Supply Chain Coordination in Industrial Symbiosis Networks with Uncertain Waste Demand and Supply

Abstract

By-product synergy (BPS) is considered an effective measure to support a circular economy and sustainable development as it can reduce waste disposal and natural resource consumption. The adoption of BPS can create new supplier-buyer relations that are different from traditional ones because the traded products are usually outside of the core business of the supplier, so the new relations need to be coordinated. This paper considers a two-echelon supply chain consisting of a manufacturer and a retailer. The by-product is randomly generated along with the production of the core product. The manufacturer sells its core product directly to the market with uncertain demand and sells the by-product to the retailer facing stochastic demand. To coordinate both the manufacturer’s production and retailer’s order decisions and achieve efficient performance, we analyze several contracts and find that a combined contract with an ABD contract and a revenue sharing contract could coordinate the supply chain and realize Pareto-improvement. A numerical experiment is also carried out to explore the influences of fluctuations in demand and supply on the performance of the manufacturer, the retailer, and the total supply chain.