Coordination in Closed-Loop Supply Chains

Abstract

In any type of supply process, closed-loop or open-loop (Chapter 2), multiple decision-makers within a firm or in different firms are involved in decisions concerning the efficiency and the profitability of the supply process. For example, for consumer goods such as one-time use cameras (Kodak), the distributor network operates as the product return point due to the disposal convenience for the consumer. Kodak collects cameras from large retailers who also develop film for customers. The retailers are reimbursed both on a fixed-fee-per-unit basis and for transportation costs. Decision-makers in different companies control the return flow of cameras to the remanufacturing facility. Return flows of products can also be influenced by different decision-makers within a single firm. One example is tire retreading, a common recovery process for tires. When the tread of a tire is worn, the tire can no longer be used but the casing is often in good shape. Retreading is the process of replacing the worn tread by a new tread and reusing the casing. Typically, the demand of retreaded tires depends on the price discount that is given with respect to new tires. The supply of retreadable tires, however, depends on the technology chosen by the tire manufacturer. Hence, technology decisions made by the product design department, and marketing decisions made by the marketing department, determine the flows of retreaded tires.