Third-party Remanufacturers Research Articles

The choice of remanufacturing strategy for the OEM with third-party remanufacturers’ advantages

Outsourcing remanufacturing is a commonly adopted business practice under which original equipment manufacturers (OEMs) outsource remanufacturing to third-party remanufacturers (TPRs) and focus on new products. Motivated by different advantages from TPRs, we develop two models to characterize the features: (1) the TPR has a cost advantage by improving remanufacturing system and device (Model C); (2) the TPR has a quality advantage from brand guarantee (Model Q). The results suggest that in-house remanufacturing seems to be in an inferior position, but actually it is better than outsourcing if TPRs’ advantages and the customers’ perception of returned quality are unobvious. Both repairing cost and customers’ perception of returned quality are essential for the OEM’s optimal remanufacturing strategy. The outsourcing is dominant in the relatively high repairing cost or customers’ perception of returned quality. Moreover, the obvious quality advantage plays the dominant role in outsourcing. Furthermore, we analyze the environmental impact and consumer surplus of remanufacturing strategies and identify the condition under which strategy benefits the environment and customers. When the environmental impact (acceptance) of the remanufactured product is relatively high (low), the optimal strategy presents a conflict between environment and customers’ benefit.

Blockchain adoption and channel selection strategies in a competitive remanufacturing supply chain

Environmental protection and economic benefits have attracted original equipment manufacturers (OEMs) and third-party remanufacturers (TPRs) enter into the remanufacturing industry. Considering that consumers have a low willingness to pay for remanufactured products, OEMs tend to apply blockchain technology to disclose more product information to consumers to improve their purchase intention. Along this line, we investigate a supply chain consisting of an OEM, a TPR and a retailer, and examine four models depending on whether the OEM adopts blockchain technology or not, and whether the OEM sells products directly to consumers (direct channel) or indirectly by the retailer (retail channel). In this paper, a Stackelberg game is formulated to obtain the optimal strategies for blockchain technology adoption and distribution channel selection. Analytical results show that the OEM should adopt blockchain technology only when consumers’ value discount for remanufactured products produced by the OEM is high and the unit cost of adopting blockchain technology is not high under both direct and retail channels. In specific situation, the direct channel is always advantageous to the OEM whether or not blockchain technology is adopted. In addition, when consumers’ value discount for remanufactured products is not low and the unit cost of adopting blockchain technology is not high, blockchain technology adoption is beneficial to the environment under both direct and retail channels.

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

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.

Retailer or the third-party remanufacturer: Which is the greener contractor for outsourcing remanufacturing?

Retailer or the third-party remanufacturer: Which is the greener contractor for outsourcing remanufacturing?

Optimal remanufacturing strategy in the presence of consumer reviews

This paper investigates the informative role of consumer reviews and its impact on the original equipment manufacturer’s (OEM) pricing decisions as well as the third-party remanufacturer’s (TIR) entry decisions. The TIR may free ride the consumer reviews to disseminate the experienced quality information of the remanufactured product whereas the OEM may counteractively adjust its pricing strategy to manipulate consumer reviews. We uncover three strategic effects including the informative effect of consumer reviews, the incremental effect of the remanufactured product and the cannibalization effect, which jointly determine the OEM and TIR’s strategies and profits. We show that the presence of consumer reviews endows the OEM and the TIR with more flexibility in crafting their pricing strategy and remanufacturing strategy, respectively, wherein in equilibrium: (1) the TIR are more likely to choose the “partial-remanufacturing” strategy when the experienced quality level of the new product is relatively low but the “full-remanufacturing” strategy otherwise; (2) the OEM prefers to adopt the skimming strategy when the experienced quality level is moderate but the penetration pricing strategy otherwise. Counter-intuitively, we find that the TIR’s entry will attain a “win–win” situation for both players when the experienced quality level is sufficiently low. Our results also show that consumer reviews are not always beneficial to both players, which is closely dependent on the new product’s quality level. We further find that consumers’ heterogeneity in the incremental effect has certain influence on the choices of the OEM’s pricing strategy and the TIR’s remanufacturing strategy.

