Remanufacturing configuration in complex supply chains

The closed-loop dynamics of sustainable supply chains play a key role in their performance, as the reverse flows of returns and remanufactured products entail new sources of uncertainty that alter the normal performance of the supply chain. However most of the studies assume a linear supply chain with a single reverse flow of returns, which is a simplification that may not hold in most of the existent supply chains, which often show more complex structures with several flows of returns. When there are several return flows, a critical decision for the supply chain dynamic performance is whether the remanufacturing process should be centralised (i.e. a single facility jointly remanufactures the returns from all the locations) or decentralised (i.e. the remanufacturing takes place independently in each location). This paper explores the impact of this critical decision on the performance of a divergent closed-loop supply chain with several point-of-sales and reverse flows. A simulation model is developed considering different return rates, information transparency levels, and number of nodes in the supply chain. Findings reveal that a centralized configuration reduces the uncertainty in the reverse flows of remanufactured products, smoothing the production orders of the involved organizations and improving their inventory performance. As a drawback, upstream members of the supply chain may face a higher uncertainty due to some correlation of orders. As such, this configuration may not be recommended in long supply chains with a significant number of return flows and high average return volumes, unless there is a high transparency of information. Furthermore, guidelines for managers are provided in order to reduce the bullwhip effect when implementing these circular economy practices.