Closing the Loop: Forging High-Quality Virtual Enterprises in a Reverse Supply Chain through Solution Portfolios

Reverse supply chains are receiving increased attention in both academia and practice to address business and environmental sustainability opportunities. As few organizations are adept at both forward and reverse supply chains, subcontracting various activities is imperative. Forging temporary partnerships as a virtual enterprise to take advantage of a short-term market opportunity is one available avenue. Vendor selection that can best achieve combined expertise to complete the entire or strategic portions of a reverse supply chain, while simultaneously forming the virtual enterprise quickly to seize market opportunities, is an emerging and important issue. This paper presents a mixed-integer program that seeks to select vendors that minimize the maximum formation time of a reverse supply chain virtual enterprise, subject to a set of practical decision-making constraints. This model is then integrated into a novel algorithmic technique that generates a portfolio of high-quality and yet diverse solutions of optimal vendor choices, allowing managers to integrate intangible and subjective factors into their final decisions. Numerical examples and computational experiments on simulated data demonstrate the model’s efficiency for generating sets of high-quality solutions and the flexibility for accommodating a range of decision factors. Moreover, this paper sets the stage to further investigate the research nexus of reverse supply chains and virtual enterprises. Keyword: Virtual Enterprise, Reverse Supply Chain, Sustainability, Integer Programming, Solution Portfolios, Diversity