Reverse channel choice in a closed-loop supply chain with new and differentiated remanufactured goods

This study deals with the problem of manufacturer's choice of alternative reverse channel structures for collecting end-of-use products from consumers. We consider a two-echelon supply chain with one manufacturer and one retailer, based on which three reverse channel formats are proposed: an integrated model, manufacturer collection model, and retailer collection model. The main reason behind developing the models is to investigate how the wholesale price, the retail price, the collection rate, and the total channel profits are affected by the choice of the reverse channel structure. The three models are formulated as supply-constrained multi-variated optimization models and solved by using Lagrangian relaxation scheme. Our research findings suggest that the manufacturer tends to choose the direct collection system for a lower remanufacturing cost and a higher discount valuation of the remanufactured goods and to choose the indirect collection system for a lower collecting cost by the retailer.