Modeling and solving a sustainable closed loop supply chain problem with pricing decisions and discounts on returned products

Abstract

Abstract Increasing rates of environmental and social concerns involved in various communities have recently attracted researchers' attention to consider them in proper designs of sustainable supply chains (SSCs). In this paper, the planning problem of a multi-period multi-echelon sustainable closed loop supply chain (SCLSC) is investigated. A comprehensive model that seriously takes into account the social and environmental aspects of the supply chain (SC) decisions and measures their social and environmental effects using the GRI (Global Reporting Initiative) guideline indicators is proposed. The proposed planning model includes tactical decisions comprising the price of the product and logistic decisions. A discount offer is used on the returned product as an incentive policy to increase customers' willingness to return back the used products. In this offer, the discount depends on the quality of the returned products. Besides, as the discount for upcoming purchases stimulates customers to buy new products more, the product demand depends on the discount offer in addition to the product price. Moreover, two recovery approaches including remanufacturing and recycling alongside disposing of very low quality returned products are considered. Categorizing returned products according to their quality, quality-dependent recovery decisions for returned products, and the quality-dependent discount offer is the other novel points of this paper. The proposed model is implemented in a case study involving a CFL light bulbs supply chain. The TH (Torabi-Hassini) procedure is employed to solve the newly-developed three-objective optimization problem. The results of sensitivity analyses on the case-study demonstrate that the discount offer significantly improve the collecting rate of used products, which in turn helps improving sustainability. Finally, the Pareto optimal solutions show that the proposed approach provides a comprehensive planning model for SSCs which enables the decision makers to use a proper solution that considers legislation, social preference, cost, and environmental objectives.