Strategic Grading in the Product Acquisition Process of a Reverse Supply Chain

Abstract

Most recommerce providers have moved to a quality-dependent process for the acquisition of used products.They acquire the products via websites at which product holders submit upfront quality statements and receive quality-dependent acquisition prices for their used devices.Motivated by this development of reverse logistics practice, the aim of this paper is to analyse the product assessment process of a recommerce provider in detail. To this end, we first propose a sequential bargaining model with complete information which captures the individual behaviour of the recommerce provider and the product holder. We determine the optimal strategies of the product holder and the recommerce provider in this game. We find that the resulting strategies lead to an efficient allocation, although the recommerce provider can absorb most of the bargaining potential due to his last mover advantage.In a second step, we relax the assumption of complete information and include uncertainty about the product holder's residual product value. We show the trade-off underlying the recommerce provider's optimal counteroffer decision and analyse the optimal strategy, using a logistic regression approach on a real-life data set of nearly 60,000 product submissions. The results reveal a significant improvement potential, compared to the currently applied strategy.

Revenue‐Sharing Contracts Under Quality Uncertainty in Remanufacturing

“…One stream in the remanufacturing literature has focused on the acquisition of used products for remanufacturing (Galbreth and Blackburn 2010, Guide et al. 2003, Hahler and Fleischmann 2017, Mutha et al. 2016).…”

Consumer motivation for product disposal and its role in acquiring products for reuse

“…The literature on product acquisition addresses a wide range of issues relevant to how firms can acquire optimal product for reuse. These include issues relevant to purchasing (Hahler & Fleischmann, ), volume (Galbreth & Blackburn, ), forecasting (Clottey, Benton, & Srivastava, ), quality (Ovchinnikov, ; Ray et al, ), pricing (Ray et al, ), collection (Atasu et al, ; Savaskan et al, ), and competition (Ferguson & Toktay, ).…”

“…In practice, manufacturers increasingly offer to buy consumers' used products, as a means to increase new product sales, and support product reuse operations (e.g., Apple GiveBack and Samsung Trade Up). Such programs, including trade‐ins, online auctions, individual selling, and recycling, reflect a growing number of ways in which firms can connect directly with consumers to acquire product and encourage upgrades by consumers (Hahler & Fleischmann, ; Kim, Rao, Kim, & Rao, ; Srivastava & Chakravarti, ). Research in this space, however, particularly regarding how firms might more cost‐effectively acquire products from consumers, rarely draws from the behavior of actual consumers.…”

“…The ability to predict the quality and quantity of what is being acquired is a constant problem. Prior scholarship for the most part suggests that firms should deal with this uncertainty through their relationships with suppliers, or by increasing their control over how products are collected (Atasu, Toktay, & Van Wassenhove, ; Guide & Van Wassenhove, ; Hahler & Fleischmann, ; Savaskan, Bhattacharya, & Van Wassenhove, ). While these practices have helped to reduce uncertainty in used product supply, they neglect the fundamental role of consumers.…”

Agent Based Simulation Optimization of Waste Electrical and Electronics Equipment Recovery

“…After acquiring the product, it will be evaluated in order to assess its actual obsolescence level. Recent literature [63] suggests that a great inconsistency is present between the quality levels claimed by the consumers and the actual quality levels of the products. Using product MoL data (e.g., repair and maintenance events) via cloud may be a solution to this problem.…”