unique products. In order to meet consumers’ demands, the emergence of new products on the market is faster and faster, the cycles of product life are shortened gradually, which leads to an increasing number of outdated products and discarded items. Reverse supply chain has been emphasized gradually, but few studies on the reverse supply chain coordination.This paper focuses on the reverse supply chain optimization model based on the option contract, considering the single re-manufacturer and the singer recycler’s reverse supply chain firstly. Recycle waster products according to market’s demand for recycled goods from the recyclers, introduce options contracts into the reverse supply chain to increase flexibility and build the reverse supply chain based on the option contract centralized and decentralized decision-making model. Studies have shown that the reverse supply chain based on the option contracts and its members’decision-making and benefits are better than the newsboy model. Secondly, considering the risk of downtime, build a reverse supply chain risk management model based on the option contract, considering the reverse supply chain from a single manufacturer, the main recyclers and reserve recyclers. Investigate the case when you start the backup recyclers and do a simple analysis and comparison for the two model. The results show that the latter is more obvious to the proceeds of the reverse supply chain improvements. Again, the model analysis of the option contract contributes to the improvement of the efficiency of reverse supply chain. Find the conditions when the reverse supply chain coordination, by adjusting the option contract parameters can affect the remanufacturer, the main recyclers, reserve recyclers and reverse supply chain revenue. Achieve to the coordination of interests among the members and achieve Pareto improvement. Finally, an example analysis to verify the correctness of the conclusions of the above model and compare the incomes of both models optimal reverse supply chain.Introducting the option contract to the reverse supply chain is contribute to the improvement of the reverse supply chain efficiency.which is conducive to environmental protection and efficient use of resources.