Reverse channel selection under remanufacturing risks: Balancing profitability and robustness

• Published in: International journal of production economics 2016-12, Vol.182, p.63-72
• Main Authors: Han, Xiaohua, Wu, Haiyan, Yang, Qianxia, Shang, Jennifer
• Format: Article
• Language: English
• Subjects: Closed-loop supply chain; Dominant retailer; Environmental regulations; Game theory; Profitability; Remanufacturing; Reverse channel; Risk management; Studies; Supply chain risk management; Supply chains
• ISSN: 0925-5273; 1873-7579
• DOI: 10.1016/j.ijpe.2016.08.013

Remanufacturing, by taking back used products, can help firms meet environmental regulations and improve economic benefits, but in the meantime it is subject to vulnerability due to operational and disruption risks. In this paper, we investigate manufacturer's reverse channel selection (i.e., how to collect used products from consumers) in a closed-loop supply chain (CLSC) with one dominant retailer when remanufacturing cost is uncertain and subject to disruption. Different from the literature, in this research we study reverse channels from the perspectives of profitability and robustness. We find that on profitability, the direct channel outperforms indirect channel under a favorable operational environment (i.e., static cost or lower cost); while the indirect channel performs better in an adverse environment (i.e., cost rise). Defining infrequent need to change production plan as robustness, we find the indirect channel has higher robustness than the direct channel under remanufacturing risks. Our findings enrich the literature and practice by developing insights into the reverse channel selection and enhance the performance of CLSC.