To face the reality of resources exhaustion, the significance of recycling and remanufacturing in the closed-loop chain has become quite evident. This paper constructs a competitive recycling and remanufacturing model of the closed-loop supply chain through a case study of Midea Corp. and Gree Corp. and explores the impact of two recycling modes on total revenue of the supply chain and market share. The simulation results show that the total revenue of the supply chain will benefit from the increasing coverage points by the third party and the increasing environmental awareness of certain regions. The retailers show more enthusiasm of recycling through certain amendment of the contract between manufacturers and retailers. The time of payment could be shortened in closed loop. Moreover, the improvement of recycling mechanism of the retailers can enlarge the share of supply chain market. Guiding role of the proposed model and the simulation results played in establishing a better supply chain mode is presented.
The research field of forward supply chain logistics has been widely established that concerns the economic benefits growth, the improvement of the service network, and reduction of the logistics cost. Resource recycling, environmental protection, and sustainable development have not been fully concerned. With the rapid development of modern commercial society, people consume huge amounts of natural resources, which results in waste and the eco-environmental deterioration.
Some work is still needed to develop and optimize the traditional supply chain models. Now the research on the traditional forward supply chain model is substituted by that on the whole logistics process including the product recycling, product reusing, product reprocessing, and other activities. The whole logistics process evolves into a circular structure, which is named as closed-loop supply chain. E-waste, commonly known as electronic trash, refers to the discarded electric appliance or electronic equipment, which includes all kinds of old computers, communication equipment, TV sets, washing machines, refrigerators, and some electronic instruments and meters that are out of use. In 2014, the total of global electronic waste amounted to 41.8 million tons, and it was growing at a rate of 2 million tons per year. There were 6.033 million tons of electronic waste produced in China in 2014 and 6.5 million tons in 2015, ranking the second in the world behind the United States. China has already entered a peak of electronic scrap, with an average annual growth of 20%. E-waste recycling and utilization should be developed in a sustainable way. Establishment of an effective system of electronic recycling is beneficial to the environment and general health of people. An effective system of electronic recycling is an indispensable part of development of circular economy and is the key to solving the energy problem.
At present, the main researches on the closed-loop supply chain at home and abroad are as follows. Savaskan et al. [
In the field of recycling mode, Sun et al. [
In the research on supply chain optimization, Majumder and Groenevelt [
In the research on recycling strategy, Golroudbary and Zahraee [
In the above research, Savaskan represented comprehensive studies on the closed-loop supply chain model’s recycling channel selection, recycling modes, and recovery strategies. Some work is still needed to develop and optimize the across-chain competition about remanufacturing and recycling of closed-loop supply chain. The research scope is limited to the game relationship between the same-layer joints. Miao et al. [
Gree Corp. is the largest air-conditioning enterprise which includes products’ developing manufacturing, marketing, and maintaining air-conditioners all over the world. Gree has ranked first in production and marketing and market share for consecutive 12 years since 1995. The accumulative tax since 1991 is 4.25 billion RMB. The sales revenue in 2006 reached 23.803 billion RMB. The sales volume of the domestic air-conditioners reached 13 million RMB, ranking the first in the world for two years in a row. Midea Corp. was established in 1968 as a modern enterprise focusing on household appliances and logistics. It is one of the biggest environmentally friendly manufacturers which produce air-conditioners, refrigerators, and kitchen aids and other kinds of small house appliance. Midea Corp. was the only nominated household appliance enterprise in the most valuable 500 brand ranking lists published by “Brand Finance”: international authoritative British brand consultant institution. The competition between Gree Corp. and Midea Corp. is constant. Gree Corp. used to consistently specialize in air-condition manufacturing while Midea Corp. continued to seek product diversification. Under the guidance of “low-Carbon, Ecolife” policy published by Chinese government, Gree Corp. and Midea Corp. and other corporations start new programs to recycle and remanufacture their own household appliances in different recycling modes and tactics. This paper constructs a mode in which Gree Corp. and Midea Corp. are competing with each other. In addition, the impact of recycling modes and recycling strategies on enterprises competitiveness is analyzed by comparing two recycling modes applied by the two enterprises.
Midea Corp. and Gree Corp. are competing in the same market. In this model, Midea Corp. is operated as supply chain 1. Supply chain 1 works as follows: the division of labor and cooperation among manufacturers, retailers, and third party. The duties of manufacturers and retailers and third-party enterprise are the production and the sale of electronic products and the recycling and sorting of waste electronic products, respectively. Gree Corp. is operated as supply chain 2. Supply chain 2 is running through the cooperation of the manufacturers and retailers. The duty of manufacturers is producing electronics, while the duty of retailers includes selling the products and recycling and sorting the waste electronic products (Figure
Recycling competition structure model.
The recycling mode of supply chain 1 is third-party enterprises leading. After the retailers sell the products to the market, recycling and disposing will be conducted by the third-party enterprises. Normally, the E-waste is treated by the third-party enterprises in two ways. Some E-waste is returned to the manufacturer and disassembled into components which would be remanufactured; the rest of the products are sold as second-hand goods. In this mode, the manufacturers, the retailers, and the third-party enterprises are responsible for the production, sales, and recycling, separately. This mode can promote the specialization in the close-loop supply chain running to the greatest extent and formation of scale effect. At the same time, it is worth noting that the third-party enterprises take many approaches to recycle the E-waste, such as street vendors, settled recycling site, and indirectly recycling through repair sites. There are many factors that can influence the productivity of the independent E-waste recycling of the third-party enterprises, such as recycling point coverage rate and environmental protection consciousness of consumers. The recycling inventory can be adjusted according to the trading volume of the E-waste in the local market. After simple treatment of the recycled E-waste, the third-party enterprise can optimize and distribute the E-waste to maximize the interests of the whole supply chain.
The recycling mode of supply chain 2 is retailers leading. After the retailers sell the products to the market, recycling of E-waste will be conducted by themselves and they will return the E-waste to the manufacturer directly. There are two ways of dealing with the E-waste: the portion that can be remanufactured will be returned to the manufacturer and the portion that cannot be used will be disposed. In this mode, the manufacturer reaches an agreement with retailers. As the main body of the recycling model, retailers play a role of connecting manufacturers and market. They take charge of product sales and recycling, while the manufacturers only need to have charge of product manufacturing and remanufacturing and giving the retailer a certain economic compensation in recycling.
The recycling mode dominated by retailers is commonly used in the electronics industry, even in the household papers industry. The main advantage of this model lies in the market demand information collection and response of the supply chain. Retailers are the closest part to the customers in the supply chain, and only they can obtain the information of the market demand directly. If the retailers are considered as the recycling core of the supply chain, the process and response to the demand information in the supply chain will be faster. Since retailers grasp the real-time demand information, their decisions on the various supply chain management are more rational. There is a trend that the consumer’s position will be more and more important. In this case, the recycling model dominated by retailer will gain greater development.
Li et al. [
System dynamics is a discipline of close integration of scientific theory and computer simulation, comprising feedback structure of research system and behavior. The method is the combination of qualitative and quantitative research and the method of system comprehensive inference. Its modeling process is a combination of learning, investigation, and research.
A causal loop diagram is used to reflect the correlation between elements and the feedback process of the system. In this analysis, the author considers the influential factors of each node in the closed-loop supply chain and establishes a causal loop diagram in Figure Resales Rate 1↑ → Market Share 1↑ → Service Factor 1↑ → Market Demands 2↓ → Sales Rate 2↓ → Market Share 2↓ → Service Factor 2↓ → Market Demands 1↑ → E-waste Recycling Rate 1↑ → Resales Rate 1↑
Casual loop diagram of across-chain competition.
(R1) is a causal loop of across-chain. Compared with the recycling mode dominated by the retailers, the recycling mode dominated by the third party has more choices to dispose the reusable products in the case of equal market share of both supply chains. In this mode, resale activities can expand Market Share 1, so as to improve Market Demands 1. Market Demands 1↑ → Total Revenue 1↑ → Quality Factor 1↑ → Market Demands 2↓ → Sales Rate 2↓ → Total Revenue 2↓ → Quality Factor 2↓ → Market Demands 1↑
(R2) is a causal loop of across-chain. Since the Total Market Demands is fixed, the increasing of Market Demands 1 of the recycling mode dominated by third-party enterprise can promote Total Revenue 1 and Quality Factor 1, while this will affect the Sales Rate 2 of electronic products in the recycling mode dominated by retailers and therefore reduce its market competitiveness. Production Rate 1↑ → E-waste Recycling Rate 1↑ → Resales Rate 1↑ → Market Share 1↑ → Production Rate 1↑
(R3) is an internal causal loop of the recycling mode dominated by third-party enterprise. Increasing Production Rate 1 to promote the efficiency of production and sales of electronic products makes the amount of waste electronic products increased in the market. The recycling rate will be improved correspondingly by recyclers and therefore promote the Resales Rate 1 of waste electronic products and improve the Market Share 1.
Then we establish the system dynamics model based on supply chain competition, in which recycling and remanufacturing of two corporations are taken as example. The two different kinds of recycling dominant models are illustrated and compared in Figure
Across-chain competition system dynamics model.
Since the third party is introduced to dominate the recycling in the supply chain 1, the smoothness of the closed-loop supply chain depends to a great extent of the third party’s recycling ability. Figure
The third-party recycling mechanism flow diagram.
For the supply chain 2, because of recycling costs in the recycling dominated by retailers, manufacturers need to develop appropriate incentive strategy and establish a contract to motivate retailers in recycling efforts. The contract structure flow diagram is shown in Figure While While While While
Contract structure flow diagram.
In this contract, the
Assuming that the demand of household appliance complied with the normal distribution in the E-waste recycling system supply chain, the
Some constants are set as follows (Table
Constants set.
Parameter | value |
---|---|
|
2 |
|
2 |
|
10 |
|
0.2 |
|
12 |
|
12 |
|
0.2 |
|
6.5 |
|
0.5 |
|
0.3 |
|
1 |
|
0.36 |
|
1 |
|
2 |
|
1 |
|
12 |
|
48 |
|
12 |
|
1.2 |
|
0.3 |
|
0.64 |
|
48 |
|
5 |
|
10 |
|
1.2 |
|
10 |
The simulation time length: initial time = 0 weeks, final time = 100 weeks, and time step = 1 week; the simulation cycle is 100 weeks, a week for a step.
The main function relational expression:
Under recycling model dominated by the third party, considering the influence of
Considering there will be a certain delay from electronic products to E-waste in the market, we use SMOOTH (
Considering the third-party recycling for E-waste is limited by the
One part of E-waste can be resold and another needs to be returned for remanufacturing in
The two different recycling modes of the supply chains lead to different reverse logistics paths. Thus the
In order to improve the
Since its interest is hurt, supply chain 2 decides to make adjustments on the recycling strategy. In supply chain 2 retailers dominate the recycling. We can improve
As can be seen from Figure
Two supply chains’ market demand is determined by the quality and service. The functional relationship between
The competitions of traditional supply chains are out of date with the maturity and development of manufacturing industry. The new competing mode of recycling and remanufacturing arises. To study the structures of the two recycling modes, this paper constructs the recycling and remanufacturing model in which Gree Corp. supply chain and Midea Corp. supply chain compete. The effects of two modes on the total revenue of the supply chains and market share are simulated by the method of system dynamics. Unprecedentedly, this paper simulates a condition that two three-step closed-loop supply chains compete for the same market. The third-party recycling supply chain and retailer recycling supply chain construct two closed loops, respectively. The optimal strategies of these two supply chains are proposed after adjusting the system parameters, respectively. This paper provides a theoretical guidance for the choosing of supply chain recycling mode. The conclusion involves fours aspects: More recycle point coverage will boost the total profit of the supply chain within the scope of the third-party manufacturing ability. The publicity of low-carbon lifestyle raises the regional consumers’ awareness at the expense of increasing cost. The retailer’s initiative to recycle could be encouraged to renew the contract between manufacturers and retailers. The speed of the product circulating on the manufacturer-retailer market closed loop is hastened and the delay time of the payment is shortened at the cost of manufacturer’s giving up some profits. A better recycling mechanism of the retailers will lead to more market share of the supply chain.
The model provided here is based on conditional hypothesis. The follow-up study should involve robustness and universality and extend the two-recycling-mode competition to several-recycling-mode competition.
The authors declare that they have no conflicts of interest.
This work was supported by the Hei Long Jiang Postdoctoral Foundation (no. LBH-Z5100) and the Foundation of Heilongjiang Educational Committee (no. 12541108). The authors thank all project partners for their valuable contributions and feedback.