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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasetheiri
2、nvolvementinactivitiesovertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerialflowinasupplychain:Products,informationandfundsflowfromtheforwar
3、dsupplychaintothecustomerandback.Werefertosuchasupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisnoflowbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproductsflowingbackintotheoriginalsu
4、pplyprocess,informationaboutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithinafirmorindifferentfirmsareinvolvedindecisionsconcerningtheefficiencyandtheprofitabilityofthesupplyproces
5、s.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowingexample:In
6、adecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpacttheprofits,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavedifferentincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsusedproductsan
7、dpaysarebatetothecustomer.Anotherexampleisafirm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanufacturedproducts.However,thesupplyofproductsthatcanberemanufactureddependsonthedurabi
8、lityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
