Science Research Management ›› 2020, Vol. 41 ›› Issue (6): 256-267.

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A research on the closed-loop supply chain decisions by considering CSR and quality effort

Li Xinran, Xu Yuqing   

  1. School of Economics and Management, Dalian University of Technology, Dalian 116024, Liaoning, China
  • Received:2019-08-25 Revised:2020-03-09 Online:2020-06-20 Published:2020-06-20

Abstract: The rapid growth of global economy has put tremendous pressure on resources and the environment. The problems of the shortage of resources and environmental pollution are becoming increasingly serious. Faced with this situation, our government has emphasized to promote the development of remanufacturing industry in some important policies such as "Made in China 2025". Therefore, recycling and remanufacturing of waste products are becoming increasingly critical. In the process of recycling waste resources, the difficulty in selling remanufactured products has become a major problem in the remanufacturing industry currently. Based on the difficulty in selling remanufactured products, we considered both the corporate social responsibility (CSR) fulfilled by retailers and the quality effort performed by manufacturers for remanufactured products, and explored whether they can improve consumers′ doubts on the level of quality of remanufactured products, thereby increasing the sales of remanufactured products. In this paper, we discussed based on a closed-loop supply chain (CLSC) system consisting of a single manufacturer and a single retailer. In the forward supply chain, the manufacturer produces new and remanufactured products, and sells them to the retailer at different wholesale price, then the retailer sells them to consumers at different sales price. In the reverse supply chain, waste products must meet quality standards before they can be recycled. The retailer recycles waste products from consumers at the recycling price, then the manufacturer recycles waste products from the retailer at the transfer price, and uses them for remanufacturing. Considering that the market demand is affected by the quality effort and price, we built four models of CLSC about decision. Next we established the decision functions of the manufacturer and the retailer in each model of CLSC. The first one is the model without the CSR fulfilled by retailer and the quality effort performed by manufacturer. Here the manufacturer and the retailer both take the maximization of their own profit as their decision goal. The second one is the model with the quality effort performed by manufacturer. Similarly, the manufacturer and the retailer both take the maximization of their own profit as their decision goal. The third one is the model with the CSR fulfilled by retailer. Here the manufacturer takes the maximization of its own profit as decision goal. While the goal of the retailer is to maximize the sum of self-profit and consumer surplus. And the last one is the model with both the CSR fulfilled by retailer and the quality effort performed by manufacturer. Similarly, the manufacturer takes the maximization of its own profit as the decision goal. While the goal of the retailer is to maximize the sum of self-profit and consumer surplus. Among them, the consumer surplus indicates retailer′s focus on consumers. The parameter indicates the level of retailer′s performance of CSR. Based on the Stackelberg game model, the inverse induction method and linear programming method are used to obtain the optimal solution of each model. We compared the optimal solution of decision functions above four models in pairs, discussed the effect of CSR and quality effort on factors such as the profit and price of CLSC system and member. And we reached the following conclusions: (1) Quality effort can increase the price and the demand of remanufactured products, keep the price of new products unchanged and decrease the demand of new products. However, the total market demand of products will be increased. A certain range of quality effort can increase the profit of retailer, manufacturer, and CLSC system. (2) Whether manufacturer performs the quality effort or not, CSR fulfilled by retailer will not affect the wholesale price of products, but it will make the sales price decreased, the market demand increased. At the same time, the interest of retailer will be damaged, but manufacturer, CLSC system, social welfare will all benefit from it. (3) In the case of retailer fulfilling CSR, compared with the case where there is no quality effort , manufacturer performing the quality effort will make the price of new products remain unchanged, the price of remanufactured products increased, the market demand of new and remanufactured products increased. A certain range of quality effort can alleviate the loss of retailer due to fulfilling CSR. With reference to previous literature, we assigned appropriate values to parameters in models. And we used the software called MATLAB to simulate the trend of main variables to verify the correctness of conclusions obtained. Finally, corresponding countermeasures are proposed. Research shows that: (1) Quality effort performed by manufacturer can increase the market share of remanufactured products and the market size of products. A certain range of quality effort can reduce consumers′ doubts on the quality of remanufactured products, effectively improve the situation that it is difficult to sell remanufactured products , and can increase the interest of all parties in CLSC. (2) Retailer fulfills CSR by actively recycling waste products, guiding customers to purchase remanufactured products through setting signs ,which can expand the market size of products. It will damage its own interests but benefit manufacturer, CLSC system and social welfare. From the perspective of social , it can improve the welfare of partners and consumers. From the perspective of enterprise, it will not only be help to build a good product reputation and increase product sales; but also be help to establish a good brand image and form a competitive advantage, thereby attracting more partners and bringing long-term, potential benefits .(3) Manufacturer can set up the reasonable level of quality effort according to the level of retailer′s CSR, which can alleviate the loss of retailer for fulfilling CSR. Therefore, if retailer would like to fulfill CSR, it should encourage manufacturer to perform the quality effort by actively recycling waste products and setting up signs to guide customers to purchase manufacturer′s products or cooperate with the manufacturer that performs the quality effort. Then manufacturer can adjust the level of quality effort based on the level of CSR fulfilled by retailer to achieve a win-win situation.

Key words: corporate social responsibility, quality effort, closed-loop supply chain