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Optimal Operation for Green Supply Chain with Quality of Recyclable Parts and Contract for Recycling Activity

Kusukawa, Etsuko;Alozawa, Sho

  • Received : 2014.12.19
  • Accepted : 2015.09.05
  • Published : 2015.09.30

Abstract

This study discusses a contract to promote collection and recycling of used products in a green supply chain (GSC). A collection incentive contract is combined with a reward-penalty contract. The collection incentive contract for used products is made between a retailer and a manufacturer. The reward-penalty contract for recycling used products is made between a manufacturer and an external institution. A retailer pays an incentive for collecting used products from customers and delivers them to a manufacturer with a product order quantity under uncertainty in product demand. A manufacturer remanufactures products using recyclable parts with acceptable quality levels and covers a part of the retailer's incentive from the recycled parts by sharing the reward from an external institution. Product demand information is assumed as (i) the distribution is known (ii) mean and variance are known. Besides, the optimal decisions for product quantity, collection incentive of used products and lower limit of quality level for recyclable parts under decentralized integrated GSCs. The analysis numerically investigates how (1) contract for recycling activity, (ii) product demand information and (iii) quality of recyclable parts affect the optimal operation for each GSC. Supply chain coordination to shift IGSC is discussed by adopting Nash Bargaining solution.

Keywords

Green Supply Chain;Quality;Collection Incentive;Reward-Penalty Contract;Demand Information;Game Theory

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Acknowledgement

Supported by : Japan Society for the Promotion of Science