Inventory cooperation strategies between one supplier and two recycling centers

Abstract Due to environmental and economic incentives, reverse supply chains have developed. In a reverse supply chain, due to the uncertainty of recycling, the probability of out‐of‐stock is high for recycled parts. In inventory management, transshipment and substitution are often used to avoid various consequences caused by stock shortages. This paper deals with a single‐echelon inventory system with two recycling centers and one supplier. Given demand characteristics, replenishment methods, and sharing rules, four inventory models: general strategy, lateral transshipment between the two recycling centers, substitution between recycling centers, and the supplier and the multi‐strategy are constructed. In the numerical example, Mathematica 11.3 is used to solve the models. Results show that lateral transshipment does not necessarily reduce the cost of recycling centers, while the substitution strategy and the multistrategy are better than the other two, among which the multistrategy is usually better than the substitution, unless the recycling center faces low replenishment rates with high demand rates. These conclusions can provide some management implications for recycling companies.