LAUSR

Abstract Closed-loop production systems encompass all processes for returning, remanufacturing, recycling, discarding, and repackaging products. These elements form the core of sustainable manufacturing by managing what otherwise would be waste to enable reuse and by controlling its associated pollution. This paper presents the general management model of sustainable remanufacturing within a dynamic closed-loop supply chain. Our specification encompasses agents positioned at key stages in the supply chain, e.g., manufacturers, retailers, and customers, and considers both profitability and environmental performance of their decentralized decisions. We cast the problem to allow for interdependence of agents through a Nash game. These salient features simultaneously render the mathematical model more realistic and computationally challenging. To proceed, our model is formalized by using variational inequalities, which in turn are converted to a fixed point problem that we solve using a computationally tractable algorithm. Decision rules for strategic remanufacturing and recycling are provided to complement the numerical solution in an illustrative example.