A study of manufacturing and inventory strategies in close-loop supply chain: a two-phase news-vendor model with an extended warranty

Abstract

Closed-loop supply chain procedures provide manufacturers with a competitive advantage over their competitors. Also, the supply chain involves a manufacturer and customers, in which the manufacturer produces and sells products from the manufacturing market. Interestingly, combining forward and reversal strategies presents challenges on both the on-demand and supply sides of the market. When customers purchase products, they are uncertain about the quality of the product, and the manufacturer offers a warranty to assure the customers about the reliability and quality of the products. This paper presents a two-phase News-vendor framework for warranted and non-warranted products with inventory carryover to describe the best manufacturing and re(manufacturing) procedures. The demand is modeled in stochastic nature with one dimensional extended warranty for both new and reman products. Two scenarios are considered to demonstrate the importance of providing an extended warranty. Finally, the numerical analysis concludes that the expected profit affects the manufacturer's influence when providing a warranty and graphical results reveal that offering an extended warranty and lowering holding expenditure enhances the manufacturer's expected total profit over two phases.