Remanufacturing in Asia: location choice and outsourcing

Abstract

Purpose – Remanufacturing is a process whereby value from old products is recovered by replacing and recovering used components to bring such products to a new or like-new state. Today, both original equipment manufacturers (OEMs) and third parties are engaged in remanufacturing activities, investing in many locations throughout Asia. The purpose of this paper is to examine the reasons for initiating remanufacturing activities as well as the location determinants for the remanufacturing sector in Asia. Design/methodology/approach – The authors conduct a multiple case study. Triangulation is applied to gain objective views from interviewing three OEMs, one logistics firm, and three local small enterprises. Real options theory is the theoretical lens used to examine the location choice of the OEMs. Findings – Firms engaged in remanufacturing tend to co-locate facilities with existing manufacturing facilities, and those investing in new sites for remanufacturing view the regulatory environment as the most important factor. OEMs tend to leverage on existing manufacturing facilities or third-party remanufacturers to reduce their cost of commitment when starting remanufacturing at new locations. Research limitations/implications – The sample size is still small for the generalization of the results. Further empirical study is needed to test the propositions from this paper. Practical implications – This paper could assist managers and decision makers in the multinational corporations to design appropriate logistics-related solutions for remanufacturing in Asia. Originality/value – The authors work contributes to the theory on remanufacturing location determinants. It shows that OEMs and third-party remanufacturers can have a collaborative relationship instead of the commonly assumed competitive one, which is currently not found in the literature.