The integral decision on production/remanufacturing technology and investment time in product recovery

Abstract

This paper examines the financial impact of technological decisions firms face when introducing a new product which, as firms increasingly assign responsibility for the recovery of their used products, must be expanded to include their influence on available options on how to deal with used products. The integrated choice between a low (disposal) or high (remanufacturing) level of product recovery and, in the second case, at which time to start remanufacturing activities and whether the firm would dispose of initial product returns or store them until start time result in three generic options: (a) design for single use, (b) design for reuse, and (c) design for reuse with stock-keeping. After introducing a basic dynamic framework consisting of a product life cycle for the demand and a similar development for an external return stream, the Net Present Values of the relevant payments connected with each option are given and optimal policies for options (b) and (c) are derived. An extensive numerical study is used to examine the potential benefits from using the inventory and the applicability of simple heuristic rules for stock-keeping and for determining when to start remanufacturing.