pp 1–24 | Cite as

Effect of buyback price on channel’s decision parameters for manufacturer-led close loop dual supply chain

  • Umangi PathakEmail author
  • Ravi Kant
  • Ravi Shankar
Application Article


The objective of this study is to evaluate the effect of self and cross channel’s buyback price on demand, optimum selling price and collection rate for different manufacturer-led close loop dual supply chain structures using Stackelberg game approach. This study considers a dual channel made up of an e-tail as well as a conventional retail channel, and both of these channel members are responsible for forward selling and return collecting practices. A linear model is developed for profit maximization under the aim of optimum selling price and collection rate. A backward induction method is used to find out the optimum values of selling price and collection rate as a function of buyback price. Further, a numerical analysis is done to evaluate the effect of self and cross channel’s buyback price on decision parameters (each channel’s demand, optimum selling price and collection rate). The result shows that, the decision parameters are correlated with the buyback price. If a channel member increase the offered buyback price then it will lead to; an increase in demand at self-channel, decline the demand at the cross channel, raise in the optimum selling price at self-channel, and decline in the collection rate at the cross channel. Further, cross channel’s optimum selling price and self-channel’s collection rate is dependent on self-channel’s buyback price, but the change is based on channel structure. In addition, the results help to gauge the effect of buyback on optimum selling price, demand and collection rate. The study assists channel partners to vary the data set values for the prediction of the results and to compare the results without implementation.


Close Loop Dual Supply Chain-CLDSC Manufacturer-led dual channel structures Stackelberg game approach Buyback decision 



