In this study, we investigate in recycling systems by constructing a closed-loop supply chain model where retailers engage in the collection work. We describe the current recycling practices in three major IT companies and propose a conceptual model to summarize the current practice model. In the current practice model, the manufacturer authorizes a third-party player to collect used products from customers. However, from the past researches, a recycling model where third-party players engage in collection work is inefficient. Then we develop a retailer collection model where used products are collected by the retailer. In the proposed retailer collection model, the retailer collects those used products and the manufacturer cooperates with third-party players to handle those obsolete products.
From the analytical results of the retailer collection model, in order to maximize the manufacturer’s profits, it would like to see a high return rate of used products. In order to earn higher profits, the manufacturer provides the third-party player with an appropriate contract to induce the retailer to increase the return rate of those obsolete products. Then we compare the performance measures such as the return rates, the profits of manufacturer, and the total profits between the retailer collection model and the current practice model. We verify that these performances of the retailer collection model are better than the current practice model under some conditions. Furthermore, we consider that the third-party player in the retailer collection model acting as a non-profit organization where the unit cost is equal to the unit revenue. When the third-party player is a non-profit organization, the return rate, the profits of manufacturer, and the total profits in the retailer collection model are better than the current practice model.
In this study, we describe the contract relationship between the manufacturer and the third-party player as a simple linear contract with used products return rate. However, some
other contract types such as the revenue sharing contact and the incentive mechanism design which are introduced in Section 2 are proposed to improve some performance measures in supply chain models. We may incorporate the contract design concepts into the recycling models proposed in this study to make the recycling system more efficient. Those returned obsolete products can be collected by retailers or third-party firms. We can also consider the condition where retailers and third-party firms both engage in used products collection work.
Then in the recycling market, there exists a competition relationship between the retailers and the third-party firms. In practice, a manufacturer would face several retailers and third-party players and we may consider multiple retailers and third-party players in future research.
References
Acer. 2008a. European Nations’ Recycling Channels.
<http://global.Acer.com/about/sustainability34.htm> Accessed June 10 2009.
Acer. 2008b. Product Environmental Management.
<http://global.Acer.com/about/sustainability32.htm> Accessed June 10 2009.
Arena, U., M. L. Mastellone, F. Perugini. 2003. Life cycle assessment of a plastic packaging recycling system. International Journal of Life Cycle Assessment, 8(2) 92-98.
Bierma, T. J., F. L. Waterstraat. 1999. Cleaner production from chemical suppliers:
understanding shared saving contracts. Journal of Cleaner Production, 7 145-158.
Cachon, G. P., M. A. Lariviere. 1999. Capacity choice and allocation: strategic behavior and supply chain performance. Management Science, 45(8) 1091-1108.
Cachon, G. P., M. A. Lariviere. 2005. Supply chain coordination with revenue sharing contracts: strengths and limitations. Management Science, 51(1) 30-44.
Chauhan, S. S., J.-M. Proth. 2005. Analysis of a supply chain partnership with revenue sharing. International Journal of Production Economics, 97 44-51.
Corbett, C. J., X. de Groote. 2000. A supplier’s optimal quantity discount policy under asymmetric information. Management Science, 46(3) 444-450.
Corbett, C. J., G. A. DeCroix. 2001. Shared-saving contracts for indirect materials in supply chain: channel profit and environmental impacts. Management Science, 47(7) 881-893.
Corbett, C. J., G. A. DeCroix, A. Y. Ha. 2005. Optimal shared-savings contracts in supply chains: Linear contracts and double moral hazard. European Journal of Operational Research, 163 653-667.
Coughlan, A. T. 1993. Salesforce compensation: A review of MS/OR advances. J.Eliashberg, G. Lilien, eds. Handbooks in Operations Research and Management Science, Vol. 5:
Marketing, North-Holland, Amsterdam 611-651.
Dell. 2008a. Dell Corporate Responsibility Report Fiscal Year 2008.
