SD Model For Strategic Capacity Planning for Closed-Loop Supply Chain with Collection and Remanufacturing
Uncertainty of the quantity of used products is an important issue in the closed-loop supply chain and has a significant impact on the recovery operations’ economic viability. To deal with the uncertainties of the quantity of used products, some companies pay the customer an amount of money, also known as buy-back incentive, to get back the used products at their end of life (EoL). The return ratio of the used products depends on the buy-back incentive amount offered by the company. Many research pointed out the effectiveness of buy-back incentive offers to encourage customers to return their used products. Capacity planning of reverse networks is a strategic factor of major importance for the profitability of recovery operations. To the best of our knowledge very little research had been conducted to study the capacity planning of closed-loop supply chains with buy-back incentive offers.This research studies the remanufacturing network of a closed-loop supply chain and proposes a dynamic capacity planning of collection and remanufacturing with a buy-back incentive offer. The behavior of the closed-loop supply chain under study is analyzed via a simulation model using system dynamics’ principles. The results showed that the total profit of the closed-loop supply chain initially increases as the incentive offer increases but starts decreasing as soon as the incentive offer crosses the optimal value of 19% of the product selling price. The total profit of CLSC with leading capacity expansion strategies of collection and remanufacturing is 70 % higher compared with matching expansion strategies and 3 times higher than trailing expansion strategies. For the optimal review period of collection capacity expansion 50 weeks and the optimal review period of remanufacturing capacity expansion 45 weeks, the total profit is 30% higher compared to short review periods and 36% higher compared to long review periods. Finally, we found that the breakeven point of the total profit of the forward supply chain and the CLSC is 40% of the product price.
Keywords - Closed-Loop Supply Chain, Capacity Planning, Collection, Remanufacturing, Buyback Incentive, System Dynamics.