Remanufacturing mode selection considering uncertain EOL products’ quality and differential consumers’ WTP

Abstract

PurposeThe purpose of this paper is to investigate remanufacturing operational strategies considering uncertain quality of end-of-life (EOL) products and differential consumers’ willingness-to-pay (WTP) for new products and provide suggestions on the remanufacturing mode selection for the original equipment manufacturer (OEM).Design/methodology/approachThis study considers three remanufacturing modes, i.e. in-house, outsourcing and authorization modes. By establishing and comparing decision models of three modes from the perspectives of profit, consumer surplus and environment, the optimal remanufacturing mode is discussed.FindingsThe results suggest that if the OEM’s remanufacturing capability is high, the in-house mode brings to the highest environmental performance, OEM’s profit and consumer surplus. Otherwise, the outsourcing mode (authorization) is the best benefit to environment (consumers if the unit production cost of new products is not too high). As for the preference of two decision-makers to outsourcing and authorization modes, if the difference of consumers’ WTP for new products is low, the OEM prefers the outsourcing mode; otherwise, the OEM prefers the authorization mode. The preference of the third-party remanufacturer (TPR) to remanufacturing mode is affected by consumers’ WTP for remanufactured products, WTP difference for new products and remanufacturing quality level standard.Practical implicationsThese results can provide operational insights into how to select remanufacturing mode when the quality of EOL products is uncertain and consumers’ WTP for new products is different under three remanufacturing modes.Originality/valueThis paper is among the first to investigate the joint effects of EOL products’ uncertain quality and differential consumers’ WTP for new products on the operational strategies and performance under different remanufacturing modes.