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Market-Based Solutions to Vital Economic Issues
Research
Jan 9, 2014

Value of Operational Flexibility During Product Upgrade in Closed Loop Supply Chains

Abstract

Motivated by the upgrade of Eurocopters at the US Coast Guard (USCG), we analyze a closed loop supply chain (CLSC) with modular products (e.g., aircraft) whose performance is affected by the type of component (e.g., gearbox or engine) installed. We analyze the performance of the closed loop supply chain during the upgrade process of converting products with regular components to upgraded components in order to improve product performance. As products are used, they fail due to component failure. Failed components are replaced with working components and the failed components are then repaired. The supply chain thus consists of two closed loops – one involving regular and upgraded products and the other involving regular and upgraded components.


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