Competitive remanufacturing strategy and take-back decision with OEM remanufacturing

Abstract

Consumer desire for environment-friendly and economical products drives original equipment manufacturers (OEMs) to offer remanufactured products. Thus, OEMs compete with independent remanufacturers (IRs) not only in sales but also in collection of used items for remanufacturing. In this paper, we develop a closed-loop supply that consists with an OEM that sells new and remanufactured products and an IR. Each firm is endowed with two remanufacturing strategies that drive economies of remanufacturing by sales or collection. We then elaborate the relation between the firms’ decisions and the remanufacturing strategies, and further derive the equilibrium decisions and strategic schemes. We find that OEM remanufacturing provides the OEM with the variability to respond to changes of competitive scenarios by allocating sales between new and OEM-remanufactured products, compelling the IR to react differently. We further show the conditions for firms to determine their profitable strategies, and characterize the firms’ equilibrium strategic choices and operational decisions. This study provides managerial insights for OEM and IR managers in terms of firms’ equilibrium behavior.