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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsin
2、creasetheirinvolvementinactivitiesovertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerialflowinasupplychain:Products,information
3、andfundsflowfromtheforwardsupplychaintothecustomerandback.Werefertosuchasupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisnoflowbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamo
4、fproductsflowingbackintotheoriginalsupplyprocess,informationaboutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithinafirmorindifferentfirmsareinvolvedindecisionsconcerni
5、ngtheefficiencyandtheprofitabilityofthesupplyprocess.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionma
6、kers’objectivesatasecondlevel.Considerthefollowingexample:Inadecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpacttheprofits,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavedifferentincentivestosetthereta
7、ilandthewholesalepricesrespectively,dependingonwhocollectsusedproductsandpaysarebatetothecustomer.Anotherexampleisafirm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanuf
8、acturedproducts.However,thesupplyofproductsthatcanberemanufactureddependsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
