Strategy of Production and Ordering in Closed-loop Supply Chain under Stochastic Yields and Stochastic Demands

Abstract

A closed-loop supply chain system consisting of one manufacturer with random yield and one retailer with random demand is discussed in this paper. The models of expected profit of supply chain system are founded under centralized decision and decentralized decision, respectively. The optimal strategies of yield and order are obtained in two modes. It is proved that the order of retailer is not affected by yield randomness. That is showed by numerical example, the results show: the scheduled production of new product for manufacture will decrease and the total profit and each participant of supply chain will increase as recovery price increases, when the cost of remanufacturing production is lower than the new product. © 2015 SERSC.