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Closed-loop Supply Chain Games with Innovation-led Lean Programs and Sustainability

Author

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  • Talat Genc

    (Department of Economics and Finance, University of Guelph, Guelph ON Canada)

  • Pietro De Giovanni

    (Department of Operations Management, ESSEC Business School, Paris, France)

Abstract

This paper studies the impact of some innovation-led lean programs in a Closed-loop Supply Chain(CLSC)setting. We use a game-theoretic approach to model a CLSC composed of one supplier and one manufacturer. The supplier sets the wholesale price of an intermediate product while the manufacturer sets the selling price of a final product. Further, the manufacturer invests in innovation-led lean practices to entail both a strategic effect and a process innovation effect. The strategic effect consists of responsiveness involving the CLSC's capacity to properly respond to consumers' needs and leading to increase in sales. Further, the strategic effect enhances sustainability as consumers align their behavior to the CLSC's attitude of reducing the waste through lean, thus using their products for longer time period and entirely exhausting their residual value. Innovation-led lean practices also generate a process innovation effect, which consists of the marginal production cost abatement. Our findings indicate that lean practices leading to both strategic and process innovation are profitable for the manufacturer and sponsor sustainability. When only one of those can be presented, CLSCs should prefer the adoption of a strategic lean program. From its side, the supplier is much less sensitive to environmental benefits, thus it focuses on sales and operational matters. Furthermore, in a centralized CLSC, the preferences for strategic vs. process innovation lean follow the same path of the decentralized CLSC. Nevertheless, we pinpoint that the manufacturer in the decentralized CLSC has a larger incentive to adopt a strategic lean program than in the centralized CLSC. Also, the supplier always obtains larger economic benefits in the decentralized CLSC under any type of innovation-led lean program.

Suggested Citation

  • Talat Genc & Pietro De Giovanni, 2018. "Closed-loop Supply Chain Games with Innovation-led Lean Programs and Sustainability," Working Papers 1803, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2018-03
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    13. Cheng, Fei & Chen, Tong & Chen, Qiao, 2022. "Cost-reducing strategy or emission-reducing strategy? The choice of low-carbon decisions under price threshold subsidy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
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    15. Ehsan Shekarian & Simme Douwe Flapper, 2021. "Analyzing the Structure of Closed-Loop Supply Chains: A Game Theory Perspective," Sustainability, MDPI, vol. 13(3), pages 1-32, January.
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    18. Genc, Talat S., 2024. "Energy Transition and the role of new natural gas turbines for power production: The case of GT11N2 M generators," Energy Economics, Elsevier, vol. 131(C).
    19. Pietro De Giovanni, 2020. "Recursive Effects to Study Feature-Based Capabilities in Supply Chain Management," Logistics, MDPI, vol. 4(4), pages 1-17, November.
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    21. Kailing Liu & Quanxi Li & Haowei Zhang, 2022. "Analysis of the Impact of Remanufacturing Process Innovation on Closed-Loop Supply Chain from the Perspective of Government Subsidy," Sustainability, MDPI, vol. 14(18), pages 1-25, September.

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    More about this item

    Keywords

    Closed-loop Supply Chain; Innovation-led Lean; Process Innovation; Sustainability; Used-product returns; Vertical Integration;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D30 - Microeconomics - - Distribution - - - General
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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