Decision Models and Coordinative Strategy of Closed-Loop Supply Chain Based on CVaR Criterion

The paper proposes the decentralized decision and centralized decision models of a closed-loop supply chain (CLSC) with stochastic demand, consisting of one risk-neutral manufacturer and one risk-averse retailer, with the use of the game theory and the conditional value-at-risk(CVaR) criterion. The purpose is to characterize the impact of the risk-averse degree of retailer on the order-quantity decision and the profit of supply chain, and analyze the effect of inferior-products' repairing and remanufacturing. Based on the contract theory, a profit sharing contract was put forward to coordinate the CLSC. The study reveals that the decentralized order-quantity is lower than the centralized order-quantity; the two decision models of the CLSC with the risk-averse retailer generalize the corresponding models of the CLSC with the risk-neutral retailer, and the classic newsvendor model is a special case of the decentralized models; the profit-sharing contract can coordinate the CLSC and generate a win-win situation between the manufacturer and the retailer. Sensitivity analysis shows that the retailer being more risk-averse makes fewer order quantities; but the lower rate of regular products leads to higher order quantities; under both circumstances the profits of the manufacturer, the retailer and the whole supply chain will reduce.