An analysis of the supply chain dynamics of remanufacturing with multiple collectors

This paper addresses how decisions related to the collection of used products (namely the location and number of collection sources) affect the dynamic performance of remanufacturing. More specifically, we address the case where a manufacturer produces both new and remanufactured, as-good-as-new, products and delivers them to the final customers via a supplier (or suppliers). A percentage of these products is collected at the end of their life by multiple collection sources – either the suppliers, third-parties in charge of the collection, or a combination of both – that may differ in the time required to carry out their collection activities. In this scenario and assuming an optimal operation of all nodes in the supply chain, we derive an exact formulation for two well-known indicators of the so-called bullwhip effect, i.e. the amplification of the order variance and the inventory variance experienced by the manufacturer as compared to that of the final customer demand. The analysis of the so-obtained formulae highlights the importance of the collection lead times (which may be employed as a proxy of the location of the collection source, or its effectiveness in the collection process), as only the number of collection sources with different collection lead times affects the bullwhip effect, being irrelevant how collection sources with the same collection lead times allocate their collection quotas of end-of-life products among themselves. An expression for the optimal allocation (in terms of reduction of the bullwhip effect) of the collection quotas of end-of-life products to each collection source is given, showing the positive effect of increasing the number of groups of collection sources with different collection lead times. In order to reap these benefits, it is required to perform a balanced allocation of the collection of end-of-life products among these groups. These results offer a number of managerial insights for the design of a collection system for the end-of-life products in a remanufacturing setting from a dynamic performance perspective.