Pricing in reverse logistics considering product quality and stochastic demand

Abstract

Presently, due to bio-ecological concerns, reverse logistics, recycling, reproducing and reusing the product returns is gaining interest in business and research worldwide.One of the important issues in reverse logistics is determination the price of the final product as well as the cost of recollecting used (recycled) products.This study proposes a profit maximization-modeling framework for an integrated, forward and reverse logistics network design problems. A mixed integer non-linear programming (MINLP) formulation is presented for designing an integrated direct, reverse multi-level, single period and multi product logistic network. Product demands and returns are considered stochastic with a continuous function of price. Based on the stochastic demand and product returns, a two-stage stochastic programming is developed by using scenario-based stochastic approach. Moreover, the price of the returned products is considered as the decision variable dependent on its quality level. In order to solve the model, GAMS software is used. The proposed model is justified by a numerical example and implemented for real case YAZD TIRE Company.

Keywords

• Reproduction
• Network Design
• Uncertainty
• pricing
• Reverse Logistics
• Facility Location