Abstract
Remanufacturing has become an important and fast-growing industry. Many original equipment manufacturers (OEMs) cooperate with third-party remanufacturers (3PRs) through either outsourcing or licensing. They sell the new and remanufactured products either directly to the consumer or indirectly through a retailer. Our study compares the OEM’s remanufacturing strategy selection in different distribution channel structures. We demonstrate that outsourcing remanufacturing benefits the OEM when the new products are sold directly and remanufactured products, with a relatively low valuation, are sold indirectly; otherwise, licensing remanufacturing is more beneficial for the OEM. We further find that when consumers perceive the remanufactured products with a sufficiently high value, the selection of remanufacturing strategies benefits consumers, society, and the environment.
Highlights
Remanufacturing, from both a quality and performance perspective, is a controlled and reproducible industrial process by which previously used, worn, or nonfunctional products or parts are revamped to the like-new or betterthan-new condition [1]. ere is a general consensus both in academic and industrial fields that remanufacturing, a key part in circular economy, could significantly reduce the discharge of greenhouse gas and energy consumption [1]
According to Proposition 2, we find that the original equipment manufacturers (OEMs) always chooses to license the remanufacturing to the 3PR in the channel structure DD. e reason is, as demonstrated in Corollary 1, licensing can lead to higher marginal profits from both new and remanufactured products and larger production from remanufactured products
According to Proposition 6, we find that, in the structure D D, the OEM always chooses to license the remanufacturing to the 3PR in the channel structure D D
Summary
Remanufacturing, from both a quality and performance perspective, is a controlled and reproducible industrial process by which previously used, worn, or nonfunctional products or parts are revamped to the like-new or betterthan-new condition [1]. ere is a general consensus both in academic and industrial fields that remanufacturing, a key part in circular economy, could significantly reduce the discharge of greenhouse gas and energy consumption [1]. Besides the different remanufacturing operation strategies, the OEM and 3PR may choose different distribution channels for their products. Both new and remanufactured products may be sold either directly or indirectly through a retailer. (1) What are the implications of the distribution channel (direct selling or indirect selling) on remanufacturing strategy selection (outsourcing or licensing)?. To answer our research questions, we build a model wherein an OEM produces a new remanufacturable product and chooses remanufacturing strategies (i.e., outsourcing remanufacturing operation and licensing remanufacturing business). All proofs and technical details are presented in the appendix
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