Logistics cost is an important contributor to the overall cost in a supply chain system. By using collapsible containers, the frequency of return freight can be reduced and the return of containers can be optimized, leading to potential logistic cost savings. However, the dynamic behavior of container flows due to demand, inventory, storage, and repair requirements make it difficult to accurately analyze container system performance. An accurate estimation of this collapsible container usage impact is of great importance for decision-making.

This paper describes the development of a mathematical model of the container dynamic flow system by using the collapsible containers. A continuous time, discrete space Markov process is used for stochastic scenario. The model determines the total cost savings, based on the collapsible rate, the number of collapsible containers, the performance of the factory and the supplier and the transportation environment. The presented mathematical formulation enables the evaluation of the system performance. A case study of collapsible container supply chain system demonstrates the advantages of this methodology. In addition, a simulation model of this stochastic system is presented to verify the mathematical model. Simulation tests are conducted to demonstrate the potential logistics cost savings in the closed-loop supply chain system.

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