How Marginal Value of Time Influences Optimality when Remanufacturing to Multiple Generations

Abstract

Because a product’s value decays over time, recovered items (cores) cannot regain their original value when remanufactured—even if kept in pristine condition. We consider a Remanufacturing Original Equipment Manufacturer who can remanufacture recovered cores to their original configuration or upgrade them to current technology. He sells new and remanufactured items concurrently. Each production period signifies an upgrade of the product’s features to a new technological generation. We use our novel modeling of Marginal Value of Time (MVT) to perform a rigorous structural decomposition over all potentially optimal values of costs, consumers’ valuations, core availability, and MVT to determine conditions under which cores should be restored to their original configuration and those conditions under which cores should be upgraded to current technology. We also show that for only a very small region of the parameter space (1.58% of remanufacturing instances) does concurrently offering both generations of remanufactured units provide greater profit than does remanufacturing to the optimal single generation. Furthermore, the average improvement in these instances is negligible (0.42%).