Optimal collection delegation strategies in a retail-/dual-channel supply chain with trade-in programs

Abstract

A continuous supply of used products ensures large-scale remanufacturing. Manufacturers can delegate used product collection to third-party collectors (3PCs) that provide a trade-old-for-cash (TOC) program, in addition to collecting used products through a trade-old-for-new (TON) program. However, few studies have investigated the interactions between collection delegation and channel structure in a supply chain. To fill this gap, we develop game-theoretic models in a supply chain under traditional retail channel and dual-channel structures to explore whether and when the manufacturer adopts the collection delegation policy and examine the optimal channel choice for trade-ins. Our finding shows that the manufacturer always benefits from collection delegation, but the retailer would be worse off from such delegation in certain cases. To be specific, under the retail channel structure, collection delegation has no impact on the retailer when the salvage value of used products is relatively low, whereas it hurts the retailer when the salvage value is relatively high. However, under the dual-channel structure, collection delegation never affects the retailer. Moreover, we find that the manufacturer's channel choice depends on the consumer acceptance of the direct channel and the salvage value of used products. We further consider the case that the manufacturer does not introduce the TON programs to explore the effects of TON and the case that the new and remanufactured products are sold at different retail prices to examine the equilibrium strategies. Our results can provide useful managerial insights for decisions-makers who face the choice of collection delegation under different channel structures.