An optimal put option contract for a reverse supply chain: case of remanufacturing capacity uncertainty

Abstract

Reverse supply chain (RSC) management can be implemented to ameliorate environmental and economic goals simultaneously. In 2020, the devastating influences generated by the COVID-19 global pandemic had established high uncertainty in the manufacturers' capacity, which can hinder the fulfillment of such goals. To address such a problem, in this research, we analyze a two-echelon RSC, including a re-manufacturer who, despite facing the remanufacturing capacity uncertainty, remanufactures eligible obsolete products, then re-enters the marketplace, and a collector who accumulates eligible obsolete products from consumers. We survey centralized and decentralized decisions, and also a condition where the collector, as a Stackelberg game leader, offers a put option contract as a risk-sharing approach and decides on both option and exercise prices; in return, the re-manufacturer determines the order quantity. Contrary to previous studies in which the value of option contracts has been analyzed under demand disruptions, this paper aims to address the performance of a put option contract to mitigate the remanufacturing capacity uncertainty in an RSC. Our results demonstrate that by offering the put option contract and determining the option price as nearly low as the marginal refund cost, not only can the collector motivate the re-manufacturer to augment its order quantity but both parties also attain a win–win profit-sharing outcome. Besides, the customized put option contract can achieve Pareto-improving channel coordination in the condition of remanufacturing capacity uncertainty.

Pricing and Coordination of Remanufacturing Supply Chain with Government Participation considering Consumers’ Preferences and Quality of Recycled Products

“…e reward and punishment mechanism is more conducive to encouraging manufacturer and retailer to actively participate in remanufacturing activities than subsidy measures. (5) In the model that lacks supply chain coordination, government subsidies, rewards, and punishments directly affect consumers and retailer but have little impact on manufacturer. In the supply chain coordination model, the incentives of government measures to the manufacturer are partially transferred to manufacturer through revenue sharing contracts.…”

“…Remanufacturing has become an important way to realize sustainable development strategy [2,3]. e remanufacturing supply chain can not only reduce resource consumption and environmental pollution caused by used products, but also save costs, increase profits, enhance corporate competitiveness [4], and realize comprehensive economic and environmental benefits [5]. Compared with new products, remanufactured products have less impact on the ecological environment [6].…”

The impact of supply chain integration on reverse supply chain adoption

“…The firms have developed strategies to collect used products from their customers in response to these pressures. For instance, Apple proposed discounts on new products to the customers who bring back old products (Bakhshi and Heydari, 2021). Reducing the amount of waste dumped into landfills is the main goal of used product collection and product recovery.…”

A meta heuristic approach for reliable capacitated facility joint inventory-location problem with round-trip transportation under imperfect information of disruption in a Fuzzy environment

“…In today's world, considering uncertainty is an essential part of planning. Over the past years, many studies and research have been conducted to apply uncertainty modeling techniques in planning problem (e.g., Bakhshi and Heydari, 2021;Dehghan-Bonari et al, 2021). One of the critical uncertainties in any supply chain is the amount of customer demand, in which various fluctuations can lead to extensive changes in the supply chain's performance and impose a cost on to supply chain (Heydari and Bakhshi, 2022).…”