Research On Processor’s Procurement Policy In Waste Reverse Supply Chain Based On Option Coordination Contract

With the development of science and technology, the excessive consumption of resources and environmental pollution problems caused by e-waste products have become increasingly severe. Thus recycling and processing of e-wastes have aroused attention of the government and society. At the same time, the awareness of environmental protection and the strong enforcement of environmental protection measures promote the theoretical and practical development of reverse logistics research.Recent years, the development of supply chain management and the rise of e-commerce spot market have changed the traditional procurement policy. The ideology of supply chain management has made the company focus more on business cooperation. Supply chain management procurement emphasizes on the cooperation between the buyer and the supplier in order to achieve rapid response, low costs, low inventory, and win-win situation. The development of e-commerce spot market has formed a coexisting structure of the traditional contract market and the spot market.Most research on procurement decisions in reverse logistics network usually assumes that the decision-makers are risk-neutral, without considering the impact of risk attitudes. In practice, the risk attitude of decision makers has an important impact on decision-making. Therefore, considering the risk attitudes of decision makers has important practical significance.According to the above-mentioned background, this paper has studied the procurement policy in an e-waste reverse supply chain which consists of a processor and a collector considering the impact of spot market and the risk attitude of decision makers. After literature review, modeling, and simulation, the main research and findings of this thesis are as below:Firstly, related literatures are reviewed, such as reverse logistics, electronic wastes, procurement policy in supply chain and spot market, option contract and procurement policy with different risk attitudes.Additionally, a procurement model based on option contract is proposed, considering the characteristics of reverse logistics in the presence of spot market. With different procurement contracts combined, a procurement model based on fixed contract and option contract is constructed. Based on Stackelberg game theory, different situations of either dominant collector or dominant processor are studied. Optimal order quantity and optimal contract parameters are derived. Then the model is verified by numerical analysis. The difference among the fixed contract, the option contract, and the combined contract has also been analyzed through numerical study. The study shows that in the presence of spot market, combining the option contract and fixed contract is better than only option contract or fixed contract, and thus can coordinate the reverse supply chain.Finally, considering the risk attitude of decision makers, a procurement model based on option contract is suggested using the loss aversion model in prospect theory. The parameters that impacting the order quantity are analyzed. Procurement policy between loss aversion and risk neutral is compared. The impact of loss aversion coefficient on order quantity is studied. The study shows that the order quantity under loss aversion is affected by the loss aversion coefficient, and the shortage cost. and depends on trade-off between expected stock-out loss and expected overstocking loss. The impact of shortage cost on option order quantity under loss aversion is larger than that in risk neutral situation.This paper developed procurement model based on option contract and mixed contract in the presence of spot market, considering risk attitudes towards procurement decision. The model in this paper can offer suggestions for purchasing decision in reverse supply chain.