A system dynamics framework for integrated reverse supply chain with three way recovery and product exchange policy

With the technological advancements and rapid changes in demand pattern, diverse ranges of products are entering into the market with reduced lifecycle which leads to the environmental disasters. The awareness of product take-back and recovery has been increasing in various supply chains not only due to the obligation imposed by legislation but also competitive economics worldwide. In this paper, we develop a system dynamics framework for a closed-loop supply chain network with product exchange and three way recovery policy, namely; product remanufacturing, component reuse and remanufacturing, and raw material recovery. In the simulation study, we investigate the significance of various factors including product exchange, collection and remanufacturing; their interactions and the type of their impact on bullwhip and profitability through sensitivity and statistical analysis. Our results suggest that the inclusion of three way recovery in reverse channel and product exchange policy in the forward channel reduce the order variation and bullwhip effect at both retailer and distributor level and increases the profitability of RL operations. In addition, we redefine the reverse logistics framework with "open-loop" in which the remanufactured products are redistributed only in the secondary market and compare the performance of open-loop model with that of closed-loop. Extended numerical investigation provides insights to the decision makers regarding the actions which can lead to better performance of the system. (C) 2013 Elsevier Ltd. All rights reserved