  1. 1.
    Xiao, T., Shi, J.: Pricing and supply priority in a dual-channel supply chain. Eur. J. Oper. Res. 254, 813–823 (2016). CrossRefGoogle Scholar
  2. 2.
    Radhi, M., Zhang, G.: Pricing policies for a dual-channel retailer with cross-channel returns. Comput. Ind. Eng. 119, 63–75 (2018). CrossRefGoogle Scholar
  3. 3.
    Cheng, J., Li, B., Gong, B., Cheng, M., Xu, L.: The optimal power structure of environmental protection responsibilities transfer in remanufacturing supply chain. J. Clean. Prod. 153, 558–569 (2017). CrossRefGoogle Scholar
  4. 4.
    Liu, L., Wang, Z., Xu, L., Hong, X., Govindan, K.: Collection effort and reverse channel choices in a closed-loop supply chain. J. Clean. Prod. 144, 492–500 (2017). CrossRefGoogle Scholar
  5. 5.
    Zhou, Y.W., Guo, J., Zhou, W.: Pricing/service strategies for a dual-channel supply chain with free riding and service-cost sharing. Int. J. Prod. Econ. 196, 198–210 (2018). CrossRefGoogle Scholar
  6. 6.
    Wang, T., Ji, P.: Understanding customer needs through quantitative analysis of Kano’s model. Int. J. Qual. Reliab. Manag. 27, 173–184 (2010). CrossRefGoogle Scholar
  7. 7.
    Li, Y., Xu, F., Zhao, X.: Governance mechanisms of dual-channel reverse supply chains with informal collection channel. J. Clean. Prod. 155, 125–140 (2017). CrossRefGoogle Scholar
  8. 8.
    Jaber, M.Y., El Saadany, A.M.A.: The production, remanufacture and waste disposal model with lost sales. Int. J. Prod. Econ. 120, 115–124 (2009). CrossRefGoogle Scholar
  9. 9.
    Rahman, S., Subramanian, N.: Factors for implementing end-of-life computer recycling operations in reverse supply chains. Int. J. Prod. Econ. 140, 239–248 (2012). CrossRefGoogle Scholar
  10. 10.
    Lee, J., Berente, N.: Digital innovation and the division of innovative labor: digital controls in the automotive industry. Organ. Sci. 23, 1428–1447 (2012). CrossRefGoogle Scholar
  11. 11.
    Arshad, M., Khalid, Q.S., Lloret, J., Leon, A.: An efficient approach for coordination of dual-channel closed-loop supply chain management. Sustainability (2018). CrossRefGoogle Scholar
  12. 12.
    Kong, L., Liu, Z., Pan, Y., Xie, J., Yang, G.: Pricing and service decision of dual-channel operations in an O2O closed-loop supply chain. Ind. Manag. Data Syst. 117, 1567–1588 (2017). CrossRefGoogle Scholar
  13. 13.
    Li, B., Jiang, Y.: Impacts of returns policy under supplier encroachment with risk-averse retailer. J. Retail. Consum. Serv. 47, 104–115 (2019). CrossRefGoogle Scholar
  14. 14.
    Taleizadeh, A.A., Moshtagh, M.S., Moon, I.: Pricing, product quality and collection optimization in a decentralized closed-loop supply chain with different channel structures: game theoretical approach. J. Clean. Prod. 189, 406–431 (2018). CrossRefGoogle Scholar
  15. 15.
    Xue, R., Zhang, F., Tian, F., Oloruntoba, R., Miao, S.: Dual Chains Competition under Two Recycling Modes Based on System Dynamics Method. Sustainability 10(7), 2382 (2018). CrossRefGoogle Scholar
  16. 16.
    Yi, P., Huang, M., Guo, L., Shi, T.: Dual recycling channel decision in retailer oriented closed-loop supply chain for construction machinery remanufacturing. J. Clean. Prod. 137, 1393–1405 (2016). CrossRefGoogle Scholar
  17. 17.
    Mukhopadhyay, S.K., Setaputra, R.: A dynamic model for optimal design quality and return policies. Eur. J. Oper. Res. 180, 1144–1154 (2007). CrossRefGoogle Scholar
  18. 18.
    Batarfi, R., Jaber, M.Y., Aljazzar, S.M.: A profit maximization for a reverse logistics dual-channel supply chain with a return policy. Comput. Ind. Eng. 106, 58–82 (2017). CrossRefGoogle Scholar
  19. 19.
    Grubbström, R.W., Tang, O.: Optimal production opportunities in a remanufacturing system. Int. J. Prod. Res. 44, 3953–3966 (2006). CrossRefGoogle Scholar
  20. 20.
    Feng, L., Govindan, K., Li, C.: Strategic planning: design and coordination for dual-recycling channel reverse supply chain considering consumer behavior. Eur. J. Oper. Res. 260, 601–612 (2017). CrossRefGoogle Scholar
  21. 21.
    Savaskan, R.C., Bhattacharya, S., Van Wassenhove, L.N.: Closed-loop supply chain models with product remanufacturing. Manag. Sci. 50, 239–252 (2004). CrossRefGoogle Scholar
  22. 22.
    Savaskan, R.C., Van Wassenhove, L.N.: Reverse channel design: the case of competing retailers. Manag. Sci. 52, 1–14 (2006). CrossRefGoogle Scholar
  23. 23.
    Zanoni, S., Ferretti, I., Tang, O.: Cost performance and bullwhip effect in a hybrid manufacturing and remanufacturing system with different control policies. Int. J. Prod. Res. 44, 3847–3862 (2006). CrossRefGoogle Scholar
  24. 24.
    El Saadany, A.M.A., Jaber, M.Y., Bonney, M.: How many times to remanufacture? Int. J. Prod. Econ. 143, 598–604 (2013). CrossRefGoogle Scholar
  25. 25.
