Suppliers portfolio and returner incentive decisions in closed-loop remanufacturing systems under multiple stochastic scenarios

ABSTRACT We propose a decision tree model that considers reverse and forward flows in a closed-loop supply chain (CLSC). Based on observations of three CLSCs, the model considers an environment where there is uncertainty in the quantity of returned used components (and new components from suppliers) with the decision being the incentive offered to each return source. Given that there are multiple suppliers, one must determine which supplier(s) to use and the corresponding capacity to reserve, in order to minimise total system costs. An example and a sensitivity analysis are presented to illustrate the model and to investigate multiple scenarios under various conditions. The analysis demonstrates that the supplier portfolio and returner incentive decisions are strongly linked to the supplier reliability, returned quantities, and the costs of not meeting the demand. Furthermore, the analysis suggests that understanding the behaviour of return sources relative to incentives is the most critical variable to implement the model.