Remanufacturing authorization strategy for an original equipment manufacturer-contract manufacturer supply chain: Cooperation or competition?

Zhou, Qin; Meng, Chao; Yuen, Kum Fai; Sheu, Jiuh‐Biing

doi:10.1016/j.ijpe.2021.108238

Cited by 42 publications

(31 citation statements)

References 49 publications

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“…In practice, the royalty fee agreed on in licensing contract depends on the relative bargaining power of the OEM and the IR. Hence, the royalty fee may also be determined by the IR if it is the leader in the licensing cooperation [14]. In this case, a Nash bargaining game should be adopted on the royalty fee decision process.…”

Section: Limitations and Future Researchmentioning

confidence: 99%

“…For instance, Hauser and Lund [10] find that only 6% of over 2000 remanufacturing firms are OEMs. A more common industry practice for the remanufacturing industry is that many OEMs cooperate with the IRs through a license agreement [11][12][13][14].…”

Section: Introductionmentioning

confidence: 99%

“…However, we show that the IR will always choose a high-quality level when there is an intercompetitor licensing contract between the OEM and the IR, leading to a competition-5 intensifying effect on product quality. Third, regarding the OEM's attitude towards remanufacturing and remanufacturer by using licensing contract, many researchers had identified the conditions under which the OEM should embrace or deter the entry of the IR, such as Oraiopoulos, et al [11], Liu, et al [12], Zhou, et al [13], and Zhou, et al [14]. In this research, we also show that a wide range of parameter regions for mutually acceptable licensing contracts exist for the OEM and the IR while considering IR's remanufacturing technology and remanufacturing quality decisions.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Intercompetitor Licensing on Remanufacturing Market Competition and Cooperation

Zhou

Yuen

Meng

et al. 2024

IEEE Trans. Eng. Manage.

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This research investigates the impact of intercompetitor licensing between an original equipment manufacturer (OEM) and an independent remanufacturer (IR) on (1) market competition between new and remanufactured products, (2) the IR's remanufacturing strategy, and (3) the IR's optimal quality choice for remanufactured products. In the considered supply chain, the OEM sells new products, and the IR collects used products and then sells remanufactured products to compete with the OEM. To produce remanufactured products, the IR can acquire remanufacturing technology either by paying a licensing fee to the OEM or self-developing it in-house by incurring a fixed research and development cost. We develop game-theoretic models to determine the optimal supply chain decisions concerning the royalty licensing fee, IR's remanufacturing strategy and production quality, and product sale prices.We find that a licensing contract will always induce the OEM and the IR to increase their sales price for new and remanufactured products. However, the OEM will always increase the sales price for new products to a larger degree than that of the IR. This can alleviate price competition between new and remanufactured products and make remanufactured products more competitive in the market. Under licensing cooperation, the IR will always remanufacture used products to a higher quality level which will intensify quality competition. No matter whether the royalty fee is exogenously or endogenously determined by the OEM, there exists a wide range of parameter regions such that a licensing contract will produce a win-win solution for the OEM and the IR. A licensing cooperation may be reached even when the unit royalty fee is at a relatively low level and the total royalty fee is higher than the selfdevelopment option.Managerial relevance statement: From a practical perspective, this study proposes how the OEM, and the IR should make licensing cooperation decision which aims to achieve a win-win solution. It also reveals that a royalty licensing contract can be mutually acceptable between the OEM and the IR in a wide range of parameter regions. This result is important for managers who want to engage in the 2 remanufacturing business. For the OEM, the result shows that licensing its remanufacturing technology at a low royalty fee may still be beneficial. For the IR, the result shows that seeking technology licensing may be more profitable even when the total paid royalty fee is higher than the cost of self-developing the technology. Strategic implications of royalty licensing on market competition, remanufacturing production strategy, and remanufacturing quality strategy should be carefully considered before making strategic decisions on remanufacturing and licensing cooperation.

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Section: Limitations and Future Researchmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Impact of Intercompetitor Licensing on Remanufacturing Market Competition and Cooperation

Zhou

Yuen

Meng

et al. 2024

IEEE Trans. Eng. Manage.

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“…The cannibalization effect between new and remanufactured products has been widely acknowledged. When remanufactured products are introduced to the market, customers' demand for new products would be cannibalized by the existence of remanufactured products [7,9,[12][13][14][15][16][17][18]. This cannibalization effect is usually the main concern for most manufacturers and prevents many from taking further steps in entering the remanufacturing business.…”

Section: Introductionmentioning

confidence: 99%

Impact of Market Competition on Remanufacturing Investment

Zhou

Meng

Sheu

et al. 2024

IEEE Trans. Eng. Manage.

