Collaboration for a closed-loop deteriorating inventory supply chain with multi-retailer and price-sensitive demand

In this paper, a closed-loop logistics system with manufacturing and remanufacturing cycle is analyzed using three optimization methods. They are: (i) sequential optimization, (ii) centralized optimization without benefit sharing, and (iii) centralized optimization with benefit sharing. In the first method, the decisions of sequential optimization are made initially by the retailers, and then by the manufacturer. In the second method, the decision of the centralized optimization is made simultaneously by the whole logistics system. The second method is not favorable to the retailers because the retailers' profit will become smaller as a result of collaboration. Therefore a third method with benefit sharing is investigated. The logistics system includes a manufacturer and multi-retailer considering price-sensitive demand and deterioration. Industrial examples of such products are IC chips, computers and mobile phones that usually outdate or decrease in value due to technological innovation. The decrease in value is considered as a form of deterioration. In order to add value, these outdated products can be remanufactured and resold to market. Four key effects are investigated in this study: (i) recycling in supply chain, (ii) deterioration, (iii) collaboration effect between manufacturer and retailers using three optimization methods, and (iv) price sensitive demand.