Selling Remanufactured Products under One Roof or Two? A Sustainability Analysis on Channel Structures for New and Remanufactured Products

Abstract

Even though many manufacturers integrate remanufacturing into existing business models, it should be noted that such efforts are usually accompanied by a major concern for cannibalization of new product sales from remanufactured products. To deal with this problem, many manufacturers, such as Dell, adopt a “two-roof policy” where the sale of new products takes place in a store and their remanufactured products in another. However, in contrast, some manufacturers, including Apple and HP, adopt a “one-roof policy”, by which all new and remanufactured products are sold through one store/chain. Although the literature on remanufacturing has extensively addressed sustainability issues within operations management, little attention has been paid to how “differentiated roof policy” for the marketing of remanufactured products affects sustainability issues. To fill this gap, in this paper, the authors develop two theoretical models in which manufacturers have the flexibility to distribute new and remanufactured products (1) through a one-roof policy (Model O) or (2) through a two-roof policy (Model T), respectively, and strive to address the question of how differentiated roof policies impact sustainability issues related to remanufacturing operations. Among other results, the central result suggests that, if the manufacturers care about economic performance, distributing both products through a two-roof policy is an advantageous strategy. Conversely, if they care about environmental sustainability, one roof is the preferred strategy.