Coordination of closed-loop supply chain considering loss-aversion and remanufactured products quality control

The closed-loop supply chain has been receiving increasing attention in recent years. Supply chain coordination and remanufactured products quality control are two fundamental factors for the closed-loop supply chain to obtain a competitive advantage. Besides, fierce competition brings more uncertainty to the market demand. Supply chain members tend to show the characteristics of loss aversion, which could affect them in making quality decisions. Therefore, this paper attempts to coordinate the closed-loop supply chain under remanufactured products quality control with a loss-averse manufacturer and a loss-averse retailer. Under remanufactured product quality control, expected utility function of manufacturers and retailers are established under centralized decision and decentralized decision respectively. According to the principle of utility maximization, the optimal choices of manufacturers and retailers are obtained. Further, by analyzing and comparing the optimal decisions in decentralized and centralized cases, it is found that the closed-loop supply chain cannot achieve coordination. Therefore, the wholesale price and the quality cost-sharing contract are introduced which is proved to be able to harmonize the supply chain. Finally, the impacts of the parameters change on the optimal quality level and remanufactured product price under two typical decision structures are presented through the sensitivity analysis.

Automated summary

This paper investigates the coordination issue in a closed-loop supply chain under remanufactured product quality control. It is found that the closed-loop supply chain cannot achieve coordination, and the introduction of a wholesale price and quality cost-sharing contract is proven to be an effective solution.