Maximizing Profits From End-of-Life and Initial Sales With Heterogeneous Consumer Demand

Abstract

Growing concerns from customers and the government about product disposal highlight the necessity of improving product take-back systems to retain the embedded values in disposed products. Progress has been made toward minimizing the cost of the end-of-life (EOL) processes. While some progress has been made in recovering end-of-life value through decision making in the early design stage, contradictive objectives make it difficult to simultaneously optimize initial sales profits and EOL value. In this paper, a mathematical model is developed to integrate end-of-life recovery value considerations with product design decisions. The improvement of component reuse value or recycling value is achieved by linking design decisions in the early design stage with end-of-life decisions in order to maximize total product value across the span of product life cycle. A matrix based representation that can group components into several end-of-life modules with the same end-of-life decisions is also presented. The results are discussed to compare different design alternatives to understand their influence on net present product lifecycle value. The original contribution here is the simultaneous consideration of profits from initial and returned product sales, resulting from consumer demand as a function of heterogeneous preferences for the product attribute set. In order to estimate consumer demand resulting from discrete choices made by individuals, a random coefficient, mixed logit model was employed. The proposed method is illustrated through a cell phone example of product design decisions and end-of-life strategies.