Product disposition decisions on closed-loop supply chains

Abstract

In this tutorial chapter we consider the problem of product disposition on a closed-loop supply chain: what should a firm do with a product return? Options include remanufacturing, materials recycling, and dismantling for spare parts. The answer to this question depends on the firm’s objectives and environment. In many industries, remanufacturing is more profitable than dismantling for spare parts, which is more profitable than materials recycling. Recycling may or may not be profitable; and dismantling for spare parts may not be an option if the firm is not an Original Equipment Manufacturer (OEM). There may be uncertainty in demand for remanufactured products and/or the condition of returned products. We review here different decision support models for addressing this problem, and identify the conditions in which one approach is preferred over the other. We conclude with a quick review of the product (return) acquisition problem, which is related to the disposition problem, and that concerns the appropriate number of product returns to acquire in order to support the firm’s closed-loop supply chain operations.