Channel coordination and profit distribution in a three-echelon supply chain considering social responsibility and product returns

By developing markets and increasing world competition, today, companies' success is not only related to their performance but also the interaction and performance of their entire supply chain and distribution. In the supply chain strategy, operational functions, such as planning, purchasing, and financial affairs are considered all together. In the meantime, the coordination between manufacturers, distributors, and retailers is of great importance. Coordination through cooperation between distribution channels is necessary because of their potential for realizing significant profits. This study presents a mathematical model for a three-echelon supply chain. In this model, the effect of the strategy of returning goods on the amount of profit as well as on the optimal amount of wholesale-retail prices is determined. The three-echelon supply chain is represented by manufacturers, distributors, and retailers. In this study, social responsibility is considered in the model and channel coordination in this three-echelon supply chain is also considered. Hence, in addition to maximizing total profit, social responsibility is also taken into consideration. Channel coordination and optimization of the supply chain are considered in both centralized and decentralized modes. In the results, it was found that the quality of products in a consistent manner is always at a higher level than in a decentralized state. Also, it was found that if decisions are made on a coordinated basis, customers who return their goods will benefit from higher earnings than decentralized. Therefore, this model helps the firms to find out the structure, which has a better performance in terms of product quality, return policy, and social responsibility impact while reducing conflict between supply chain members. Also, through a coordinated system, firms can enhance the quality of products and return policy, which in turn improves customer satisfaction and profits.