Integrating reverse logistics into the strategic planning of a supply chain

Abstract

This paper proposes a mixed-integer programming (MIP) model for the strategic production and distribution planning of a supply chain (SC) integrating reverse logistics system. Such reverse logistics planning addresses the collection, recovery and marketing of recovered products, in addition to returned components and packing/wrapping materials. The model includes an approach that uses retail outlets as a two-way channel for marketing new products, collecting used/returned products and remarketing recovered products as a way of promoting an effective product recovery system in SC operation and optimising costs. The recovery of products/components is planned through a pool of recovery service providers (RSPs), so that maximum recovery can be ensured through combining the expertise of RSPs within optimum costs. The model follows a two-step process that addresses strategic decisions about product recovery in the first step, and the integration of the recovery process into overall SC decisions in the final step. A numerical example illustrates the applicability of the model. A sensitivity analysis has been conducted to show the effects that changes in the recovered product quantity have on the overall SC performance.