Type of Publication: Article in Journal
On the Influence of Collection Cost on Reverse Channel Configuration
- Gönsch, J.; Dörmann, N.
- Title of Journal:
- Journal of Business Economics
- Volume (Publication Date):
- 91 (2021)
- Closed-loop supply chain; Reverse logistics Remanufacturing Channel choice
- Digital Object Identifier (DOI):
- On the Influence of Collection Cost on Reverse Channel Configuration (1.22 MB)
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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.