Pricing and quality improvement strategies in a closed-loop supply chain with dual collection channel

Abstract

This paper presents two-period closed-loop supply chain (CLSC) models considering demand with and without replacement sales. A manufacturer produces a new product using raw materials in the first period, and the manufacturer and a third party compete to collect used products in the second period. Further, the manufacturer produces an improved version of the new product using raw materials and returned-used products in the second period. The product is sold through a retailer in both periods. We propose a two-period Stackelberg game with the manufacturer as a leader to investigate the product’s pricing strategy and quality improvement level. It is shown that the quality improvement level improves with an increase in the sensitivity of return to the competitor’s acquisition price but deteriorates with an increase in sensitivity of return to the collector’s acquisition price. Finally, we implement a cross-shareholding coordination mechanism and observe an improvement in the quality level and profits of the manufacturer and the retailer.

KEYWORDS:

• Closed-loop supply chain
• coordination mechanism
• cross-shareholding
• dual collection channel
• quality improvement

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The authors confirm that the data supporting the findings of this study are available within the article.

Additional information

Notes on contributors

A. K. Gaula

A. K. Gaula is a research scholar in the department of Industrial and Systems Engineering at Indian Institute of Technology, Kharagpur. He is currently pursuing his PhD in closed loop supply chain. He has done his M Tech from NIT Hamirpur.

J. K. Jha

Dr. J. K. Jha is an Associate Professor in the department of Industrial and Systems Engineering at Indian Institute of Technology, Kharagpur. His main areas of research include Operations Research, and Supply Chain Optimization and Logistics Planning. He published/presented more than sixty papers in international journals and conferences, and his publications appeared in the leading journals like Journal of the Operational Research Society, Applied Mathematical Modelling, Computers & Industrial Engineering, International Journal of Production Research, Journal of Manufacturing Systems, Journal of Cleaner Production, etc. He is serving as an Editorial Board Member of International Journal of Industrial Engineering: Theory, Applications and Practice.