Closed-loop supply chains: How do production capacity and production control policies impact the performance?

Abstract

The paper addresses the impact of manufacturing and remanufacturing capacity in a multi-product closed-loop supply chain. In the problem under investigation, the manufacturing system of the factory node is characterized by a failure-prone production line that is not able to manufacture both types of product simultaneously. Therefore, changeover operations are needed to switch from one product type to another. Since failure events and changeover times may involve unforeseen problems, the production control policy of the factory assumes a key role to enhance both the internal and external performance of the closed-loop supply chain. For that reason, this research compares four production control policies in terms of bullwhip effect, fill rate, and average inventory levels. We consider the well-established Hedging Corridor Policy and Improved Modified Hedging Corridor Policy, and two different versions, named Closed-Loop Hedging Corridor Policy and Closed-Loop Improved Modified Hedging Corridor Policy, which adapt the original policies to the features of the closed-loop supply chain. Through an extensive experimental analysis, the results can guide managers in assessing the effects of multi-product manufacturing and remanufacturing operations on the performance of closed-loop supply chains and in comparing the effectiveness of the production control policies.