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This study considers supply chain competition in which two symmetric manufacturers compete in both the new and remanufactured products markets. To engage in remanufacturing, the two competing manufacturers must appropriately determine their remanufacturing capability and design new products to facilitate their competition in remanufacturing. This inevitably changes the competing manufacturers' cost structure in terms of both fixed and variable costs. The problem is formulated as a two-stage game.Therein, the competing manufacturers first determine whether to invest in remanufacturing, followed by determining the production quantities of new and remanufactured products if they decide to invest in remanufacturing. Our analytical results reveal that the equilibria associated with the three scenarios in which both manufacturers invest, neither manufacturer invests, and either manufacturer invests can be conditionally achieved, depending on the fixed cost incurred in developing remanufacturing capability and the difference between marginal costs associated with new and remanufactured products. Furthermore, it is found that despite the cost structure changes, remanufacturing investment can expand the two competing manufacturers' market shares and outweigh the cannibalization effect between new and remanufactured products, resulting in higher profits. Nevertheless, the competing manufacturers may be trapped in a prisoner's dilemma when they both invest in remanufacturing operations. By comparing the environmental impact with and without remanufacturing investment, the result suggests that remanufacturing investment may not be environmentally friendly, especially when the cost difference between new and remanufactured products is significant. Finally, the subsidy policy is proven to benefit manufacturers in gaining more profits and promoting the development of the remanufacturing industry but may cause an unanticipated negative overall outcome on the environment. Managerial relevance statement:In this study, we draw insights for manufacturers that consider investing in remanufacturing operations in a competitive setting, aiming to maximize total profit for the manufacturers. The results obtained in this study could help competitive manufacturers make remanufacturing-related decisions in the following dimensions: (1) optimal decisions when different remanufacturing investment decisions are made; (b) Nash equilibrium for the two manufacturers regarding their remanufacturing investment decisions; (c) impact of operational factors on market equilibrium; (d) environmental impact of manufacturing and remanufacturing; and (e) impact of government subsidy.

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“…Suppose they take responsibility for their vehicles' whole life cycle; in that case, along with recycling ELVs, they also have to tackle environmental adversities by following expensive and standard processes. Besides, it is also a challenge to recover heavy investments in recycling the ELVs [19]. Thus, OVMs hesitate to undertake the ELV recycling business.…”

Section: Introductionmentioning

confidence: 99%

The Decision-Making Analysis on End-of-Life Vehicle Recycling and Remanufacturing under Extended Producer Responsibility Policy

Khan

Godil²,

Thomas

et al. 2021

Sustainability

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This research develops a dual-cycle ELV recycling and remanufacturing system to better understand and improve the efficiency of the ELV recycling and remanufacturing businesses. For the flawless operation of this system, the researchers employed evolutionary game theory to establish a game model between original vehicle manufacturers (OVMs) and third-party recyclers with the government involved. This research presents evolutionary stable strategies (ESS) that could promote an ELV recycling and remanufacturing system. Results show that OVMs’ expected profit difference between choosing and not choosing authorization is crucial in their ESS. The licensing fee plays a part of OVMs’ expected profit difference. Based on the results, optimal ESS could be achieved when the OVMs’ expected profit difference between choosing authorization and not choosing authorization and the third-party recyclers’ profit when paying the licensing fee are both positive. Then, the two groups’ involvement in dual-cycle ELV recycling and the remanufacturing system can be ensured. This research implicates the government to devise appropriate reward and punishment strategy to encourage OVMs and third-party recyclers to collaborate for efficient recycling and remanufacturing systems. Particularly, the government is suggested to impose strict restrictions on OVMs to carry ELV recycling and provide support to promote recycling quantity standards. Hence, the ELV recycling and remanufacturing system would be strengthened, thus improving waste management which is crucial for both environmental and resource efficiency.

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Remanufacturing authorization strategy for an original equipment manufacturer-contract manufacturer supply chain: Cooperation or competition?

Cited by 42 publications

References 49 publications

Impact of Intercompetitor Licensing on Remanufacturing Market Competition and Cooperation

Impact of Intercompetitor Licensing on Remanufacturing Market Competition and Cooperation

Impact of Market Competition on Remanufacturing Investment

The Decision-Making Analysis on End-of-Life Vehicle Recycling and Remanufacturing under Extended Producer Responsibility Policy

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