Managing mass customization products with modular design for recycling in a closed‐loop supply chain

Investing in the modular architecture design for mass customization (MC) products cannot only enable product variety, thereby improving MC ability to cope with consumer individual needs, but also increase the product interchangeability, thereby reducing the recycling and remanufacturing costs. This paper considers a closed‐loop supply chain (CLSC) with MC, in which the manufacturer sells the new, modular MC products via the retailer and also actively recycles the used ones for remanufacturing. We study the optimal modularity level for new MC products and the best recycling channel for used MC products in a CLSC. One centralized and two decentralized recycling decision models are formulated, and then the equilibrium solutions among proposed models are compared and analyzed. The government subsidy and channel leadership are further discussed in extension. Different from the traditional view that outsourcing the recycling activity to retailer is best because of its proximity to consumers, our results suggest that the manufacturer directly recycling used MC products can be optimal in terms of modularity level, recycling rate, supply chain profits, total social surplus, and decision‐making speed.