Coordination mechanisms for a three‐stage reverse supply chain to increase profitable returns

In this article, we consider a generic electronic product that can be remanufactured or recycled at the end of its life cycle to generate new profit. We first describe the product return process and then present a customer segmentation model to capture consumers' different behaviors with respect to product return so that the retailer can work more effectively to increase the return volume. In regard to the collaboration between the retailer and the manufacturer, we explore a revenue‐sharing coordination mechanism for achieving a win‐win outcome. The optimality and sensitivity of the critical parameters in four strategies are obtained and examined both theoretically and numerically, which generate insights on how to manage an efficient consumer‐retailer‐manufacturer reverse supply chain, as well as on the feasibility of simplifying such a three‐stage chain structure. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2013