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Abstract— Recently years, it is becoming important to build a
"Closed Loop Supply Chain (CLSC)" that collects used
products and reuses them. A CLSC is a way of recovering used
products from the market and reusing parts to reduce
production costs and improve the profit of the entire supply
chain. Also, the Product Life Cycle has been shortened due to
diversification of products and demand management becomes
necessary to make total sales profit.
Therefore, I thought two stage demand management with
recycle parts in CLSC for Extending product life cycle is
promising way. In fact, it is difficult to control the second
demand amount for profit and the collection rate to satisfy it, so
this research on addressing these problems is effective. Further,
I formulate the method for the production planning with two
stage demand management by Mixed Integer Programing
optimization model. And maximize SCM total profit by
controlling recovery rate and second demand start time.
Index Terms— Closed Loop Supply Chain (CLSC), Demand
Management, Product Life Cycle, Reverse Logistics.
I. INTRODUCTION
N recent years, the demand for resources has increased.
Also "Environmental protection" and “Resource saving”
are becoming important. Therefore, there is a need to
establish a Closed Loop Supply Chain (CLSC) that expands
profits by reusing recycled parts obtained from it (Fig1).
Also, the Product Life Cycle has been shortened due to
diversification of products and demand management
becomes necessary to make total sales profit. Therefore, I
thought two stage demand management with recycle parts in
CLSC for Extending product life cycle is promising way
(Fig2). In fact, there are few studies on CLSC, there is also no
research combined with demand management in previous
research. In addition, it is difficult to control the second
demand amount for profit and the collection rate to satisfy it,
so this research on addressing these problems is effective. ManufacturerNew Parts Supplier
Market
Reused Parts Supplier
Demand
Disposal
Collection
Order
Order
Received order
Received order
Fig1. Closed Loop Supply Chain
Ryuhei Kajiyama, Graduate School of Information, Production and
Systems Waseda University, Japan (e-mail : [email protected])
Tomohiro Murata, Professor Graduate School of Information, Production
and Systems Waseda University, Japan (e-mail : [email protected])
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Demand1 amount(Normal) Demand2 amount(Lower)
Demand
Management
Extending PLC
Stage1
Stage2
(Demand)
(Month) Fig2. Image of two stage demand management
II. RESEARCH GOAL
In this research, proposing a novel production planning
method for two stage demand management with recycle parts
in CLSC model to maximize total sales profit.
In addition, considering the “collection rate” of the
recovery product from the initial demand and the “sale start
time” of the second demand in the CLSC model, the objective
is to find a combination for max profit of the entire supply
chain due to each fluctuation.
Also, formulating the model for the production planning
with two stage demand management by Integer Programing
optimization model and evaluating the proposed model with
case study to find feasible condition to increase max profit.
Through four experiments, I examined the effectiveness of
the model proposed in this research.
III. SURVEY OF RELATED RESEARCH AND DRAWBACKS
Summarized the previous research on the Closed Loop
Supply Chain as follows. Kaya studied incentives and
product reproduction. Samar studied the reproduction model
considering the quality of recycled parts. Watanabe [1]
collected used products by paying incentives and decided the
optimal order amount according to the quality level of the
collected products. Kainuma [2] is doing a lot of research on
the recycling type supply chain, and He studied the
effectiveness of VMI under the closed supply chain. Kaya [3]
studied incentives and product reproduction. Samar [4]
studied the reproduction model considering the quality of
recycled parts.
However, there were no studies reusing parts recovered by
CLSC for two stage demand.
PROBLEM DESCRIPTION
A. Closed Loop Supply Chain model
The CLSC model proposed in this research is as shown
in the figure (Fig3). The CLSC model consists of one
Production Planning for Closed Loop Supply
Chain with Recycle Parts and Product Life Cycle
Ryuhei Kajiyama and Tomohiro Murata.
I
Proceedings of the International MultiConference of Engineers and Computer Scientists 2019 IMECS 2019, March 13-15, 2019, Hong Kong
ISBN: 978-988-14048-5-5 ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)
IMECS 2019
manufacturer, one new parts supplier, and one recycled
parts supplier. Manufacturers produce two products,
“Normal Priced Product” and “Lower Price Product”.