The Impact of Government Dual Policy on the Selection of OEM’s Regulatory Strategy for Third-Party Remanufacturing

Remanufacturing plays an important role in the circular economy and environmental protection. In the development of the remanufacturing closed-loop supply chain (CLSC), the impact of government policy cannot be ignored. However, previous studies have rarely answered the impact of government dual policy (the policy combination of trade-old-for-remanufactured and carbon tax policy) on the optimal decisions of CLSC enterprises. To fill the gap, this work considers the remanufacturing modes and government dual policy simultaneously and investigates a CLSC of waste of electronic and electrical equipment (WEEE) consisting of an original equipment manufacturer (OEM) and a third-party remanufacturer (TPR). Here the OEM has three strategies for regulating third-party remanufacturing activities: outsourcing (Model O), authorization (Model A), and nonregulation (Model D). The results show that: (i) Whether the government implements the dual policy or not, Model O is the best choice for OEM. And compared with nongovernment policy intervention, government dual policy can improve the recovery rate of WEEE products and then effectively promote the recycling of waste resources; (ii) When the government dual policy parameters meet a certain condition, the dual policy could effectively increase supply chain members’ profits and the total profits of CLSC and boost market demand expansion; (iii) Compared with the other two remanufacturing modes, the CLSC under nonregulation strategy is the optimal remanufacturing mode for the whole society; meanwhile, OEM nonregulation strategy is the worst strategy for the environmental protection. In addition, when the government sets appropriate parameters, government dual policy is beneficial to the consumer, supply chain member, and the society simultaneously, but the impact of the dual policy on the environment is also related to the ratio of the two products’ impact on the environment.

Outsourcing decision-making in global remanufacturing supply chains: The impact of tax and tariff regulations

In contemporary international remanufacturing supply chains, whether an original equipment manufacturer (OEM) engages in remanufacturing operations or outsources to a third-party remanufacturer (TPR) is influenced by tax and tariff regulations. This study develops a two-stage game model for the decision-making of an OEM from an exporting country showing that the optimal remanufacturing model is significantly affected by the tax and tariff regulations of the importing country and more particularly, the difference between sales tax on remanufactured products and the unit product import tariffs on new products. The model selections for the OEM and the importing country align when this difference is close to zero. This paper is one of the few examining the impact of tax and tariff regulations on outsourcing decisions in remanufacturing contexts, which is largely neglected in the extant literature but has become increasingly important, especially with recent development trends of deglobalization (e.g., Brexit, the US–China trade war, and various sanctions). The significance of this study is threefold: the work makes novel theoretical contributions to the decision-making game model with tax and tariff constructs taken into consideration, has practical implementations for optimizing the strategic business deployment of OEMs, and has implications for consideration of policy and social welfare by policy makers of the destination country.

Pricing Decision for a Closed-Loop Supply Chain with Technology Licensing under Collection and Remanufacturing Cost Disruptions

Closed-loop supply chain (CLSC) management faces collection and remanufacturing cost disruption challenges. This study explores a CLSC system wherein original equipment manufacturers (OEMs) license the third-party remanufacturer (TPR) to bear the remanufacturing activities and investigate pricing decisions in the CLSC, while considering collection and remanufacturing cost disruptions. To obtain the optimal pricing strategy, we develop game theory models under the disruptions of both centralized and decentralized CLSCs. Based on theoretical and numerical analyses, we obtain the following results: (1) Whether or not disruption events occur, the centralized supply chain can better encourage consumers to participate in the collection of used products than a decentralized supply chain; (2) when collection disruption in a large positive region or the remanufacturing cost disruption in a large negative region occurs, OEM and TPR profits will greatly increase, and the OEM will raise the licensing fee to extract more profit from the remanufacturing activity; (3) a certain robust region exists for the retail price and wholesale price when the supply chain faces disruption increase; (4) when the supply chain faces the disruptions, it has great influence on the OEM’s licensing fee but little on the TPR’s acquisition price. The main contributions of the study include: (1) We considered the impacts of both technology licensing and collection and remanufacturing cost disruption; (2) we developed game theory models to determine the optimal manufacturing and remanufacturing quantities, and pricing strategy under the disruptions; (3) based on theoretical and numerical analyses, we presented some interesting and important insights. The results of this paper could provide useful guidelines for supply chain members on how to effectively control costs to obtain more profit by adjusting prices and selecting a better operation mode for the closed-loop supply chain.

Optimal production and financing portfolio strategies for a third‐party remanufacturing supply chain with capital constraint

This paper considers a supply chain comprising one loss‐averse third‐party remanufacturer (TPR) and one capital‐constrained original equipment manufacturer (OEM), then investigates its optimal production and financing portfolio strategies when OEM finances through three strategies: pure bank loan (PBL), full delay‐in‐payment with bank loan (FDP‐with‐BL), and partial delay‐in‐payment with bank loan (PDP‐with‐BL). It is found that the optimal structure of PDP‐with‐BL strategy depends on the relative size of TPR's actual loss aversion and a threshold value. When TPR's loss aversion intensifies, PDP‐with‐BL gradually replaces FDP‐with‐BL as the most favorable financing strategy for third‐party remanufacturing. OEM prefers PBL strategy, while TPR and the supply chain prefer PDP‐with‐BL strategy.

