Decision-Making And Incentive Mechanism Of Reverse Supply Chain Based On EPR Instrument With Capacity Constraints

With the development of technology and manufacturing process, various material and spiritual requirements are satisfied along with the emerging of excessive consumption of resources and environmental pollution. At the same time, growing consensus of environmental awareness accelerate the implementation of resource recycling which becomes an vital strategic initiatives of sustainable socio-economic development. The implementation of EPR (Extended Producer Responsibility) and resource recycling are considered of critical importance to found a resource-intensive society as well as develop a recyclable economy. Since the reverse remanufacturing industry keeps staying in its infancy at present with immature infrastructures and EPR mechanism, game theory, incentive theory and optimization theory are applied to investigate the decision-making and incentive strategy of RSC (Reverse Supply Chain) with third party inventory, aiming to give guidances of the design of resource recycling among supply chain members and references of governmental policy making regarding EPR. The main research contents and conclusions are summarized as follows.(1) Based on the prerequisites that the manufacturer acts as the core member in the supply chain which is faced with limited capacity of storage facilities and that the recycle amount has a random linear relationship with recycle price and recycle efforts, RSC members’ decision makings are discussed in the context that the manufacturer takes the responsibility for additional rental inventory considering either situation of the recycle amount within or above the certain capacity of inventory. Further analysis of the results helps to conclude that the manufacture is suggested to rent a third party inventory. In addition, the range of inventory capacity required for the maximum recycling and diverse optimal decisions and relevant revenues due to various stock ranges are put forward as well.(2) In terms of the efficiency optimization problem of either case of manufacture or recycler takes the responsibility of renting additional inventory under limited inventory capacity, RSC members’decision-making behavior and results are investigated based on Stackelberg game and centralized decision respectively. Numerical analysis is also applied to analyze how decisions variables and the third-party storage facilities affect supply chain members’ revenue. The results show that centralized decision is superior to Stackelberg game under the certain third-party inventory condition. Meanwhile, rental activities taken by the manufacture other than the recycler earns more profits for the supply chain in the context of decentralized decision-making.(3) As for the evaluation of reward and punishment allocated by the government, a bilevel programming model are established between the supply chain consisting one manufacturer and one recycler and the government which imposes tax and incentive mechanisms and discussed both optimal solutions within and without incentive mechanisms. The results indicate that the existence of incentive mechanism has a more positive effect on optimal decisions on production volume, recycle prices along with recycle effort, effectively improving the overall profit of the reverse supply chain.