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doi: 10.3934/jimo.2021232
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## Optimal recycling price strategy of clothing enterprises based on closed-loop supply chain

 1 College of textile science and engineering, Zhejiang Sci-Tech University, Hangzhou 310000, China 2 School of International Education, Zhejiang Sci-Tech University, Hangzhou 310000, China

*Corresponding author: Xiaofen Ji

Received  July 2021 Revised  October 2021 Early access January 2022

Fund Project: The research is supported by Zhejiang Soft Science Foundation Project Grant No.2020C35038

More and more garment enterprises begin to pay attention to the importance of recycling, take the corresponding recycling strategy to recycle garment products and remanufacture, forming a closed-loop supply chain (CLSC). In reality, recycling is a complex system, the recycling strategy of clothing brands will not only affect the reverse channel of closed-loop supply chain, but also affect the consumer demand of forward channel, and then affect the profit of supply chain. In order to solve this problem, we propose a CLSC composed of a manufacturer, a retailer and a collector, establish three different Stackelberg leadership models, and derive the optimal recycling strategy. Our results show that consumers' sensitivity to the recycling price will affect the optimal decision of supply chain members. The increase of the recycling market is not always beneficial to the profits of supply chain members. By comparing the profits of the three models, it is found that the retailer leadership model is the most effective scenario of CLCS. The results of this paper provide a reference for garment enterprises to formulate recycling strategies.

Citation: Huaqing Cao, Xiaofen Ji. Optimal recycling price strategy of clothing enterprises based on closed-loop supply chain. Journal of Industrial and Management Optimization, doi: 10.3934/jimo.2021232
##### References:
 [1] C. M. Armstrong, K. Niinimäki, S. Kujala, E. Karell and C. Lang, Sustainable product-service systems for clothing: Exploring consumer perceptions of consumption alternatives in Finland, Journal of Cleaner Production, 97 (2015), 30-39.  doi: 10.1016/j.jclepro.2014.01.046. [2] X. H. Chen, K. Li, F. Q. Wang and X. H. Li, Optimal production, pricing and government subsidy policies for a closed loop supply chain with uncertain returns, J. Ind. Manag. Optim., 16 (2020), 1389-1414.  doi: 10.3934/jimo.2019008. [3] X. H. Chen, P. Xu, J. J. Li, T. Walker and G. Q. Yang, Decision-making in a retailer-led closed-loop supply chain involving a third-party logistics provider, J. Ind. Manag. Optim., 2020. doi: 10.3934/jimo.2021014. [4] T. Chi, Consumer perceived value of environmentally friendly apparel: An empirical study of Chinese consumers, The Journal of The Textile Institute, 106 (2015), 1038-1050.  doi: 10.1080/00405000.2014.985879. [5] T. M. Choi, Optimal return service charging policy for a fashion mass customization program, Service Science, 5 (2013), 56-68.  doi: 10.1287/serv.1120.0036. [6] T. M. Choi, Y. Li and L. Xu, Channel leadership, performance and coordination in closed loop supply chains, International Journal of Production Economics, 146 (2013), 371-380.  doi: 10.1016/j.ijpe.2013.08.002. [7] J. Cruz-Cárdenas, J. Guadalupe-Lanas and M. Velín-Fárez, Consumer value creation through clothing reuse: A mixed methods approach to determining influential factors, Journal of Business Research, 101 (2019), 846-853. [8] S. Cuc and M. Vidovic, Environmental sustainability through clothing recycling, Operations and Supply Chain Management: An International Journal, (2014), 108–115. doi: 10.31387/oscm0100064. [9] H. Dahlbo, K. Aalto, H. Eskelinen and H. Salmenperä, Increasing textile circulation–Consequences and requirements, Sustainable Production and Consumption, 9 (2017), 44-57.  