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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasetheirinvolvementinactivitieso
2、vertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerial?owinasupplychain:Products,informationandfunds?owfromtheforwardsupplychaintothecustomerandback.Werefertosuch
3、asupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisno?owbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproducts?owingbackintotheoriginalsupplyprocess,informationaboutquality,quantityandthetimingofreturnsandf
4、undsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithina?rmorindi?erent?rmsareinvolvedindecisionsconcerningthee?ciencyandthepro?tabilityofthesupplyprocess.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendeci
5、sionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowingexample:Inadecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpactthepro?ts,whichaccruetothemanufactureran
6、dtotheretailer.Aretailerandamanufacturermighthavedi?erentincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsusedproductsandpaysarebatetothecustomer.Anotherexampleisa?rm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrate
7、gywilldeterminethedemandforbothnewandremanufacturedproducts.However,thesupplyofproductsthatcanberemanufactureddependsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