First of all, “Normal Priced Product” is distributed to the
market. Later, these products are recycled by recycled parts
supplier from the market by collection rate “c”. Recycled
parts supplier disassembles and inspect the collected
products. Recycled parts are reused as “Lower Priced
Product”. Also, when demand can’t be satisfied by recycled
parts, it is procured new parts and manufacture products.
demand
Collection of Recycled Products
New
PartsDisposal
ManufacturerNew Parts Supplier
Recycled Parts Supplier Demand2
Normal priced
products
Lower priced
products
Demand1
Disposal
Inspection
Optimal
Ordering plan
customer
Recycled
PartsRecycle
(Rate : c)
Fig3. Closed Loop Supply Chain model
B. Initial Demand Model (Bass Model)
Initial demand is expressed by using “Bass model”. The
result is as shown in the figure below (Fig4).
The Bass model is a demand forecasting model formulated
by adding customer's purchasing behavior to the logistic
curve. It is a model suitable for simulating the diffusion
process of durable consumer products in particular. The Bass
model is formulated as follows and is composed of
“Maximum cumulative sales amount: m”, “External
influence factor: p”, “Internal influence factor: q”, and
“Time: t”.
2)()(2 )/()(1 tqptqp
t qepeqpmD (1)
C. Collection Amount Model (Bass Model)
The amount of recycle products from the initial demand is
determined by the following formulation. It is formulated by
adding “Collection Start Time: Δ t” and “Collection Rate: C”
to the initial demand model. (Fig4)
)(1
ttt DcCL ⊿ (2)
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Demand1 amount(Normal)
Recycle available amount
Δ t
(Demand)
(Time)
Fig4. Initial Demand and Collection Amount Curve
D. Second Demand Model (Bass Model)
The second demand is determined from the formulation
that when Sales Start Time “s” is delayed, the total demand
amount also decreases by “d” (Fig5). There is the following
trade-off by adding conditions.
When sales start time is early, demand is high, but
inventory of recycled parts is small and manufacturing price
increases. When sales start time is later, demand decrease and
it can’t be got profit.
))(1(})/()({2 2)()(2
, stdqepeqpmD s
tqptqp
st δ
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(Demand)
(Time) Fig5. Second Demand Curve
E. Max Profit Function
The formulation for obtaining the maximum profit is as
follows.
Max Profit = Total sales of Lower priced Products
- (Procurement cost of Recycle parts + Procurement cost of
New parts) - Inventory cost of Recycle parts
IV. FORMULATION OF THE PROBLEM
A. Symbol
I set symbols for max profit function (Table1).
Object Function for Max Profit
I formulated a function that decides “Optimal Sales Start
time” for maximize profit. The expression is as follows. Also,
calculate as below the procurement amount of recycled parts
and inventory amount.
TABLE I
SYMBOL FOR MAX PROFIT FUNCTION
Symbol Quantity
D1 Demand amount of “Normal Priced Products” at time t
D2 m
p
q
d
Demand amount of “Lower Priced Products” at time t
Total demand amount
Prospect of starting to use it under the influence of Ad
It is expected that the products will be affected by people
Demand reduction rate
ILt Inventory amount of “Lower Priced Products” at time t
ILC Inventory cost of “Lower Priced Products”
CRt Amount of available recycle parts at time t
c Collection rate of recycle products
PNt Procurement amount of new parts
PRt Procurement amount of recycle parts
PNC Procurement cost of new parts
PRC Procurement cost of recycle parts
PL Price of “Lower Priced Products”
δs Decision making [0, 1] of sale start time
Proceedings of the International MultiConference of Engineers and Computer Scientists 2019 IMECS 2019, March 13-15, 2019, Hong Kong
ISBN: 978-988-14048-5-5 ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)
IMECS 2019
36
1
36
1
36
1
, )(2
)(
t t
ttt
t
st PRPRCPNPNCILILCDSPL
sPROTFIT
ttttt ILDDDPR }3/)222({ )1()1(
)2()1( ttt PRILIL
V. METHOD TO SOLVE THE PROBLEM
This research is solved by the following method. While
changing the values of “collection rate” and “sales start
time” to the formulated CLSC model, find the combination
that will maximize profit under the given parameters. Also,
simulation is done by coding in R language.
