The Effect of Remanufacturing Effort on Closed-Loop Supply Chain with Stochastic Demand

Demand uncertainty is leading to the inventory risk for the downstream retailers and the random unsold products return flow as well as random demand from the secondary market are risky for the upstream suppliers, which are differ the return flow from the traditional forward flow. The following two scenarios have been examined: the retailers process inventory products on their own; and the suppliers remanufacture the downstream retailers inventory products. The decision of remanufacturing or recycling selection of the upstream suppliers is studied. The paper proposes a supply chain model based on the influence of recovery effort and consumers' price sensitivity to the remanufactured or recycled products. We use the reverse induction method in the game theory to find out the Nash equilibrium solution of the supply chain under different circumstances and then discussed whether the supplier chooses the constraint condition of remanufacturing. We simulated and analyzed the cost coefficient of recovery effort, the influence of price sensitivity coefficient, the recovery effort efficiency coefficient, the repurchase price on the decision-making behavior and expected profits of supplier and retailer. The results show that the suppliers choose to remanufacturing decision depends on recovery effort cost factor, price sensitivity coefficient, recovery effort efficiency factor and repurchase price.