Retailer's make-or-buy decision for remanufactured products under in-house yield uncertainty

Remanufacturing is a sustainable practice, as it can save resources and alleviate environmental pollution. However, the production process can be subject to yield uncertainty if the manufacturer has limited remanufacturing capability. This study considers a retailer that sells both new and remanufactured products simultaneously. The retailer can either produce the remanufactured product in-house under yield uncertainty (Scenario I), or remove this uncertainty by relying on a third-party remanufacturer (Scenario O). We investigate the retailer's make-or-buy decision under in-store competition (between new and remanufactured products) and find that, remarkably, consumers’ high valuation of the remanufactured product induces the retailer to order an increased quantity of new products in both Scenarios O and I. In addition, we find that the retailer can obtain a higher profit in Scenario O because the new product supplier will strategically lower the wholesale price owing to the intensified supply competition, which could also benefit the new product supplier and, hence, achieve a win–win situation.

Remanufacturing Strategies for a Closed-Loop Supply Chain Considering Brand Power and Carbon Regulation

This paper aims to investigate the impact of the cap-and-trade system on remanufacturing strategies in a competitive market, taking into account market power related to brand image. Therefore, we characterize a closed-loop supply chain that consists of two firms (high-end and low-end) and a third party, such that only the high-end firm or third party can perform remanufacturing. The optimal solution for each scenario measures the economic and environmental performances of the closed-loop supply chain. The findings reveal that the acceptable regions of remanufacturing third-party remanufacturing are inferior to high-end remanufacturing for high-end products. However, third-party remanufacturing is more eco-friendly than internal remanufacturing under a smaller carbon quota. The study provides significant managerial insights for businesses interested in remanufacturing. It can also serve as a basis for policymakers to implement carbon regulations.

Cooperative mechanism on a three-echelon supply chain with remanufacturing outsourcing

This paper studies the cooperative mechanism for a three-echelon supply chain with remanufacturing outsourcing comparing a supplier, a manufacturer, and a third-party remanufacturer, wherein we take the relative fairness concerns into consideration. The Stackelberg game theory is introduced to analyze the best values for the supply chain and each member. Nash bargaining solution is used as the relative fairness-concerned reference to discuss the corresponding optimal solutions of these models. By determining and comparing the equilibrium solutions across the five models, we discover that given the Nash bargaining fairness-concerned behavior, the system profits in the completely decentralized and three cooperative scenarios are lower than they are for products in the completely centralized decision model. The results show that in the centralized channel, the optimal profit and market demand in the three-echelon supply chain are maximized. Furthermore, it turns out that a cooperative mechanism can bring great benefits to its performance.

Channel Structure Choice for Remanufacturing under Green Consumerism

In recent decades, more and more consumers—referred to as “green consumers”—are willing to incorporate environmentally responsible decisions into their purchasing behaviors. This tendency is particularly notable in the European Union, the USA, and China. From a research perspective, while recent studies on remanufacturing have investigated optimal practices in regard to green consumerism, they have failed to address the flexibility manufacturers are afforded to outsource remanufacturing operations to third parties. In practice, some brand-name manufacturers—such as IBM, Land Rover, and Sun—do indeed outsource their remanufacturing operations. To further our understanding of the implications of differentiated structures for remanufacturing operations under green consumerism, we developed two models: one for a manufacturer undertaking remanufacturing themselves (Model M), and one for a manufacturer outsourcing it to a third-party remanufacturer (Model O). Our results indicate that, for markets with significant green consumerism, Model M tends to result in more remanufactured units and creates higher profitability for the manufacturer. However, under certain conditions, this model may also result in greater harm to the environment due to the comparative excess of manufacturers in the remanufacturing process. This implies that environmental groups and agencies should not only aim to encourage green consumerism, but should also focus their attention on the channel structures for remanufacturing.