doi: 10.1016/j.spc.2016.06.005. [10] N. C. P. Edirisinghe, B. Bichescu and X. Shi, Equilibrium analysis of supply chain structures under power imbalance, European J. Oper. Res., 214 (2011), 568-578.  doi: 10.1016/j.ejor.2011.05.008. [11] B. Freudenreich and S. Schaltegger, Developing sufficiency-oriented offerings for clothing users: Business approaches to support consumption reduction, Journal of Cleaner Production, 247 (2020), 119589.  doi: 10.1016/j.jclepro.2019.119589. [12] J. Gao, H. Han, L. Hou and H. Wang, Pricing and effort decisions in a closed-loop supply chain under different channel power structures, Journal of Cleaner Production, 112 (2016), 2043-2057. [13] B. C. Giri, A. Chakraborty and T. Maiti, Pricing and return product collection decisions in a closed-loop supply chain with dual-channel in both forward and reverse logistics, Journal of Manufacturing Systems, 42 (2017), 104-123.  doi: 10.1016/j.jmsy.2016.11.007. [14] G. Hole and A. S. Hole, Recycling as the way to greener production: A mini review, Journal of Cleaner Production, 212 (2019), 910-915.  doi: 10.1016/j.jclepro.2018.12.080. [15] S. Jørgensen and G. Zaccour, Equilibrium pricing and advertising strategies in a marketing channel, J. Optim. Theory Appl., 102 (1999), 111-125.  doi: 10.1023/A:1021894529093. [16] K. Kant Hvass, Post-retail responsibility of garments–a fashion industry perspective, Journal of Fashion Marketing and Management, 18 (2014), 413-430. [17] W. Leal Filho, D. Ellams, S. Han, D. Tyler, V. J. Boiten, A. Paço, H. Moora and A. L. Balogun, A review of the socio-economic advantages of textile recycling, Journal of Cleaner Production, 218 (2019), 10-20. [18] N. Liu, T. Choi, C. M. Yuen and F. Ng, Optimal pricing, modularity, and return policy under mass customization, IEEE Transactions on Systems, Man, and Cybernetics - Part A: Systems and Humans, 42 (2012), 604-614.  doi: 10.1109/TSMCA.2011.2170063. [19] T. Maiti and B. C. Giri, A closed loop supply chain under retail price and product quality dependent demand, Journal of Manufacturing Systems, 37 (2015), 624-637.  doi: 10.1016/j.jmsy.2014.09.009. [20] S. K. Mukhopadhyay and R. Setoputro, Optimal return policy and modular design for build-to-order products, Journal of Operations Management, 23 (2005), 496-506.  doi: 10.1016/j.jom.2004.10.012. [21] L. J. R. Nunes, R. Godina, J. C. O. Matias and J. P. S. Catalão, Economic and environmental benefits of using textile waste for the production of thermal energy, Journal of Cleaner Production, 171 (2018), 1353-1360.  doi: 10.1016/j.jclepro.2017.10.154. [22] H. Peng, N. Shen, H. Liao, H. Xue and Q. Wang, Uncertainty factors, methods, and solutions of closed-loop supply chain–A review for current situation and future prospects, Journal of Cleaner Production, 254 (2020), 120032.  doi: 10.1016/j.jclepro.2020.120032. [23] Y. Ranjbar, H. Sahebi, J. Ashayeri and A. Teymouri, A competitive dual recycling channel in a three-level closed loop supply chain under different power structures: Pricing and collecting decisions, Journal of Cleaner Production, 272 (2020), 122623.  doi: 10.1016/j.jclepro.2020.122623. [24] R. Ruiz-Benitez and A. Muriel, Consumer returns in a decentralized supply chain, International Journal of Production Economics, 147 (2014), 573-592.  doi: 10.1016/j.ijpe.2013.05.010. [25] G. Sandin and G. M. Peters, Environmental impact of textile reuse and recycling-A review, Journal of Cleaner Production, 184 (2018), 353-365. [26] R. C. Savaskan, S. Bhattacharya and L. N. Van Wassenhove, Closed-loop supply chain models with product remanufacturing, Management Science, 50 (2004), 239-252.  