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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasetheirinvolveme
2、ntinactivitiesovertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerialflowinasupplychain:Products,informationandfundsflowfromtheforwardsupplychaintoth
3、ecustomerandback.Werefertosuchasupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisnoflowbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproductsflowingbackintotheoriginalsupplyprocess,informationa
4、boutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithinafirmorindifferentfirmsareinvolvedindecisionsconcerningtheefficiencyandtheprofitabilityofthesupplyprocess.Thedecisionmakers’decisionsint
5、eractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowingexample:Inadecentralizedsupplychain,boththewholesa
6、leandtheretailpriceofaproductimpacttheprofits,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavedifferentincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsusedproductsandpaysarebatetothecustomer.Anotherexampleisafirm’s
7、marketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanufacturedproducts.However,thesupplyofproductsthatcanberemanufactureddependsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesignd
8、epartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
