Economic sustainability of closed loop supply chains: A holistic model for decision and policy analysis

• We develop a closed-loop supply chain (CLSC), and identify the decision making required for economic viability of the chain.
• We model the lifecycle of a consumer electronics product to examine the complex interactions among different decision makers.
• Sustainable CLSC policies require a well-calibrated return rate among types of products (new and refurbished) and consumers.
• Sustainable return policy increases sales significantly for both types of customers (innovators and imitators).
• Product design and marketing are critical for economic sustainability of refurbishers and recyclers.

We develop an end-to-end model of a closed-loop supply chain (CLSC), and identify the systemic decision making required for economic viability of participants in this chain. Economic viability is a key ingredient for environmentally sustainable behavior and policies, and our decision making framework includes producers, refurbishers and recyclers. We model the lifecycle of a consumer electronics product to examine the complex interactions among different participants and their decisions. Using data from recyclers and marketing and supply chain literature, we find that i) sustainable CLSC policies require a well-calibrated return rate among types of products (new and refurbished) and consumers (innovators and imitators); ii) a sustainable return policy increases sales significantly for both types of customers; and iii) product design that improves refurbishability, and marketing efforts that create perceived differentiation between products and at the same time social awareness and acceptability for refurbished products, is critical for economic sustainability of refurbishers and recyclers. Our model can be used at a company or industry level to conduct cost–benefit scenarios for all participants of the CLSC, and make decisions based on systemic value. It can also be used to create public policies and incentives to reward companies that meet these benchmarks, for sustained economic and environmental benefits.