Coordinating a reverse supply chain under stochastic demand and uncertain quality of returned products

Abstract

PurposeThe purpose of this study is to investigate the impact of greening and promotional effort dependent stochastic market demand on the remanufacturer's and the collector's profits when the quality of used products for remanufacturing is uncertain in a reverse supply chain.Design/methodology/approachThe proposed model is developed to obtain optimal profits for the remanufacturer, the collector and the whole supply chain. Both the centralized and decentralized scenarios are considered. To motivate the collector through profit enhancement, the remanufacturer designs a cost-sharing contract. Through numerical examples and sensitivity analysis, the consequences of greenness and promotional effort on optimal profits are investigated.FindingsThe results show that the remanufacturer gets benefited from greening and promotional effort enhancement. However, a higher value of minimum acceptable quality level decreases the profits of the manufacturer and the collector. A cost-sharing contract coordinates the supply chain and improves the remanufacturer's and the collector's profits. Besides green innovation, remanufacturing mitigates the harmful effects of waste in the environment.Originality/valueTwo different viewpoints of remanufacturing are considered here – environmental sustainability and economic sustainability. This paper considers a reverse supply chain with a remanufacturer who remanufactures the used products collected by the collector. The quality of used products is uncertain, and customer demand is stochastic, green and promotional effort sensitive. These two types of uncertainty with green and promotional effort sensitive customer demand differs the current paper from the existing literature.