Formulation of Optimization Model
Set Parameter
Collection Rate Optimal sales start time
Analysis of optimal solution for profit
maximization by “GNU R”
Sensitivity Analysis
I decide the “Optimal sales start time” and “Optimal procurement
amount” for maximizes profits and find the most influential factors.
Fig6. Method to solve of my research
VI. EXPERIMENT
In this research, conducting “Four experiments”. The
contents of the experiment are as follows. In addition, each
parameter was set as shown in Table 2. Similar values were
used in all experiments.
A. Experiment1
Finding “Optimal sales start time” and “Procurement plan
and Inventory plan of recycle parts” under the given
conditions. In this experiment, I set the collection rate as
“0.5”. The result is as follows (Fig7).
(8,000,000,000)
(6,000,000,000)
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(2,000,000,000)
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Profit Demand1 amount(Normal) Recycle available amount Demand2 amount(Lower)
(Demand)
(Month)
(Profit)
Demand1
Demand2
Collection Amount
Profit
Fig7. Results under the given condition
Firstly, the reason why the profit became negative was that
the recycled parts were not recovered enough to satisfy the
demand, and because the procurement costs took to satisfy
the demand with new parts, it can be said that this resulted.
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Demand2 amount(Lower) Invwntory amount ProcurementL
(Demand)
(Month)
Procurement
Inventory
Demand2
Fig8. Behavior of Inventory and Procurement Recycle Parts
The above figure shows the behavior of inventory amount
and recovered amount of recycled parts.
When inventory amount increased more than demand, it was
such a result because recycled parts were conditioned not to
procure.
B. Experiment2
In this experiment, finding the combination of the sales
start time “s” and collection rate “c” for max profit. In
experiment 1, I decided the optimal sales start time under
given conditions. In experiment 2, changing the sales start
time and the collection rate of recycled parts and finds the
combination with the maximum profit (Fig9).
0.1
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0.5
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7m
on
th
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nth
start time 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
(Month)
(Collection rate)
(Profit)
Max Profit
Fig9. Combination of the sale start time and collection rate
Overall, when collection rate was small and sale start time
was delayed, max profit decreased. The reason is that when
the total demand amount decreased, the sales start time was
delayed and max profit decreased also.
Similarly, the lower the recovery rate, the lower the overall
profit. It is thought that this is because the collection amount
can’t satisfy the demand amount and it was supplemented
with new parts, so it took procurement cost.
TABLE 2
SET PARAMETERS
Symbol Quantity Value
T Total Life Cycle 36 (Month)
p Innovation effect for Demand1 0.03
q Imitation effect for Demand1 0.5
m
p
q
m
Total amount of Demand1
Innovation effect for Demand1
Imitation effect for Demand1
Total amount of Demand1
5000000
0.06
0.25
5000000
c Collection Rate 0.1 ~ 0.9
PNC Procurement Cost of New Parts 70000
PRC
Procurement Cost of Recycle Parts 40000
ILC Inventory Cost of recycle Parts 10000
SPL Sale Price of Lower Priced Product 100000
.
Proceedings of the International MultiConference of Engineers and Computer Scientists 2019 IMECS 2019, March 13-15, 2019, Hong Kong
ISBN: 978-988-14048-5-5 ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)
IMECS 2019
160000000000
165000000000
170000000000
175000000000
180000000000
185000000000
190000000000
195000000000
200000000000
205000000000
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
8month
(Collection Rate)
(Profit)
Fig10. Relationship Max Profit and Collection Rate
when collection rate is high, inventory cost increased, and
when collection rate is small, because procurement costs of
new parts are required, it is considered that the maximum
profit was obtained at the collection rate of 0.5. At the time of
this combination the maximum profit could be obtained
“54322876667”, which was about 15.7% better than when no
second demand management was done (Fig11).