doi: 10.1287/mnsc.1030.0186. [27] R. C. Savaskan and L. N. Van Wassenhove, Reverse channel design: The case of competing retailers, Management Science, 52 (2006), 1-14.  doi: 10.1287/mnsc.1050.0454. [28] B. Shen, J. H. Zheng, P. S. Chow and K. Y. Chow, Perception of fashion sustainability in online community, The Journal of The Textile Institute, 105 (2014), 971-979.  doi: 10.1080/00405000.2013.866334. [29] W. B. Wang, P. Zhang, J. F. Ding, J. Li, H. Sun and L. Y. He, Closed-loop supply chain network equilibrium model with retailer-collection under legislation, J. Ind. Manag. Optim., 15 (2019), 199-219.  doi: 10.3934/jimo.2018039. [30] W. Wang, Y. Zhang, K. Zhang, T. Bai and J. Shang, Reward–penalty mechanism for closed-loop supply chains under responsibility-sharing and different power structures, International Journal of Production Economics, 170 (2015), 178-190.  doi: 10.1016/j.ijpe.2015.09.003. [31] Z. D. Wu, X. H. Qian, M. Huang, W. K. Ching, H. B. Kuang and X. W. Wang, Channel leadership and recycling channel in closed-loop supply chain: The case of recycling price by the recycling party, J. Ind. Manag. Optim., 17 (2020), 3247-3268.  doi: 10.3934/jimo.2020116. [32] J. Xie and A. Neyret, Co-op advertising and pricing models in manufacturer-retailer supply chains, Computers & Industrial Engineering, 56 (2009), 1375-1385.  doi: 10.1016/j.cie.2008.08.017. [33] B. R. Zheng and X. P. Hong, Effects of take-back legislation on pricing and coordination in a closed-loop supply chain, J. Ind. Manag. Optim., 2021. doi: 10.3934/jimo.2021035. [34] Make Fashion Circular: Outlook for a New Textile Economy in China, Report of China National Textile, 2020. Available from: http://sdgstewardship.org/circular/.

show all references

##### References:
 [1] C. M. Armstrong, K. Niinimäki, S. Kujala, E. Karell and C. Lang, Sustainable product-service systems for clothing: Exploring consumer perceptions of consumption alternatives in Finland, Journal of Cleaner Production, 97 (2015), 30-39.  doi: 10.1016/j.jclepro.2014.01.046. [2] X. H. Chen, K. Li, F. Q. Wang and X. H. Li, Optimal production, pricing and government subsidy policies for a closed loop supply chain with uncertain returns, J. Ind. Manag. Optim., 16 (2020), 1389-1414.  doi: 10.3934/jimo.2019008. [3] X. H. Chen, P. Xu, J. J. Li, T. Walker and G. Q. Yang, Decision-making in a retailer-led closed-loop supply chain involving a third-party logistics provider, J. Ind. Manag. Optim., 2020. doi: 10.3934/jimo.2021014. [4] T. Chi, Consumer perceived value of environmentally friendly apparel: An empirical study of Chinese consumers, The Journal of The Textile Institute, 106 (2015), 1038-1050.  doi: 10.1080/00405000.2014.985879. [5] T. M. Choi, Optimal return service charging policy for a fashion mass customization program, Service Science, 5 (2013), 56-68.  doi: 10.1287/serv.1120.0036. [6] T. M. Choi, Y. Li and L. Xu, Channel leadership, performance and coordination in closed loop supply chains, International Journal of Production Economics, 146 (2013), 371-380.  doi: 10.1016/j.ijpe.2013.08.002. [7] J. Cruz-Cárdenas, J. Guadalupe-Lanas and M. Velín-Fárez, Consumer value creation through clothing reuse: A mixed methods approach to determining influential factors, Journal of Business Research, 101 (2019), 846-853. [8] S. Cuc and M. Vidovic, Environmental sustainability through clothing recycling, Operations and Supply Chain Management: An International Journal, (2014), 108–115. doi: 10.31387/oscm0100064. [9] H. Dahlbo, K. Aalto, H. Eskelinen and H. Salmenperä, Increasing textile circulation–Consequences and requirements, Sustainable Production and Consumption, 9 (2017), 44-57.  doi: 10.1016/j.spc.2016.06.005. [10] N. C. P. Edirisinghe, B. Bichescu and X. Shi, Equilibrium analysis of supply chain structures under power imbalance, European J. Oper. Res., 214 (2011), 568-578.  