Optimizing the Interaction Between Two Closed-Loop Supply Chains Based on Inverse Logistics Using the Game Theory Method

Abstract

Over the past few years, attention to environmental problems, legal necessities, and economic advantages emerging from reproduction activities has attracted attention to reverse logistics activities in the form of a closed-loop supply chain, whether in industry or scientific research. The current study aims to model competitiveness and comparison between two closed-loop three-level supply chains, each of which includes a manufacturer, a retailer, and a third party to collect the products used by the customer, taking into account the concepts of game theory and the existence of aggregates. Moreover, a separate supplier for each chain is considered. In the forward supply chain, the manufacturer produces new products using new components or re-used products that have been collected from the consumer, then sells these products mainly to the retailer, and the retailer sells them. In the reverse chain, the collector provides the used products to the manufacturer after collection. The study utilized the definitions and concepts of game theory to model this closed loop chain as a Stackelberg game to obtain the optimal value of wholesale and retail price and the optimal value of the product return coefficient for the collector. Finally, the models based on some numerical examples are solved. Given the results, the remanufacturing costs have a significant role in making more profits for all members in such chains, and competitive chains should attempt to remanufacture the products at lower costs.

Keywords

• closed-loop supply chain
• game theory
• out-of-chain competition
• reverse logistics
• stackelberg game