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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasethei
2、rinvolvementinactivitiesovertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerialflowinasupplychain:Products,informationandfundsflowfromthefo
3、rwardsupplychaintothecustomerandback.Werefertosuchasupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisnoflowbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproductsflowingbackintotheorig
4、inalsupplyprocess,informationaboutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithinafirmorindifferentfirmsareinvolvedindecisionsconcerningtheefficiencyandtheprofitabilityofthesupp
5、lyprocess.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowing
6、example:Inadecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpacttheprofits,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavedifferentincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsus
7、edproductsandpaysarebatetothecustomer.Anotherexampleisafirm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanufacturedproducts.However,thesupplyofproductsthatcanberemanufactureddepe
8、ndsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
