Optimizing circular economy efficiency: an analysis of third-party recovery service providers in capacity-constrained systems

Purpose The rise in environmental degradation demands a shift from linear to circular economy practices. The study aims to develop a circular economy model that integrates it with third-party recovery service providers (3PRSPs) to tackle real-world capacity constraints to improve the performance of the circular supply chain. Design/methodology/approach A multi-objective circular economy model is formulated based on (1) product-mix profitability maximization, (2) environmental deterioration minimization, and (3) non-recoverable product reduction. Two scenario analyses are conducted to analyze the impact of a centralized and decentralized circular economy network. The model is solved using neutrosophic optimization to account for uncertain product return rate and demand. The methodology is also compared with the epsilon-constraint method and interactive multi-objective fuzzy programming, highlighting the superior ability of neutrosophic optimization to handle higher-order uncertainty. Sensitivity analysis is performed by changing the selling price of new and recovered products to assess the financial viability of the model. Findings Scenario B with a centralized circular economy network yields higher profitability due to greater reliance on third-party recovery and reduced fixed costs. Scenario A, featuring a decentralized circular economy network, reduces environmental impact due to localized recovery and shorter logistical distances. Non-recoverable products remain the same in both network designs, underscoring the inefficiency in raw material quality and product design. Sensitivity analysis also indicates that profitability is highly sensitive to the new product pricing strategy. In addition, neutrosophic optimization enhances the robustness of circular economy network design under uncertain conditions. Originality/value The study provides a robust decision-making framework for the integration of the circular economy network with 3PRSPs under capacity constraints. By utilizing a neutrophic approach, this model accounts for demand and return rate uncertainty and fills the gap between theoretical frameworks and practical implementation of the circular economy system. The findings provide insights for researchers, managers and policymakers that strategic network design and collaboration with third party for recovery operations can improve economic, environmental and operational dimensions of the circular economy.