Product and sales contract design in remanufacturing

Abstract

We develop and analyze an economic model of remanufacturing to address two main research questions. First, we explore which market, cost, and product type conditions induce a profitmaximizing firm to be a remanufacturer, given a separate (secondary) remanufactured goods market. Such markets exist for consumer goods, where "newness" is a differentiating factor. Second, we describe what effect profitable remanufacturing has on the environment. Our stylized modeling framework for analyzing these issues incorporates three components: lease contracting, product design, and remanufacturing volume. To operationalize this framework, we model and solve for the optimal decisions of two firm types: a non-remanufacturer, which we call a traditional firm, and a remanufacturer, which we call a green firm. We describe conditions under which remanufacturing is (and is not) profitable, and demonstrate that under certain cost and market conditions remanufacturing has negative consequences for the environment. Our results have implications for firms and policy makers who would like to choose remanufacturing as a strategy to improve profitability and environmental performance, given the existence of conditions under which neither might occur.

Core (product) Acquisition Management for remanufacturing: a review

“…Return timing is usually controlled by dynamic acquisition effort, such as Kleber et al [61], Xiong and Li [112], among others. Another method to control the return timing is to offer the consumers a leasing contract, where the leasing duration can be optimized by the remanufacturer [6,84,115]. Later in Section "Acquisition functions" different research assumptions about the acquisition function are further discussed.…”

“…They also show that the leasing duration should be longer if the production capacity is smaller, while if the production capacity is very small, the leasing duration should be equal to the product lifecycle and no remanufacturing should be performed. Yalabik et al [115] also study the leasing contract of a remanufacturer, and describe conditions when remanufacturing is profitable or not. In their paper, the remanufactured goods are in a secondary market.…”

Knowledge Sharing in Closed-Loop Supply Chain Management

“…In a study by Yalabik et al [26], the interactions between product properties, such as value extraction, market properties, and production costs, are taken into account in order to choose a remanufacturing strategy that would improve profitability and environmental performance.…”

Coordination of the closed-loop supply chain for product line design with consideration of remanufactured products

“…Chen and Chang (2013) investigated the dynamic pricing strategy for new and remanufactured products in a CLSC considering the price-dependent market demand. Yalabik et al (2014) examined the profitability of traditional and green companies in terms of market, cost, and product type conditions, where the green company produces remanufactured products for lease and secondary markets. Hatcher et al (2011) reviewed the literature and defined future research needs in design for remanufacture in which end-of-life and lifecycle considerations were stated as essential issues in product design.…”