Title: Bargaining in a closed-loop supply chain with consumer returns

Authors: Yertai Tanai; Emmanuel Dechenaux; Eddy B. Patuwo; Alfred L. Guiffrida

Addresses: Department of Information Systems and Decision Sciences, Craig School of Business, California State University, Fresno, CA 93740, USA ' Department of Economics, College of Business Administration, Kent State University, Kent, OH 44242, USA ' Department of Management and Information Systems, College of Business Administration, Kent State University, Kent, OH 44242, USA ' Department of Management and Information Systems, College of Business Administration, Kent State University, Kent, OH 44242, USA

Abstract: The increasing quality of consumer returns creates substantial economic potential for closed-loop supply chains to extract value from returned goods. In this paper, we focus on the supply chain interaction between a retailer and a third party reverse logistics provider (3PRLP) to process consumer returns under a full refund policy. In the model, the retailer orders processed returns from the 3PRLP in exchange for a fee and then resell the processed returns. We compare an uncoordinated supply chain, in which the retailer makes a take-it-or-leave it offer of a fee to the 3PRLP, to a coordinated supply chain, in which the retailer and the 3PRLP jointly decide on the quantity of processed returns and the fee using Nash bargaining. We show that coordination leads to both a higher quantity processed and a higher fee than in the uncoordinated case. We also derive a set of sensitivity results with respect to important parameters.

Keywords: closed-loop supply chain; CLSC; supply chain coordination; 3PRLP; consumer returns; Nash bargaining.

DOI: 10.1504/IJOR.2021.115624

International Journal of Operational Research, 2021 Vol.41 No.2, pp.168 - 195

Received: 06 Mar 2018
Accepted: 06 Jul 2018
Published online: 15 Jun 2021 *

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