0
50000000000
100000000000
150000000000
200000000000
250000000000
300000000000
350000000000
400000000000
450000000000
Only initial demand two stage demand management
(Max Profit)
15.7%
Fig11. Profit improvement rate
C. Experiment3
In this experiment, finding second demand boundary for
getting profit by two stage demand management. In
Experiments 1 and 2, the second demand was set to be less
than 50% of the initial demand. By doing this experiment, I
find the required demand for profit. By finding this necessary
demand amount, it becomes a criterion as to whether or not
profit will be obtained when forecasting demand. The
conditions of the experiment are the combination of the sales
start time and the collection rate for the maximum profit.
(20,000,000,000)
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Profit
(Demand)
(Max Profit)
Boundary of Demand Amount
C=0.5
Fig12. Boundary of “Max Profit” and “Demand Amount”
Above figure shows the results of this experiment. The
experiment started with the same amount of demand as the
initial demand, and gradually decreased from there. As a
result, I found that the required demand amount will be
profitable even if it is even smaller than the demand amount
set initially.
D. Experiment4
In this experiment, finding recycled parts cost boundary to
get total profits by two stage demand management.
Experiment 4 was performed under the same conditions as in
Experiment 3. By finding the boundary of recycle parts cost,
it is possible to increase profits. The cost of recycled parts
was experimented from the same price as the new parts, and
the cost was gradually reduced. When the price was
equivalent to that of the new part, it was impossible to obtain
profits as expected from the experiment. The price at which
profit actually appears is about 3 times the price set at the
beginning. The following figure is the result of this
experiment, the circled position is the boundary.
(12,000,000,000)
(10,000,000,000)
(8,000,000,000)
(6,000,000,000)
(4,000,000,000)
(2,000,000,000)
0
2,000,000,000
Max Profit
(Recycle Parts Cost)
(Max Profit)
Boundary of Recycle Parts Cost
C=0.5
Fig13. Boundary of “Max Profit” and “Recycle Parts Cost”
VII. CONCLUSION
In this research, I created “Two Stage Demand” by
creating CLSC model and reusing recycled parts, and
expanded the profit. In addition, I formulated the CLSC
model and simulated under constraint conditions and
conducted five experiments. By coding in R language and
changing parameters, I was able to satisfy all experiments.
Through four experiments I found a combination for the
maximum profit of “collection rate” and “sales start time”
“lead time of recycle parts”. I also found boundaries of
recycled parts prices and demand amount for maximum
profit.
However, I’ve already known that how much “demand
amount” by Bass Model in this research, so I can say that it
was a slightly different environment from the real problem.
For that reason, I would like to conduct a similar
experiment under the circumstance where the amount of
demand is uncertain in the future.
REFERENCE
[1] Takeshi Watanabe (2013), “Optimal Operation for GSCM considering
collection incentive and quality for recycling of used products”, 日本
経営工学会論文誌, p226-p235.
[2] Kainuma (2009), “クローズドループサプライチェーンにおける
ハイブリッド生産/再生産システム”, p1-p4.
[3] Onur Kaya (2010), “Incentive and production decisions for
remanufacturing operations”, European journal of operational research
201, p442-p453.
[4] Samar K (2009), “Joint procurement and production decisions in
remanufacturing under quality and demand uncertainty”, production
economics 120, p05-p17.
[5] Jean-Pierre(2012), “Production planning of a hybrid manufacturing /
remanufacturing system under uncertainty within a closed-loop supply
chain”, International Journal of Production Economics, Vol.135, No.1.
[6] Yuki Ooshita (2009), “クローズド・ループサプライチェーンにお
ける生産・再生産ハイブリッドシステム”, p01-p04
Proceedings of the International MultiConference of Engineers and Computer Scientists 2019 IMECS 2019, March 13-15, 2019, Hong Kong
ISBN: 978-988-14048-5-5 ISSN: 2078-0958 (Print); ISSN: 2078-0966 (Online)
IMECS 2019