Abstract
Although many studies have recently investigated how the product quality impacts on economic and environment performance under remanufacturing, all of them assume that remanufacturing operations are undertaken by the original equipment manufacturers (OEMs) or independent remanufacturers (IRs). However, many OEMs such as Lexmark, Canon, and Epson filed lawsuits with those IRs without licensing, but outsourced the remanufacturing operations to several contracted remanufacturers (CRs). We therefore extend the prior research to investigate the economic and environmental implications of OEMs’ strategic desired quality level choices under remanufacturing outsourcing. That is, we develop two models corresponding to two scenarios where OEMs (1) undertake remanufacturing in-house or (2) outsource it to a CR. Our results show that, to create a less intense cannibalization problem for new products sales, OEMs would be likely to choose a lower product quality when outsourcing remanufacturing to a CR. More importantly, from the economic perspective, we find that outsourcing remanufacturing to a CR hurts the OEM and the industry. However, from the environmental angle, our results reveal that there is a ratio threshold for environmental impact for different life cycle phases, above which remanufacturing in-house is definitely beneficial for OEM in economics and environment, but for the rest, outsourcing is equally or more environmental-friendly, despite cutting down the profit.
Highlights
In contrast to the forward supply chain that involves raw material and product flows from manufacturers to final consumers, as shown in Figure 1, remanufacturing is the process of collecting end-of-life retirements back and restoring them to as-new conditions, bringing them to the market again [1,2]
Two theoretical models were developed, in which an original equipment manufacturers (OEMs) produces new products with remanufacturing operations (1) undertaken by the OEM (Model I) or (2) outsourced to a contracted remanufacturers (CRs) (Model O). That in both our models, unlike quality differentiation decisions between independent products, the increase in the quality of the new products would increases the quality of the remanufactured product to a certain extent [19,20]
Since the increase in the quality of the new products would increases the quality of the remanufactured product to a certain extent, we assume that the remanufacturing cost is related to the quality of new products
Summary
In contrast to the forward supply chain that involves raw material and product flows from manufacturers to final consumers, as shown in Figure 1, remanufacturing is the process of collecting end-of-life retirements back and restoring them to as-new conditions, bringing them to the market again [1,2]. To the best of our knowledge, there is little literature highlighting how OEMs can use product quality as a strategic lever under the scenario of remanufacturing outsourcing To fill this gap, in this paper, we extend the prior research to investigate the economic and environmental implications of OEMs’ strategic desired quality level choices under remanufacturing outsourcing strategies. We begin our study by developing two theoretical models corresponding to two remanufacturing scenarios where OEMs can undertake remanufacturing operations (1) in-house or (2) outsource them to a CR In both models, we assume that the OEM can decide the quality of the new product, which can be used as a strategic lever to reach new market segment or deal with the cannibalization problems caused by remanufacturing.
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