Optimal strategies for the closed-loop supply chain with the consideration of supply disruption and subsidy policy

Considering the circumstances of supply disruption and government subsidy, optimal recovery and production strategies for the closed-loop supply chain are investigated. It is assumed that the quality of returned products is exponentially distributed, buyback cost, return rate and remanufacturing cost are function of quality level of returned items, upon this, an optimal operation and subsidies policy model is built. A numerical example is used to verify the validity and credibility of the model by adopting Particle Swarm Optimization (PSO) and Genetic Algorithm (GA). The results show that the manufacturer could arrange properly the ratio of remanufacturing and manufacturing lots and the minimum quality of returned products to achieve system optimal outcome; besides, the enterprises should make effective decisions in the face of supply disruption; meanwhile, the government can adopt an appropriate subsidy policy to encourage the recovery of returned items. The research is helpful for the operation of the enterprises under supply disruption and the design of the government’s reasonable subsidy mechanism.