Product Recovery Behavior in a Closed-Loop Supply Chain

Abstract

Product recovery is an emerging business area which is attractive from both an economic and an environmental point of view. It is investigated to which extent profit orientation in product recovery management will or will not stimulate an environmentally conscious behavior. This study refers to a product recovery system where a manufacturer of original products is also engaged in remanufacturing used products taken back from its customers. For this type of a closed-loop supply chain, which additionally is characterized by uncertainty of demands and product returns, the optimal recovery and production policy is evaluated. By a numerical analysis, it is shown how cost-efficient decision making affects the product recovery behavior. In a sensitivity analysis, it is evaluated how various problem determinants influence the preference for product recovery under conditions of uncertainty. Exploiting the respective insights, it is discussed which measures can be taken to harmonize economical and environmental driven behavior in product recovery management.