A closed-loop supply chain profit optimization model considering customer zone selection and product returns quality in recovery success

Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Industrial Engineering

Subject Categories

Operations Research, Systems Engineering and Industrial Engineering


Gokongwei College of Engineering


Industrial Engineering

Thesis Adviser

Dennis Cruz

Defense Panel Chair

Richard Li

Defense Panel Member

Ronaldo Polancos


Given increasing pressure brought on by industry and government to reduce the environmental impact and resource consumption in manufacturing, adopting a closed-loop supply chain through the integration of reverse logistics in a company's supply chain is more desirable. Several factors come into play when creating decisions for a closed-loop supply chain for electronic products, especially when profit-generating forward supply chain decisions affect the cost-generating reverse supply chain decisions through the translation of product sales into product returns at the sold units' end-of-life. Moreover, efforts in product recovery could cause a manufacturer to either gain or lose profits, since engaging in product recovery could either lessen raw material costs or increase operational costs. These choices become even more complex when allocating sellable products to multiple customer zones, each with its own unique behavior.

This study addressed these concerns by proposing a mathematical model for a closed loop supply chain system of electronic products that considers the allocation of sellable units across different customer zones and customer markets, the manipulation of product returns quantity and quality from these zones, and the possibility of recovery failures as dictated by product returns quality levels. Aside from adaptations such as quality as a determinant of possible recovery options and considerations of factors that affect product return, the unique features of this study lie in its simultaneous consideration of both forward and reverse supply chain factors in selecting customer zones to cater to. In delving into customer zones, not only the product demands in these zones will be considered, but the behavior of the customers regarding product take-back as well. The model created is a mixed integer nonlinear program which was validated using tl1e CONOPT solver of the General Algebraic Modeling System (GAMS).

A sensitivity analysis was then performed to address the research problems of the model and the researchers discovered several insights: (1a) customer zones can be seen as more favorable than the others tl1rough its market composition (majority vs. well-balanced) and level of demand; (1b) a customer zone with a longer period before perceived obsolescence is preferable, since manufacturers could repetitively serve these zones, either through increasing collection in these zones or increasing product distribution; (1c) a zone is more beneficial when it is possible to get the optimal quantity returns from it wherein the risk off ailing to meet recovery targets due to high collections is minimized; (2) the factors regarding product collection are used more to maintain a certain level of collection that is most beneficial for the company rather than to maximize the amount of units collected; (3) given any magnitude of success probability, cannibalization and recycling are prioritized, since these create increases in value that would be used in both assembly and remanufacturing; (4) different strategies are viewed as more beneficial for the company rather than solely increasing distribution when a certain threshold is reached. The optimal strategy can be selected when there exists a properly planned production schedule. It was also discovered that zone selection may precede market selection in terms of which is given a higher importance to and that tertiary markets are only viable where there are enough zones with tertiary markets catered to.

For further research, it is recommended to determine other factors which affect the quality and quantity of product returns such as the existence third-party product recyclers, and the possibility of uncontrolled disposal in a customer zone. It is also recommended to research and delve deeper into other ways or methodologies to measure product quality. Finally, the researchers recommend integrating environmental- and health-related objectives and considerations into future models.

Abstract Format






Accession Number


Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall


Industrial ecology; Salvage (Waste, etc.)

Embargo Period


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