Analyzing a socially responsible closed-loop distribution channel with recycling facility

Abstract

Abstract This paper deals with a closed-loop distribution channel consisting of a socially responsible manufacturer, multiple retailers and a third party collector. In reality, collection of used products (plastic, glass, metal) by a third party collector is more common than the collection through retailers. This is because retailers generally faces difficulties such as lack of space and manpower. Aligned with many closed loop supply chains, this paper assumes that the third party operates the reverse channel by collecting the used products. The third party collects used products, segregates recyclable items and sends them to the manufacturer for further use. The manufacturer not only shows social responsibility to the stakeholders and shareholders, but also collects the used products from the third party and recycles them to new products. Considering profit maximizing motives of the channel members, the paper examines the effect of manufacturer’s degree of social responsibility on the collection activity of the third party. Under manufacturer Stackelberg game setting, it is found that product recycling is directly proportional to the manufacturer’s corporate social responsibility (CSR) concerns and there must be a threshold of recycling for the optimal benefit that can be acquired through CSR practice. The proposed model is illustrated by a numerical example and a sensitivity analysis reveals nature of the parameters.