Closed-loop Supply Chain Games with Innovation-led Lean Programs and Sustainability

Talat Genc and Pietro De Giovanni ()
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Pietro De Giovanni: Department of Operations Management, ESSEC Business School, Paris, France

No 1803, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: This paper studies the impact of some innovation-led lean programs in a Closed-loop Supply Chain(CLSC)setting. We use a game-theoretic approach to model a CLSC composed of one supplier and one manufacturer. The supplier sets the wholesale price of an intermediate product while the manufacturer sets the selling price of a final product. Further, the manufacturer invests in innovation-led lean practices to entail both a strategic effect and a process innovation effect. The strategic effect consists of responsiveness involving the CLSC's capacity to properly respond to consumers' needs and leading to increase in sales. Further, the strategic effect enhances sustainability as consumers align their behavior to the CLSC's attitude of reducing the waste through lean, thus using their products for longer time period and entirely exhausting their residual value. Innovation-led lean practices also generate a process innovation effect, which consists of the marginal production cost abatement. Our findings indicate that lean practices leading to both strategic and process innovation are profitable for the manufacturer and sponsor sustainability. When only one of those can be presented, CLSCs should prefer the adoption of a strategic lean program. From its side, the supplier is much less sensitive to environmental benefits, thus it focuses on sales and operational matters. Furthermore, in a centralized CLSC, the preferences for strategic vs. process innovation lean follow the same path of the decentralized CLSC. Nevertheless, we pinpoint that the manufacturer in the decentralized CLSC has a larger incentive to adopt a strategic lean program than in the centralized CLSC. Also, the supplier always obtains larger economic benefits in the decentralized CLSC under any type of innovation-led lean program.

Keywords: Closed-loop Supply Chain; Innovation-led Lean; Process Innovation; Sustainability; Used-product returns; Vertical Integration (search for similar items in EconPapers)
JEL-codes: D24 D30 L23 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (4)

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Journal Article: Closed-loop supply chain games with innovation-led lean programs and sustainability (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:gue:guelph:2018-03

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