doi: 10.1016/j.ejor.2011.05.008. [11] B. Freudenreich and S. Schaltegger, Developing sufficiency-oriented offerings for clothing users: Business approaches to support consumption reduction, Journal of Cleaner Production, 247 (2020), 119589.  doi: 10.1016/j.jclepro.2019.119589. [12] J. Gao, H. Han, L. Hou and H. Wang, Pricing and effort decisions in a closed-loop supply chain under different channel power structures, Journal of Cleaner Production, 112 (2016), 2043-2057. [13] B. C. Giri, A. Chakraborty and T. Maiti, Pricing and return product collection decisions in a closed-loop supply chain with dual-channel in both forward and reverse logistics, Journal of Manufacturing Systems, 42 (2017), 104-123.  doi: 10.1016/j.jmsy.2016.11.007. [14] G. Hole and A. S. Hole, Recycling as the way to greener production: A mini review, Journal of Cleaner Production, 212 (2019), 910-915.  doi: 10.1016/j.jclepro.2018.12.080. [15] S. Jørgensen and G. Zaccour, Equilibrium pricing and advertising strategies in a marketing channel, J. Optim. Theory Appl., 102 (1999), 111-125.  doi: 10.1023/A:1021894529093. [16] K. Kant Hvass, Post-retail responsibility of garments–a fashion industry perspective, Journal of Fashion Marketing and Management, 18 (2014), 413-430. [17] W. Leal Filho, D. Ellams, S. Han, D. Tyler, V. J. Boiten, A. Paço, H. Moora and A. L. Balogun, A review of the socio-economic advantages of textile recycling, Journal of Cleaner Production, 218 (2019), 10-20. [18] N. Liu, T. Choi, C. M. Yuen and F. Ng, Optimal pricing, modularity, and return policy under mass customization, IEEE Transactions on Systems, Man, and Cybernetics - Part A: Systems and Humans, 42 (2012), 604-614.  doi: 10.1109/TSMCA.2011.2170063. [19] T. Maiti and B. C. Giri, A closed loop supply chain under retail price and product quality dependent demand, Journal of Manufacturing Systems, 37 (2015), 624-637.  doi: 10.1016/j.jmsy.2014.09.009. [20] S. K. Mukhopadhyay and R. Setoputro, Optimal return policy and modular design for build-to-order products, Journal of Operations Management, 23 (2005), 496-506.  doi: 10.1016/j.jom.2004.10.012. [21] L. J. R. Nunes, R. Godina, J. C. O. Matias and J. P. S. Catalão, Economic and environmental benefits of using textile waste for the production of thermal energy, Journal of Cleaner Production, 171 (2018), 1353-1360.  doi: 10.1016/j.jclepro.2017.10.154. [22] H. Peng, N. Shen, H. Liao, H. Xue and Q. Wang, Uncertainty factors, methods, and solutions of closed-loop supply chain–A review for current situation and future prospects, Journal of Cleaner Production, 254 (2020), 120032.  doi: 10.1016/j.jclepro.2020.120032. [23] Y. Ranjbar, H. Sahebi, J. Ashayeri and A. Teymouri, A competitive dual recycling channel in a three-level closed loop supply chain under different power structures: Pricing and collecting decisions, Journal of Cleaner Production, 272 (2020), 122623.  doi: 10.1016/j.jclepro.2020.122623. [24] R. Ruiz-Benitez and A. Muriel, Consumer returns in a decentralized supply chain, International Journal of Production Economics, 147 (2014), 573-592.  doi: 10.1016/j.ijpe.2013.05.010. [25] G. Sandin and G. M. Peters, Environmental impact of textile reuse and recycling-A review, Journal of Cleaner Production, 184 (2018), 353-365. [26] R. C. Savaskan, S. Bhattacharya and L. N. Van Wassenhove, Closed-loop supply chain models with product remanufacturing, Management Science, 50 (2004), 239-252.  doi: 10.1287/mnsc.1030.0186. [27] R. C. Savaskan and L. N. Van Wassenhove, Reverse channel design: The case of competing retailers, Management Science, 52 (2006), 1-14.  doi: 10.1287/mnsc.1050.0454. [28] B. Shen, J. H. Zheng, P. S. Chow and K. Y. Chow, Perception of fashion sustainability in online community, The Journal of The Textile Institute, 105 (2014), 971-979.  