Operational decisions and performance of an outsourcing remanufacturing supply chain under different financing methods

Abstract

In remanufacturing industry, original equipment manufacturers (OEMs) usually outsource remanufacturing activities to third-party remanufacturers (TPRs) for cost savings and efficiency. Many TPRs often face the problem of funds shortage, impeding the development of remanufacturing. To alleviate the funds shortage, governments have implemented subsidy policies for remanufacturing, however, the delays in subsidy disbursement are common, and TPRs need to seek proper financing methods to obtain funding support. Along this line, we consider an outsourcing remanufacturing supply chain (RSC) comprising a capital-constrained TPR, a retailer, and a well-funded OEM, characterize and compare the corresponding equilibrium solutions under three financing methods, i.e., manufacturer financing, equity financing, and subsidy-based confirmation financing. We find that the equity financing can bring the highest collection rate of EOU products and the lowest sales volume of new products in most cases. When the dividend ratio is extremely low, the equity financing can bring the most profit for the TPR. When the dividend ratio overpasses one certain threshold, the TPR’s financing method depends on the initial capital and dividend ratio. We also conduct numerical analysis to illustrate our findings and gain more managerial insights, which can provide guidelines for TPR’s financing strategy with delayed subsidies.