Dynamic game of closed-loop supply chain with remanufacturer participation considering product design for recycling

Abstract

Purpose: The change in recovery rate is dynamic, while the front and back states are related and evolve continuously until reach a steady state. This paper studies the dynamic balancing strategies of members of a closed-loop supply chain system (CLSC) consisting of the original equipment re-manufacturer (OEM) and the Third-party remanufacturer (TPR).

Design/methodology/approach: Using the Itô process, the characteristics of the stochastic evolution of the recovery rate of the supply chain system are described. Based on the behavior of OEM investment in product recyclable design, the profit target function of OEM seeking to maximize profit is constructed. According to the composition of the retailer's profit, the profit target function of the retailer seeking to maximize the profit is constructed. The behavior of recycling and remanufacturing activities of TPR provided a basis for the profit target function of TPR constructed to pursue profit maximization. The evolution of optimal decision-making and profit of a closed-loop supply chain under centralized decision-making, decentralized decision-making, and TPR cost-sharing coordination contract mechanism is also discussed. The evolution process of recovery rate under decentralized decision making, centralized decision making, and coordinated contract mechanism of different TPRs sharing the proportion of product recoverable design investment cost is studied.

Findings: The results show that the recovery rate of a closed-loop supply chain under a coordination contract mechanism is higher than that under decentralized decision-making but lower than that under centralized decision-making. The higher proportion of TPR cost-sharing leads to a higher recovery rate.

Originality/value: This study introduces a dynamic game-theoretic model for closed-loop supply chains, incorporating third-party remanufacturers and product recyclable design. It uses the Itô process to model stochastic recovery rates and explores centralized, decentralized, and cost-sharing mechanisms. Findings highlight that cost-sharing improves recovery rates, offering practical insights for sustainable supply chain coordination.