The analsis of bullwhip effect om a multi-echelon closed-loop supply chain with orbit size-dependent return flows

Abstract

Companies that embrace product recovery as a beneficial business option are more competitive, better compliant with government regulations, optimizing their op erational processes, and efficiently balancing their return flows. However, uncertainty in timing, quantity, and quality of returns leads to various difficulties particularly in multi-echelon closed-loop supply chains. In this study, a multi-echelon hybrid pro duction system with return flows where a single type of product demand is met by manufacturing new products and remanufacturing returned cores is analyzed under the periodic review (r, S). The efficient use of inventory replenishment systems in hy brid supply chains is particularly important as the variance of such systems is higher than traditional supply chains due to a higher level of uncertainty. Orders placed up stream have the potential of increasing order variability or namely, the bullwhip effect. In hybrid systems, the main goal is to bring the products in use (i.e., orbit) back to the system through collection channels. Accurate prediction of returns is key as incorrect estimation leads to a gradual increase in variance. Unlike most existing literature, we assume that demands and returns are correlated and define the return rate as a func tion of the number of products in use viz. orbit size, the expected lifetime of a product in orbit, and the probability of return to the reverse supply chain at the end of use. Then, we propose a new method to foresee the returns under the orbit size knowledge and examine the bullwhip behaviour under environmental factors (e.g., review periods, return probabilities, and average product lifetime). Thus, we evaluate the value of orbit size information under stationary and impulse demand.