Strategic grading in the product acquisition process of a reverse supply chain

Most recommerce providers have moved to a quality-dependent process for the acquisition of used products. They acquire the products via websites at which product holders submit upfront quality statements and receive quality-dependent acquisition prices for their used devices. Motivated by this development of reverse logistics practice, the aim of this paper is to analyse the product assessment process of a recommerce provider in detail. To this end, we first propose a sequential bargaining model with complete information which captures the individual behaviour of the recommerce provider and the product holder. We determine the optimal strategies of the product holder and the recommerce provider in this game. We find that the resulting strategies lead to an efficient allocation, although the recommerce provider can absorb most of the bargaining potential due to his last mover advantage. In a second step, we relax the assumption of complete information and include uncertainty about the product holder's residual product value. We show the trade-off underlying the recommerce provider's optimal counteroffer decision and analyse the optimal strategy, using a logistic regression approach on a real-life data set of nearly 60,000 product submissions. The results reveal a significant improvement potential, compared to the currently applied strategy

Three essays on product acquisition management in closed-loop supply chains

One of the major global problems is the rapidly growing overconsumption of our finite natural resources. To overcome this problem, new sustainable business ideas like product recovery are becoming increasingly important. The main goal of product recovery firms is to sustain the value of already used goods in some form. This thesis examines some current challenges in the acquisition process of businesses with a focus on product recovery. The first essay investigates how a recovery firm collects the used products from individual holders in an optimal way. To be profitable, the firm has to balance the effort of the product holders to return their products with the respective acquisition costs resulting from the implemented collection network and the acquisition fee. The key result is achieved by a comparison of two currently applied strategies and shows the additional benefit of having a pricing strategy which differentiates by the quality of the used product. The second essay examines the optimal quality grading strategies of a recovery firm and an individual product holder who decides on returning his used product. A product holder has an incentive to grade the used product as being better than it is because of the higher achievable acquisition price, whereas the firm can increase the profit margin by downgrading the product. In short, the firm has to balance the risk of a rejection against the additional gain by downgrading the product quality. Here, one key result is that our model-based grading strategy has a great improvement potential in comparison with a currently applied strategy of a recovery firm. The third essay analyses the decision of a recovery firm to accept offered batches of used products from the B2B market. As the capacity management of processing individual product returns is a challenging task because of high volatilities in the return volumes, a firm can smooth capacity utilization by acquiring B2B returns. The key finding is that time-dependent effects can have a strong impact on the profitability of this capacity lever