Development of Cores Acquisition Model With Two Switching Mechanisms in a Retailer-Oriented Closed-Loop Supply Chain System

Retailer-Oriented Closed-Loop Supply Chain (ROCLSC) is an integration of forward and reverse supply chains with retailer taking charge of the remanufacturing, distribution, and collecting activities. This type of mechanism is quite effective, since the majority of product returns management is performed by the retailer. However, in practical industries, the implementation of ROCLSC is still limited. In this study, we investigate a ROCLSC system that involves an Original Equipment Manufacturer (OEM) and a retailer. OEM plays a role as a producer of new products, while the retailer is in charge of remanufacturing, collecting, as well as selling and distributing both newly manufactured and remanufactured products. We develop a mathematical model to maximize the profit of each party. Although several studies have developed models for cores acquisition, here we apply a different cores switching mechanism. We introduced the fixed rate and flat rate mechanisms used in the business-to-business (B2B) system, where product functions are very important to consumers. In addition, this research focuses on ROCLSC where most of the existing cores acquisition models are Manufacturer-Oriented Closed-Loop Supply Chain (MOCLSC). The result of this study shows that the retailer will get higher profits when the product returns are acquired through the fixed rate mechanism, rather than the flat rate mechanism. Therefore, determining the optimal amount of cores collected through the fixed rate mechanism will increase the retailer’s profit, as well as joint profit of both parties. From the results, we also point out an interesting note that the retailer should increase efforts to sell new products along with the increasing proportion of consumer Willingness to Pay (WTP) for remanufactured products. Hence, both OEM and retailer profits can be increased consecutively