Facility disruptions in a closed-loop supply chain featuring warranty policy and quality-based segmentation of returns

Abstract

This paper focuses on a closed-loop supply chain that deals with disruptions at distribution centers and optimizes the network in two dimensions of sustainability: economic and environmental. Avenues for cost minimization are designed for the customer by adding warranty periods, reworking options, and incentives for returning the used items. Non-dominated solutions via the Reservation Level-driven Tchebyche procedure are found by appropriate choice of facility establishment and suitable allocation links considering the disruption at the distribution centers. The concept of primary and supporting allocations is introduced to address the disruptions and ensures an uninterrupted ow of service. Environmentally, the model adopts a zero-waste strategy by embedding various return-segmentation policies and a secondary chain. The backward ow depends on customers' choice of reworking, validity of the warranty contract, and quality of the returns. The test results indicate that manufacturing and distribution centers prefer returns with medium-range quality, while due to the incentives o ered for recyclable items, customers bene t the most from returning the items with the lowest quality. The tests on the probability of disruptions indicate that establishing a minimum number of manufacturing and/or distribution sites without disruption leads to better overall performance.