Operational and financing decisions of original equipment manufacturers under third-party remanufacturing modes

Abstract

In recent years, many original equipment manufacturers (OEMs) permit third-party remanufacturers (TPRs) to remanufacture, primarily through outsourcing remanufacturing to the outsourced remanufacturer (UR) or authorizing remanufacturing to the authorized remanufacturer (AR). However, few studies consider OEMs are constrained by the initial capital in the third-party remanufacturing modes. Therefore, our paper supplements this existing literature by integrating the financing strategy into the third-party remanufacturing modes, analyzing and comparing the equilibrium solutions of outsourcing and authorization remanufacturing modes from the perspectives of OEMs, TPRs, and the whole supply chain, respectively. The main findings are as follows. OEMs are more willing to borrow funds from the UR in the outsourcing remanufacturing mode, while OEMs' financing options are influenced by interest rates under the authorization remanufacturing mode. Compared with the authorization remanufacturing mode, the TPRs prefer the outsourcing remanufacturing mode. Moreover, from the perspective of the whole supply chain, supply chain members earn higher profits through bank credit when TPRs' interest rates are relatively high. We also verify the validity of the results by numerical analysis.