Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior

In this paper, we consider a two-echelon reverse supply chain with dual-recycling channels where the recyclable dealer acts as a Stackelberg game leader and the recycler acts as a follower. Due to the price competition between these two channels, the dominant dealer always faces a challenge on how to strategically design the reverse channel structure. By introducing consumer preference for the online recycling channel into the model, we examine the challenge in three scenarios: single traditional recycling channel, single online-recycling channel, and a hybrid dual-recycling channel with both centralized and decentralized cases. We investigate two problems that are comprised of designing and coordinating a reverse supply chain with a traditional and an online recycling channel. The results show that the dual-recycling channel always outperforms its single channel counterparts from the recyclable dealer's and system's perspectives. In the coordination problem, a contract with transfer and online recycling prices can coordinate the dual-recycling channel reverse supply chain but harms the dealer. Therefore, we propose two complementary contracts – a two-part tariff contract and a profit sharing contract – which succeed in coordinating the reverse supply chain system and create a win-win situation. Finally, numerical examples illustrate the model, and results show that the consumer preference for online recycling affects the acceptance of the above contracts for the recyclable dealer.