Analysis of decision-making in closed-loop supply chains

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Title: Analysis of decision-making in closed-loop supply chains
Author: Lee, Chanjoo
Abstract: Closed-loop supply chains (CLSCs) that integrate the activities for reclaiming residual values in postconsumer products with the traditional forward supply chain activities are important from financial and environmental perspectives. This thesis develops models and analyses on three topics novel to the field of CLSC research with a goal of advancing knowledge about effective decision-makings in CLSCs. In the first part of the thesis, we study joint control of stochastic forward and stochastic reverse material flows in CLSCs. With an application to a CLSC where postconsumer products are collected for warranty service purposes, we demonstrate that the benefit of coordinating two production activities could be significant. We develop a model that can be used to obtain an effective inventory control policy for coordinating forward and reverse material flows. Through Monte Carlo simulation and global sensitivity analysis, we identify major influential factors that affect system's warranty cost savings performance. The results indicate that joint control of forward and reverse material flows greatly improves warranty cost savings performance as well as system's robustness to uncertainties. The second part of the thesis develops a differential game model for characterizing decentralized time-varying competitive decision-making in a CLSC. The differential game model is particularly useful for studying time-varying interactive decision-making in CLSCs that involve many stakeholders who pursue different objectives in forward and reverse production activities. We identify optimal prices and production strategies that evolve over time under fluctuating market demand. Also, the model provides a quantitative scheme that can be used to obtain an efficient apportionment of product recovery processes. The third part of the thesis describes the relationship among consumers' risk-aversion, product cannibalization of new products by remanufactured products, and growth of CLSCs through price optimization models. Whereas price is one of the most effective variables for managing market demand, previous CLSC research has mainly focused on operational problems without paying much attention on the interface between CLSCs and markets. We develop models that jointly determine optimal prices in forward and reverse channels considering consumers' willingness-to-pay (WTP) for remanufactured products, consumers' willingness-to-accept (WTA) for a buyback price, and consumers' risk aversion to uncertain quality perceptions. The results show that consumers' active participation in CLSC is an important factor for the viability and growth of a CLSC. Also, we show that companies can benefit from product remanufacturing although it may be accompanied by production cannibalization.
Type: Dissertation
Date: 2011-07-08
Publisher: Georgia Institute of Technology
Subject: Supply chain
Closed-loop supply chain
Business logistics
Waste minimization
Product life cycle
Willingness to pay
Prices Mathematical models
Department: Industrial and Systems Engineering
Advisor: Committee Co-Chair: Ammons, Jane; Committee Co-Chair: Realff, Matthew; Committee Member: Ferguson, Mark; Committee Member: McGinnis, Leon; Committee Member: Swann, Julie
Degree: PhD

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