Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior

In this paper, we consider a two-echelon reverse supply chain with dual-recycling channels where the recyclable dealer acts as a Stackelberg game leader and the recycler acts as a follower. Due to the price competition between these two channels, the dominant dealer always faces a challenge on how to strategically design the reverse channel structure. By introducing consumer preference for the online recycling channel into the model, we examine the challenge in three scenarios: single traditional recycling channel, single online-recycling channel, and a hybrid dual-recycling channel with both centralized and decentralized cases. We investigate two problems that are comprised of designing and coordinating a reverse supply chain with a traditional and an online recycling channel. The results show that the dual-recycling channel always outperforms its single channel counterparts from the recyclable dealer's and system's perspectives. In the coordination problem, a contract with transfer and online recycling prices can coordinate the dual-recycling channel reverse supply chain but harms the dealer. Therefore, we propose two complementary contracts - a two-part tariff contract and a profit sharing contract - which succeed in coordinating the reverse supply chain system and create a win-win situation. Finally, numerical examples illustrate the model, and results show that the consumer preference for online recycling affects the acceptance of the above contracts for the recyclable dealer. (C) 2017 Elsevier B.V. All rights reserved.