doi: 10.1080/00405000.2013.866334. [29] W. B. Wang, P. Zhang, J. F. Ding, J. Li, H. Sun and L. Y. He, Closed-loop supply chain network equilibrium model with retailer-collection under legislation, J. Ind. Manag. Optim., 15 (2019), 199-219.  doi: 10.3934/jimo.2018039. [30] W. Wang, Y. Zhang, K. Zhang, T. Bai and J. Shang, Reward–penalty mechanism for closed-loop supply chains under responsibility-sharing and different power structures, International Journal of Production Economics, 170 (2015), 178-190.  doi: 10.1016/j.ijpe.2015.09.003. [31] Z. D. Wu, X. H. Qian, M. Huang, W. K. Ching, H. B. Kuang and X. W. Wang, Channel leadership and recycling channel in closed-loop supply chain: The case of recycling price by the recycling party, J. Ind. Manag. Optim., 17 (2020), 3247-3268.  doi: 10.3934/jimo.2020116. [32] J. Xie and A. Neyret, Co-op advertising and pricing models in manufacturer-retailer supply chains, Computers & Industrial Engineering, 56 (2009), 1375-1385.  doi: 10.1016/j.cie.2008.08.017. [33] B. R. Zheng and X. P. Hong, Effects of take-back legislation on pricing and coordination in a closed-loop supply chain, J. Ind. Manag. Optim., 2021. doi: 10.3934/jimo.2021035. [34] Make Fashion Circular: Outlook for a New Textile Economy in China, Report of China National Textile, 2020. Available from: http://sdgstewardship.org/circular/.
Different power structures of CLSC
The influence of market size on optimal decision
The influence of the demand sensitivity to retail price on optimal decision
The influence of the demand sensitivity to recycling price on optimal decision
The influence of basic recycling quantity on optimal decision
The influence of recycling quantity sensitivity to recycling price on optimal decision
Symbols and definitions
 Model parameters $\varphi$ Basic demand, and $\varphi> 0$ $\beta$ The sensitivity coefficient of demand to the retail price, and $\beta>0$ $\varepsilon$ The sensitivity coefficient of demand to the recycling price, and $\varepsilon> 0$ $a$ Basic recycling quantity, and $a> 0$ $l$ The sensitivity coefficient of recycling quantity to the recycling price, and $l> 0$ $c_m$ The cost of a new product produced by the manufacturer $c_r$ The cost of remanufacturing a new product using recycled products $\Delta$ $\Delta = c_m - c_r$, represents the cost saved per unit product during remanufacturing $\Pi$ Profit function symbol, and $\Pi_C^M$ represents the retailer's profit under the manufacturer's leadership mode $w$ The wholesale price given by the manufacturer to the retailer $p$ The retailer's retail price $b$ The recycling price provided by the collector to the consumer $A$ The transfer price of a single product provided by the manufacturer to the collector
 Model parameters $\varphi$ Basic demand, and $\varphi> 0$ $\beta$ The sensitivity coefficient of demand to the retail price, and $\beta>0$ $\varepsilon$ The sensitivity coefficient of demand to the recycling price, and $\varepsilon> 0$ $a$ Basic recycling quantity, and $a> 0$ $l$ The sensitivity coefficient of recycling quantity to the recycling price, and $l> 0$ $c_m$ The cost of a new product produced by the manufacturer $c_r$ The cost of remanufacturing a new product using recycled products $\Delta$ $\Delta = c_m - c_r$, represents the cost saved per unit product during remanufacturing $\Pi$ Profit function symbol, and $\Pi_C^M$ represents the retailer's profit under the manufacturer's leadership mode $w$ The wholesale price given by the manufacturer to the retailer $p$ The retailer's retail price $b$ The recycling price provided by the collector to the consumer $A$ The transfer price of a single product provided by the manufacturer to the collector
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