Cooperation or competition? The remanufacturing strategy with quality uncertainty in construction machinery industry

Abstract

Construction machinery remanufacturing is energy-consuming and susceptible to quality uncertainty of used products, which increases the variability of cost and carbon emission and affects the production decisions of the original equipment manufacturer (OEM) in return. Therefore, surviving in such a situation by cooperating or competing with the third-party remanufacturer (TPR) is a vital decision for OEM. Incorporating the quality uncertainty, we first establish three remanufacturing models: integrated, outsourcing, and authorization remanufacturing. Secondly, the production decisions of the three models are derived and compared under different strategies (the complete remanufacturing strategy, CRS; the partial remanufacturing strategy, PRS; no remanufacturing strategy, NRS). Finally, the optimal remanufacturing mode and strategy are discussed according to the quantity of new and remanufactured products, profits and carbon emissions. The results suggest: (1) in terms of quantity of new products, integrated remanufacturing can be selected under CRS, and authorization remanufacturing under PRS; integrated remanufacturing generates the largest quantity of remanufactured products; (2) OEM has the highest profit in integrated remanufacturing whichever CRS or PRS is; (3) authorization remanufacturing generates the lowest carbon emissions while integrated remanufacturing generates the highest under CRS, which is the opposite under PRS; (4) as the quality threshold increases, the quantity of new and remanufactured products, profits and carbon emissions first increase and then decrease under CRS; however, new products and total carbon emissions increase, and remanufactured products and profits decrease under PRS; (5) as carbon price increases, the quantity of new products decreases under CRS and PRS, while the remanufactured ones decrease under CRS and increase under PRS; as a discount factor for remanufactured products increases, the quantity of new products increases under CRS and decreases under PRS, while remanufactured products increase under CRS and PRS.