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The yield rate paradox in closed-loop supply chains

The yield rate paradox in closed-loop supply chains

Hosoda, Takamichi, Disney, Stephen M. and Zhou, Li ORCID: 0000-0001-7132-5935 (2021) The yield rate paradox in closed-loop supply chains. International Journal of Production Economics, 239:108187. ISSN 0925-5273 (doi:https://doi.org/10.1016/j.ijpe.2021.108187)

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Abstract

We investigate the dynamics of a closed-loop make-to-stock supply chain consisting of a remanufacturer and a manufacturer with a first-order vector auto-regressive demand and return process. Remanufactured products, considered as-good-as-new, partially satisfy market demand; newly manufactured products fill the remainder. The manufacturer and the remanufacturer cooperate to minimize the sum of the 1) capacity costs at the remanufacturing and manufacturing processes, 2) finished goods inventory holding and backlog cost, 3) cost to dispose of returned items not re-manufactured and 4) collection cost. The remanufacturer inspects returned products in a triage process. Only a predetermined fraction (the triage yield rate) of the returns are re-manufactured. We investigate the impact of the triage yield on the system-wide cost. In a cost-sensitive setting, when the unit cost of remanufacturing is lower than the unit cost of manufacturing, it seems reasonable to conjecture that higher triage yields lead to lower system-wide costs. We show the system-wide cost is always convex in the triage yield rate, suggesting system-wide costs could actually increase in the triage yield rate, even when the unit remanufacturing cost is lower than the manufacturing cost. This yield rate paradox originates from the increased yields creating additional variability in the manufacturing activities. By investigating boundary conditions we find the minimal disposal penalty required to entice the remanufacturer to process all returns.

Item Type: Article
Uncontrolled Keywords: supply chain management, closed-loop supply chain, vector auto-regressive process, order-up-to policy
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Systems Management & Strategy
Faculty of Business > Networks and Urban Systems Centre (NUSC)
Faculty of Business > Networks and Urban Systems Centre (NUSC) > Connected Cities Research Group
Last Modified: 06 Jul 2021 11:21
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/33066

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