Analyzing a socially responsible closed-loop distribution channel with recycling facility

Research Article Analyzing a socially responsible closed‑loop distribution channel with recycling facility Nikunja Mohan Modak1 · Sudipta Sinha2 · Shibaji Panda3 · Nima Kazemi4 © Springer Nature Switzerland AG 2019 Abstract This paper deals with a closed-loop distribution channel consisting of a socially responsible manufacturer, multiple retailers and a third party collector. In reality, collection of used products (plastic, glass, metal) by a third party collector is more common than the collection through retailers. This is because retailers generally faces difficulties such as lack of space and manpower. Aligned with many closed loop supply chains, this paper assumes that the third party operates the reverse channel by collecting the used products. The third party collects used products, segregates recyclable items and sends them to the manufacturer for further use. The manufacturer not only shows social responsibility to the stakeholders and shareholders, but also collects the used products from the third party and recycles them to new products. Considering profit maximizing motives of the channel members, the paper examines the effect of manufacturer’s degree of social responsibility on the collection activity of the third party. Under manufacturer Stackelberg game setting, it is found that product recycling is directly proportional to the manufacturer’s corporate social responsibility (CSR) concerns and there must be a threshold of recycling for the optimal benefit that can be acquired through CSR practice. The proposed model is illustrated by a numerical example and a sensitivity analysis reveals nature of the parameters. Keywords Closed-loop supply chain · Recycling · Corporate social responsibility · Game theory · Supply chain coordination 1 Introduction In the modern corporate world, the concept of traditional business has undergone multiple changes. Production houses have to take greater responsibility in addition to making profit, and need to shoulder more responsibility for the welfare of the society. For instance, many companies are nowadays running hospitals for people, or extending their hands in community learning programs by establishing educational institutes. Some other companies are conducting projects to uplift socially and economically backward classes people. To do so, companies tend to share their profit with the members of supply chain and the society, which, in turn, makes them a responsible entity in a society. Companies are also bearing responsibilities in making the society we live in, healthier where the so-called term ‘corporate Social Responsibility (CSR)’ is used to entitle this set of activities. On the other hand, the matter of scarce resources on the earth pushes companies to sustain some resources for the next generation. As for example, Tata Motors , the largest Indian automotive manufacturer, is trying to actively take part in CSR programs providing support for the enhancement of schedule caste and schedule tribe communities by Tata Affirmative Action Program (TAAP). Furthermore, Infosys supports non * Nikunja Mohan Modak, ; Sudipta Sinha, ; Shibaji Panda, ; Nima Kazemi, | 1Palpara Vidyamandir, Chakdaha, West Bengal 741222, India. 2 Department of Mathematics, Burdwan Raj College, University of Burdwan, Bardhaman, West Bengal 713104, India. 3 Department of Mathematics, Bengal Institute of Technology, 1. No. Govt. Colony, Kolkata 700150, India. 4Center for Transportation and Logistics, Massachusetts Institute of Technology, Cambridge, MA 02142, USA. SN Applied Sciences (2019) 1:1189 | https://doi.org/10.1007/s42452-019-1173-1 Received: 23 July 2019 / Accepted: 27 August 2019 / Published online: 10 September 2019 Vol.:(0123456789) Research Article SN Applied Sciences (2019) 1:1189 | https://doi.org/10.1007/s42452-019-1173-1 profitable organizations to eradicate hunger, poverty and malnutrition. Closed Loop Supply Chain (CLSC), a more environmental friendly type of supply chain, has gained increasing attention with the growing concern of protecting environment and preserving natural resources. In fact, the importance of CLSC has been intensified by the pressure from environmental activist groups and regulations set up by authorities. CLSC includes all forward logistics flows (such as procurement of new raw materials, production and distribution) along with the reverse logistics (collection of used products and reuse). Recycling is a key element of CLSC aims at turning the activities of a forward supply more sustainable, which indeed helps in maintaining ecological balance through eco-friendly activities. Recycling is defined as the set of activities for breaking down or reusing the consumed products (such as papers, glasses, plastics, metals, batteries etc) that would otherwise be disposed of as waste. However, collecting the used products for the purpose of recycling from the waste has always been a challenging activity in the reverse supply chain. It is evident that customers cannot return the used product due to the non-availability of the collection centers and the lack of awareness of the evil effect of their disposal. They rather distort or waste the used items. So, establishment of awareness campaigns among the end users is of crucial importance and the corporate houses as well as retailers have to come forward to make consumers aware of the eco-friendly effect of recycling. Therefore, introduction/consideration of collectors of recyclable items in supply chains is very essential. Doing so not only benefits the environment, but also helps companies to become more socially responsible as increasing the number of collection centers can proportionally enhance the number of employments. In the present paper, we develop a two-echelon CLSC comprising of a manufacturer, multiple retailers and a third party collector. The third party collects the used items from the customers and separates recyclable items through screening. He then makes an arrangement to deliver the recyclable items to the manufacturer for further use. The process of recycling thus lessens the crisis of natural resources and maintains sustainability, which is the crying need of the hour for our successors. The paper uses the concept of the Vicker’s [40] classic principle stating that non-profit maximizing motives may earn higher profits than the pure profit-maximizers. Here the objectives of the manufacturer is to engage in socially responsible activities and to explore its effects on recycling and profit making. To analyze different aspects of the manufacturer’s contribution in socially responsible activities, we discuss the individual profit of the channel members separately in the decentralized channel as well as the joint Vol:.(1234567890) profit in the centralized channel. Channel members in the present model are contributing not only in CSR activities but also in making an eco-friendly environment, and thus information sharing among them will be (...truncated)