Pricing Decision Analysis On Supplier-Manufacturer Closed-Loop Supply Chain With Two-Echelon Remanufacturing

Abstract:Many legacies have been left due to the rapidly developing of the global economy, but the resource crisis and environment pollution problem are the most serious. Against this background, some policies like circulation economy, extend producer responsibility, sustainable development were put forward. As we all know, Because the more serious problem of the resource and the environment faced by our country, the policies of circulation economy, sustainable development and old products recycling of the focused industry were raised by our governments. With the strengthening of the senses of the corporate, more and more corporates are taking an active party in the remanufacturing strategy, and a good corporate image and significant returns are obtained from the remanufacturing.Closed-loop supply chain is composed by the forward supply chain and reverse supply chain, and it can be divided into several types depending on the recycling objects:closed-loop supply chain based on maintenance, based on recirculation, based on re-use, based on remanufacturing. The closed-loop supply chain has been become complicated by the adding of the reverse supply chain, for example how to coordinate the benefits and the limited resources like logistics resources, manufacturing resources among the forward supply chain and reverse supply chain.Two-Echelon Remanufacturing(product remanufacturing and parts remanufacturing) are proposed based on the closed-loop supply chain, and the supplier are selected as the decision-maker while seldom be found in the other articles. Suppliers are decision-makers which can’t be ignored in the studies of remanufacturing, because the suppliers’ decision would be influenced by the manufacturers’product remanufacturing strategy, and the suppliers have a choice whether to participate the parts remanufacturing or not under supplier-dominated.In order to discuss the influence of two-echelon remanufacturing (product remanufacturing and parts remanufacturing) on the members’ pricing decision and revenues, we use Stackelberg game theory to analyze two models according to whether the supplier is involved in the parts remanufacturing or not, then a comparative analysis on the pricing decisions and revenues is made. Finally, the following conclusions are drawn from this paper:with the implementation of remanufacturing strategy, the pricing decision of wholesale price relate to the demand situation, and the pricing decision of retail price relate to the recycling risk situation; The supplier should take an active part in the two-echelon remanufacturing strategy, because it is beneficial for the supplier to provide parts that can be used to remanufacture, and it will not only increase the both members’ revenues but also reduce the both wholesale price and retail price if the supplier takes part in the activity of parts remanufacturing. Finally, the conclusions are demonstrated by a numerical example. Our work enriches the research results about the impacts of remanufacturing strategies on pricing decisions and revenues.