Capacitated closed-loop supply chain network design under uncertainty

Abstract

This study optimizes the design of a closed-loop supply chain network, which contains forward and reverse directions and is subject to uncertainty in demands for new & returned products. To address uncertainty in decision-making, we formulate a two-stage stochastic mixed-integer non-linear programming model to determine the distribution center locations and their corresponding capacity, and new & returned product flows in the supply chain network to minimize total design and expected operating costs. We convert our model to a conic quadratic programming model given the complexity of our problem. Then, the conic model is added with certain valid inequalities, such as polymatroid inequalities, and extended with respect to its cover cuts so as to improve computational efficiency. Furthermore, a tabu search algorithm is developed for large-scale problem instances. We also study the impact of inventory weight, transportation weight, and marginal value of time of returned products by the sensitivity analysis. Several computational experiments are conducted to validate the effectiveness of the proposed model and valid inequalities.