Channel Structure Choice for Remanufacturing under Green Consumerism

Abstract

In recent decades, more and more consumers—referred to as “green consumers”—are willing to incorporate environmentally responsible decisions into their purchasing behaviors. This tendency is particularly notable in the European Union, the USA, and China. From a research perspective, while recent studies on remanufacturing have investigated optimal practices in regard to green consumerism, they have failed to address the flexibility manufacturers are afforded to outsource remanufacturing operations to third parties. In practice, some brand-name manufacturers—such as IBM, Land Rover, and Sun—do indeed outsource their remanufacturing operations. To further our understanding of the implications of differentiated structures for remanufacturing operations under green consumerism, we developed two models: one for a manufacturer undertaking remanufacturing themselves (Model M), and one for a manufacturer outsourcing it to a third-party remanufacturer (Model O). Our results indicate that, for markets with significant green consumerism, Model M tends to result in more remanufactured units and creates higher profitability for the manufacturer. However, under certain conditions, this model may also result in greater harm to the environment due to the comparative excess of manufacturers in the remanufacturing process. This implies that environmental groups and agencies should not only aim to encourage green consumerism, but should also focus their attention on the channel structures for remanufacturing.