Sustainable supply chain design: A closed-loop formulation and sensitivity analysis

We introduce the uncapacitated closed-loop location inventory model, which captures the interdependency between location inventory decisions in the forward and reverse supply chains. We consider a supply chain network in which a single plant ships one type of product through distribution centres to a set of retailers, each with uncertain demand. On the other end, retailers are given the responsibility of collecting and sorting the returned products. Remanufacturing centres serve as the intermediary between recovery of the products and their re-entry to the market as spare parts. A sensitivity analysis for different parameters of the model reveals that the value of recovered products is a major factor in the economic feasibility of the closed-loop network. Finally, we present a flexible framework for policymakers, using carbon credit allocations and trading, to enhance the economic feasibility of reverse logistics, while at the same time penalising companies that do not recover their products.