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1、CoordinationinClosed-LoopSupplyChainsLaurensDebo,CarnegieMellonUniversityCananSavaskan,NorthwesternUniversityLukN.VanWassenhove,INSEADDecember20021IntroductionMotivatedbyeithercostreductionthroughreuseorbyvalueenhancementforthecustomer,manysupplychainsincreasethei
2、rinvolvementinactivitiesovertheextendedproductlifecycle,likeproducttake-back,remanufacturing,returnallowance,repairordisposal(CorbettandSavaskan,2002).Increasedinvolvement‘closes’toacertaindegreethematerial?owinasupplychain:Products,informationandfunds?owfromthefo
3、rwardsupplychaintothecustomerandback.Werefertosuchasupplychainasa‘closed-loopsupplychain,’opposedtoan‘open-loopsupplychain,’inwhichthereisno?owbackfromthecustomer.Reverselogisticsisthegroupofactivitiesthatarerequiredtomanagethestreamofproducts?owingbackintotheorig
4、inalsupplyprocess,informationaboutquality,quantityandthetimingofreturnsandfundsintheformofrebates.Inanytypeofsupplyprocess,closed-looporopen-loop,multipledecisionmakerswithina?rmorindi?erent?rmsareinvolvedindecisionsconcerningthee?ciencyandthepro?tabilityofthesupp
5、lyprocess.Thedecisionmakers’decisionsinteractanddeterminethetotalsystemperformance.However,oftendecisionmakerspursuetheirownlocalobjectivesonly.Theclosureofthesupplychainexaggeratesthedependencybetweenthedecisionmakers’objectivesatasecondlevel.Considerthefollowing
6、example:Inadecentralizedsupplychain,boththewholesaleandtheretailpriceofaproductimpactthepro?ts,whichaccruetothemanufacturerandtotheretailer.Aretailerandamanufacturermighthavedi?erentincentivestosettheretailandthewholesalepricesrespectively,dependingonwhocollectsus
7、edproductsandpaysarebatetothecustomer.Anotherexampleisa?rm’smarketingdepartmentdeterminingthepricingstrategyofanewandaremanufacturedproduct.Thisstrategywilldeterminethedemandforbothnewandremanufacturedproducts.However,thesupplyofproductsthatcanberemanufactureddepe
8、ndsonthedurabilityofthenewproduct,whichisdeterminedbytheproductdesigndepartment,seekingfortheminimalcostdesign.Inbothexamples,itisobviousthatinadecentra
