Considering third-party logistics providers in reverse logistics

Enterprises have difficulty in completing all the required operations when facing market competition and environmental changes. In such situations, enterprises begin to explore their capacity to outsource logistics from external support, hence giving the existence of a third-party logistics. But in recent years, few scholars have inducted the third-party logistics to reverse logistics. This study thus explores the relationships among recycling by manufacturers, retailers, and third-party logistics providers in the framework of reverse logistics. Returned items must be disassembled, inspected, and disposed off to determine if they can be re-manufactured in the recycling process. Thus, this study constructs a mathematical model to get the maximum profit under the assumption that transfer price is induced by a third-party logistics service. From an overall supply chain standpoint of total profit, the third model in which the third-party provider leads returned product collection before transferring back to the manufacturer for remanufacturing, is preferred. This study shows that it is feasible when a third-party logistics provider is used in the reverse logistics system and that return rate and retail price are the main determinants of total profit. Therefore, the total profit increases when the retail price increases.