<http://www.dell.com/downloads/global/corporate/environ/report08.pdf> Accessed June 10 2009.
Dell. 2008b. Dell Recycling.
<http://www.dell.com/content/topics/segtopic.aspx/dell_recycling> Accessed June 10 2009.
Dell. 2008c. Dell-Recycling.
<http://www1.euro.dell.com/content/topics/topic.aspx/emea/topics/services/recycle>
Accessed June 10 2009.
Dell. 2008d. Executive Summary.
<http://www.dell.com/content/topics/global.aspx/about_dell/values/sustainability/executiv e/summary> Accessed June 10 2009.
Emmons, H., S. M. Gilbert. 1998. Note. The role of returns policies in pricing and inventory decisions for catalog Goods. Management Science, 44(2) 276-283.
Electronic Product Environment Assessment Tool (EPEAT). 2009. Welcome to EPEAT.
<http://www.epeat.net> Accessed June 10 2009.
Eppen, G. D., A. V. Iyer. 1997. Backup agreements in fashion buying-the value of upstream flexibility. Management Science, 43(11) 1469-1484.
GENCO. 2008. Electronics Industry Profile.
<http://www.genco.com/Industry-Profiles/electronics.php> Accessed June 10 2009.
Giannoccaro, I., P. Pontrandolfo. 2004. Supply chain coordination by revenue sharing contracts. International Journal of Production Economics, 89 131-139.
Guide, V. D. R., T. P. Harrison, L. N. V. Wassenhove. 2003a. The challenge of closed-loop supply chains. Interfaces, 33(6) 3-6.
Guide, V. D. R., V. Jayaraman, J. D. Linton. 2003b. Building contingency planning for closed-loop supply chains with product recovery. Journal of Operations Management, 21 259-279.
Hewlett-Packard (HP). 2008a. Product Reuse and Recycling.
<http://www.hp.com/hpinfo/globalcitizenship/gcreport/productreuse.html> Accessed June 10 2009.
Hewlett-Packard (HP). 2008b. Hardware recycling services - U.S.
<https://h20212.www2.hp.com/recycle/index.asp> Accessed June 10 2009.
Hewlett-Packard (HP). 2008c. Frequently Asked Questions.
<https://h20212.www2.hp.com/recycle/faq.asp> Accessed June 10 2009.
Hewlett-Packard (HP). 2008d. HP Hardware Return & Recycling Program.
<http://h41111.www4.hp.com/globalcitizenship/uk/en/environment/recycle/hardware.html
> Accessed June 10 2009.
Hong, I H., T. Assavapokee, J. Ammons, C. Boelkins, K. Gilliam, D. Oudit, M. Realff, J. M.
Vannicola. 2006. Planning the e-scrap reverse production system under uncertainty in the state of Georgia: a case study. IEEE Transactions on Electronics Packaging Manufacturing, 29(3) 150-162.
Hong, I-H., J. C. Ammons, M. J. Realff. 2008. Decentralized decision-making and protocol design for recycled material flows. Int. J. Production Economics, 116 325-337.
Integrated Waste Management Board, California (IWMB). 2003. Electronic Waste Recycling Act of 2003. <http://www.ciwmb.ca.gov/electronics/act2003/> Accessed June 10 2009.
Jenkins, R. R., S. A. Martinez, K. Palmer, M. J. Podolsky. 2003. The determinants of household recycling: a material-specific analysis of recycling program features and unit pricing. Journal of Environmental Economics and Management. 45 294-318.
Khetriwal, D. S., P. Kraeuchi, R. Widmer. 2009. Producer responsibility for e-waste management: Key issues for consideration - Learning from the Swiss experience. Journal of Environmental Management, 90 153-165.
Krumwiede, D. W., C. Sheu. 2002. A model for reverse logistics entry by third-party providers. The International Journal of Management Science, 30 325-333.
Laffont, J.-J., D. Martimort. 2002. The Theory of Incentives: the Principal-Agent Model.