    Özelkan, E.C., Çakanyildirim, M.: Reverse bullwhip effect in pricing. Eur. J. Oper. Res. 192, 302–312 (2009). CrossRefGoogle Scholar
  26. 26.
    Li, Y., Xu, L., Li, D.: Examining relationships between the return policy, product quality and pricing strategy in online direct selling. Int. J. Prod. Econ. 144, 451–460 (2013). CrossRefGoogle Scholar
  27. 27.
    Mukhopadhyay, S.K., Setoputro, R.: Reverse logistics in e-business: optimal price and return policy. Int. J. Phys. Distrib. Logist. Manag. 34, 70–89 (2004). CrossRefGoogle Scholar
  28. 28.
    Mukhopadhyay, S.K., Setaputra, R.: The role of 4PL as the reverse logistics integrator: optimal pricing and return policies. Int. J. Phys. Distrib. Logist. Manag. 36, 716–729 (2006). CrossRefGoogle Scholar
  29. 29.
    El-Sayed, M., Afia, N., El-Kharbotly, A.: A stochastic model for forward-reverse logistics network design under risk. Comput. Ind. Eng. 58, 423–431 (2010). CrossRefGoogle Scholar
  30. 30.
    Tang, C., Wang, T.: Price competition and coordination of dual-channel supply chains. Int. J. Netw. Virtual Organ. 13, 297 (2013). CrossRefGoogle Scholar
  31. 31.
    Xu, G., Dan, B., Zhang, X., Liu, C.: Coordinating a dual-channel supply chain with risk-averse under a two-way revenue sharing contract. Int. J. Prod. Econ. 147, 171–179 (2014). CrossRefGoogle Scholar
  32. 32.
    Shi, K., Ma, H.: Evolution of trust in a dual-channel supply chain considering reciprocal altruistic behavior. Adv. Complex Syst. 19, 1650014 (2016). CrossRefGoogle Scholar
  33. 33.
    Xue, R., Zhang, F., Tian, F.: A system dynamics model to evaluate effects of retailer-led recycling based on dual chains competition: a case of e-waste in China. Sustainablity (2018). CrossRefGoogle Scholar
  34. 34.
    Dan, B., Liu, C., Xu, G., Zhang, X.: Pareto improvement strategy for service-based free-riding in a dual-channel supply chain. Asia Pac. J. Oper. Res. 31, 1450050 (2014). CrossRefGoogle Scholar
  35. 35.
    Zhang, Z., Luo, X., Kwong, C.K., Tang, J., Yu, Y.: Return and refund policy for product and core service bundling in the dual-channel supply chain. Int. Trans. Oper. Res. 26, 223–247 (2019). CrossRefGoogle Scholar
  36. 36.
    Karimabadi, K., Naderi, B.: Optimal pricing and remanufacturing decisions for a fuzzy dual-channel supply chain. Int. J. Syst. Sci. Oper. Logist. (2019). CrossRefGoogle Scholar
  37. 37.
    ​Xin, C., Zhou, Y., Zhu, X., Li, L., Chen, X.: Optimal decisions for carbon emission reduction through technological innovation in a hybrid-channel supply chain with consumers’ channel preferences. Discrete. Dyn. Nat. Soc. (2019). CrossRefGoogle Scholar
  38. 38.
    Hong, X., Wang, Z., Wang, D., Zhang, H.: Decision models of closed-loop supply chain with remanufacturing under hybrid dual-channel collection. Int. J. Adv. Manuf. Technol. 68, 1851–1865 (2013). CrossRefGoogle Scholar
  39. 39.
    Saha, S., Sarmah, S.P., Moon, I.: Dual channel closed-loop supply chain coordination with a reward-driven remanufacturing policy. Int. J. Prod. Res. 54, 1503–1517 (2016). CrossRefGoogle Scholar
  40. 40.
    Giri, B.C., Chakraborty, A., Maiti, T.: Pricing and return product collection decisions in a closed-loop supply chain with dual-channel in both forward and reverse logistics. J. Manuf. Syst. 42, 104–123 (2017). CrossRefGoogle Scholar
  41. 41.
    Dan, B., Xu, G., Liu, C.: Pricing policies in a dual-channel supply chain with retail services. Int. J. Prod. Econ. 139, 312–320 (2012). CrossRefGoogle Scholar
  42. 42.
    Xie, J.P., Liang, L., Liu, L.H., Ieromonachou, P.: Coordination contracts of dual-channel with cooperation advertising in closed-loop supply chains. Int. J. Prod. Econ. 183, 528–538 (2017). CrossRefGoogle Scholar
  43. 43.
    Ma, J., Ma, A.: Pricing strategy in a dual-channel supply chain with return policy. Adv. J. Food Sci. Technol. 5, 1490–1496 (2013)CrossRefGoogle Scholar
  44. 44.
    Pu, X., Gong, L., Han, X.: Consumer free riding: coordinating sales effort in a dual-channel supply chain. Electron. Commer. Res. Appl. 22, 1–12 (2017). CrossRefGoogle Scholar
  45. 45.
    Zhang, S., Zhao, X.: Fuzzy robust control for an uncertain switched dual-channel closed-loop supply chain model. IEEE Trans. Fuzzy Syst. 23, 485–500 (2015). CrossRefGoogle Scholar
  46. 46.
    Huang, M., Song, M., Lee, L.H., Ching, W.K.: Analysis for strategy of closed-loop supply chain with dual recycling channel. Int. J. Prod. Econ. 144, 510–520 (2013). CrossRefGoogle Scholar

Copyright information

© Operational Research Society of India 2019

Authors and Affiliations

  1. 1.Department of Mechanical EngineeringSardar Vallabhbhai National Institute of TechnologySuratIndia
  2. 2.Department of Management StudiesIndian Institute of Technology DelhiNew DelhiIndia

Personalised recommendations