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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasetheirinvolvementinactivitiesovertheexten
2、dedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerialflowinasupplychain:Products,informationandfundsflowfromtheforwardsupplychaintothecustomerandback.Werefertosuchasupplychainasa‘closed
3、-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisnoflowbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproductsflowingbackintotheoriginalsupplyprocess,informationaboutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeo
4、fsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithinafirmorindifferentfirmsareinvolvedindecisionsconcerningtheefficiencyandtheprofitabilityofthesupplyprocess.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.
5、Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowingexample:Inadecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpacttheprofits,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavediffere
6、ntincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsusedproductsandpaysarebatetothecustomer.Anotherexampleisafirm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanufacturedproducts.Howeve
7、r,thesupplyofproductsthatcanberemanufactureddependsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra