Type of Publication: Article in Journal

On the Influence of Collection Cost on Reverse Channel Configuration

Author(s):

Gönsch, J.; Dörmann, N.

Title of Journal:

Journal of Business Economics

Volume (Publication Date):

91 (2021)

pages:

179-213

Keywords:

Closed-loop supply chain; Reverse logistics Remanufacturing Channel choice

Digital Object Identifier (DOI):

doi:10.1007/s11573-020-00995-x

Fulltext:

On the Influence of Collection Cost on Reverse Channel Configuration (1.22 MB)

Link to complete version:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3598850

Citation:

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Abstract

This paper revisits the impact of collection cost on a manufacturer’s optimal reverse channel choice. A manufacturer who remanufactures his own products has the choice between managing collection of used products himself, let the retailer manage collection or involve a third party company to manage collection. In particular, we consider a convex collection cost function depending on the collection rate. Contrary to previous literature, we show that the manufacturer always prefers retailer-managed collection, independent of collection cost. The retailer will always choose a positive collection rate. If collection cost is above a certain threshold, not all used products will be collected and the manufacturer (almost) collects all channel profits. Third party-managed collection is always dominated. In extensions, we also consider a restriction to equilibria and a minimum collection rate, which may be imposed by regulation. Both extensions may change the reverse channel choice to manufacturer-managed. Moreover, we see that it may be impossible for regulation to increase collection because the profit-maximizing collection rate may already be the highest economically viable one.