Lee, H. L., V. Padmanabhan, T. A. Taylor, S. Whang. 2000. Price protection in the personal computer industry. Management Science, 46(4) 467-482.
Lee, H., S. Whang. 1999. Decentralized multi-echelon supply chains: incentives and information. Management Science, 45(5) 633-640.
Maine Revised Statutes (MRS). 2008. Electronic Waste.
<http://www.mainelegislature.org/legis/statutes/38/title38sec1610.html> Accessed May 20 2009.
Meade, L., J. Sarkis. 2002. A conceptual model for selecting and evaluating third-party reverse logistics providers. Supply Chain Management, 7(5) 283-295.
Myerson, R.B. 1979. Conference structures and fair allocation rules. International Journal of Game Theory, 9(3) 169-182.
Nagurney, A., F. Toyasaki. 2005. Reverse supply chain management and electronic waste recycling-a multitiered network equilibrium framework for e-cycling. Transportation Research Part E, 41 1-28.
Pasternack, B. A. 2008. Optimal pricing and return policies for perishable commodities.
Management Science, 27(1) 133-140.
Pati, R. K., P. Vart, P. Kumar. 2006. Economics analysis of paper recycling vis-à-vis wood as raw material. International Journal of Production Economics, 103 489-508.
Pati, R. K., P. Vart, P. Kumar. 2008. A goal programming model for paper recycling system.
The International Journal of Management Science, 36 405-417.
Pochampally, K. K., S. M. Gupta. 2003. A multi-phase mathematical programming approach to strategic planning of an efficient reverse supply chain network. Proceedings of the 2003 IEEE International Symposium on the Electronics and the Environment. Boston, MA, 72-78.
RoHS. 2003. RoHS Directive.
<http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:037:0019:0023:EN:
PDF> Accessed June 10 2009.
Ross, S., D. Evans. 2003. The environmental effect of reusing and recycling a plastic-based packaging system. Journal of Cleaner Production, 11 561-571.
Sarkis, J. 2003. A strategic decision framework for green supply chain management. Journal of Cleaner Production, 11 397-409.
Savaskan, R. C., S. Bhattacharya, L. N. V. Wassenhove. 2004. Closed-loop supply chain models with product remanufacturing. Management Science, 50(2) 239-252.
Sethi, S. P., H. Yan, H. Zang. 2004. Quantity flexibility contracts: optimal decisions with information. Decision Science, 35(4) 691-712.
Siddique, R., J. Khatib, I. Kaur. 2008. Use of recycled plastic in concrete: a review. Waste Management, 28 1835-1852.
Silicon Valley Toxics Coalition (SVTC). 2009. Our Work.
<http://www.etoxics.org/svtc_work> Accessed June 10 2009.
Taylor, T. A. 2001. Channel coordination under price protection, midlife returns, and
Tsay, A. A. 1999. The quantity flexibility contract and supplier-customer incentives.
Management Science, 45(10) 1339-1358.
Tsay, A. A., W. S. Lovejoy. 1999. Quantity flexibility contracts and supply chain performance. Manufacturing & Service Operations Management, 1(2) 89-111.
Tsay, A. A. 2001. Managing retail channel overstock: markdown money and return policies.
Journal of Retailing, 77 457-492.
Wang, Y., L. Jiang, Z.-J. Shen. 2004. Channel performance under consignment contract with revenue sharing. Management Science, 50(1) 34-47.
WEEE. 2003. WEEE Directive.
<http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:037:0024:0038:EN:
PDF> Accessed June 10 2009.
Weng, Z. K. 1995. Channel coordination and quantity discounts. Management Science, 41(9) 1509-1522.
Yang, P.C. 2004. Pricing strategy for deteriorating items using quantity discount when demand is price sensitive. European Journal of Operational Research, 157 389-397.
Zhang, Y., C. Li. 2006. A principal-agent approach to incentive mechanisms in supply chains.
Proceedings of the 2006 SOLI '06 IEEE International Conference on Service Operations and Logistics, and Informatics, 358-363.