Managing Channel Profit and Total Surplus in a Closed-Loop Supply Chain Network

Abstract

Today’s government is interested in the product recovery program in order to encourage sustainability. The research develops four closed-loop supply chain models by considering different scenarios for the governmental subsidies and fees under price sensitive demand. Analytical results suggest that the government should provide subsidies to both manufacturer and collector in order to maximize channel profit and total surplus. Higher subsidies advocates manufacturer’s intention to lean towards remanufacturing activities under given manufacturing and consumption fees scenarios. The sensitivity analysis reveals that the total surplus and channel profit increases as subsidies increase in all closed-loop supply chain models.

Keywords: Closed-loop Supply chain