Coordination of dual function acquisition price and corporate social responsibility in a sustainable closed loop supply chain
Abstract In reverse supply chains, acquisition price strategy provided by manufacturers plays an essential role in collecting used products. On the other hand, owing to the fact that the acquisition price contributes to the improvement of the environmental sustainability, it can influence the purchasing behaviors of eco friendly customers. Thus, acquisition price strategy not only can positively affect the amount of returned products but also can positively affect the market demand. This study integrates bilateral effects of the acquisition price to analyze the performance of a sustainable closed loop supply chain (CLSC) by introducing a dual function acquisition price. This paper also contributes to the sustainable CLSC literature by proposing an analytical coordination mechanism to coordinate the dual function acquisition price as an environmental sustainability and corporate social responsibility (CSR) as a social sustainability. Motivated by a real case of dairy industry, the bilateral effects of the acquisition price on both reverse and forward channels are considered through its dual functionality. In the sustainable CLSC consisting of two competitive manufacturers and one retailer, the manufacturers compete with each other on the dual function acquisition price offered to the customers. Moreover, to facilitate the collection process, the manufacturers encourage the retailer to do the collection process by offering him a credit time scheme. Besides the collection process, the retailer invests in the CSR as social sustainability to boost the market share. At first, we use a manufacturer Stackelberg game to model the problem under decentralized structure where each member individually optimizes its own profitability. Afterward, the problem is formulated under centralized structure where the decision variables are determined from CLSC viewpoint. Then, a compensation based wholesale price contract is developed to coordinate the competitive CLSC under coordinated model. Using the data of the case study, the results demonstrate that the proposed contract enhances the whole CLSC and all members' profitability, the manufacturers' dual function acquisition price, and the retailer's CSR investment. Therefore, the developed contract can improve the performance of the competitive CLSC from environmental, social, and economic viewpoints.