Carbon emission reduction and coordination in a closed-loop supply chain with outsourcing remanufacturing

PurposeOutsourcing remanufacturing is a major form of remanufacturing, and emission reduction is an important part of a manufacturer's production. This paper aims to investigate carbon emission reduction strategies in a closed-loop supply chain (CLSC) with outsourcing remanufacturing and design a contract to coordinate the CLSC.Design/methodology/approachThe authors establish two-period game models between an original equipment manufacturer (OEM) and third-party remanufacturer (TPR) in different scenarios, including decentralized decision, centralized decision and coordinated decision. Furthermore, the authors study the optimal decisions by maximizing the profit model. The authors also investigate the impact of a carbon tax and emission reduction on the optimal decisions through comparative analysis.FindingsEmission reduction increases the quantity of new products and the OEM's profit. However, emission reduction decreases the outsourcing fee, which is not conducive to remanufacturing; thus, the TPR's profit does not necessarily increase. Compared with a decentralized scenario, the output of remanufactured products and the total profit increase. When the acceptance level of remanufactured products is high enough or when emissions from remanufacturing are low enough, the total carbon emissions are reduced in the centralized scenario. For the coordination of the CLSC, the OEM needs to increase the outsourcing fee and the TPR needs to share part of the emission reduction costs.Research limitations/implicationsThe TPR can choose three different remanufacturing strategies, namely, no remanufacturing, partial remanufacturing or full remanufacturing. For the majority of firms, it is difficult to remanufacture all used products. Therefore, the analysis is based only on partial remanufacturing.Practical implicationsThe results provide insights for remanufacturing and emission reduction decisions, as well as a decision basis for the cooperation between the OEM and TPR.Originality/valueThe authors combine the OEM's carbon emission reduction with outsourcing remanufacturing, and investigate the impact of technological spillover on the TPR's profit.

Research on the Evolutionary Game of Construction and Demolition Waste (CDW) Recycling Units' Green Behavior, Considering Remanufacturing Capability.

At present, China has not yet formed an effective development model for the industrialization of construction waste. The level of construction waste treatment and resource utilization is still low, and recycled products also lack market competitiveness. In order to promote the effective development of the remanufactured construction and demolition waste supply chain better, and based on the present situation, this manuscript establishes a game model for recycling units in two different situations: with and without remanufacturing capabilities. However, most existing studies have determined that all recycling units have remanufacturing capabilities. In the first situation, the main players of the game are recycling units with remanufacturing capabilities and consumers. In the second situation, the main players of the game are recycling units without remanufacturing capabilities and the third-party remanufacturer with remanufacturing ability. Therefore, our research can ascertain the optimal strategy choices of both parties in the game under different return situations and discuss the impact of changes to related parameters through numerical simulations. The results show: (1) When the recycling unit has remanufacturing capabilities, corporate leadership and government supervision rate have positive effects on its evolution to strict manufacturing. Only a high supervision rate can effectively suppress the negative impact of speculative gains and drive the system to (strict manufacturing; positive). Furthermore, the higher the supervision rate, the faster the system will converge. Then, the consumer’s payment difference coefficient has a negative effect on the evolution of the recycling unit to strict manufacturing. The larger the payment difference coefficient, the faster the system will converge to a stable state (tendency to formal manufacturing; negative). (2) When the recycling unit does not have the ability to remanufacture, the government cost subsidy rate and the recycling unit’s effort profit coefficient have positive effects on the recycling unit’s evolution to the direction of effort. Meanwhile, the larger the profit coefficient of the recovery unit’s effort, the faster the system will converge. The conclusions obtained provide certain theoretical guidance for the decision making of CDW recycling supply chain recovery units and relevant government departments.

Case Article—ReCellular Inc: Managing Demand Uncertainty in Closed-Loop Remanufacturing

The modeling-based case study is useful for two purposes: introduce closed-loop supply chains and highlight and model some of its unique aspects that the traditional newsvendor formulation does not capture. The case focuses on a third-party remanufacturer (3PR) who buys used cellphones in different quality grades in anticipation of demand. Phones in high grade have been used gently—they have a high acquisition cost but low remanufacturing cost. Low-grade phones have been used extensively—they are cheaper to acquire but have a higher remanufacturing cost. Medium-grade phones have intermediate acquisition and remanufacturing costs. The 3PR needs to trade off these two costs and determine which grade(s) of used phones to buy. The 3PR restores all phones to the same like-new standard during remanufacturing. Extensive use of the case in supply chain management courses shows that in the absence of a mathematical model, students systematically deviate from the optimal decisions because of contextual features. Overall, students believed the case was challenging and that it provides a valuable learning experience, both as an exposure to the closed-loop supply chain domain as well as developing models with industry-specific factors.Supplemental Material: The Teaching Note and Excel solution are available at https://doi.org/10.1287/ited.2021.0254ca .

Quality choice for product recovery considering a trade-in program and third-party remanufacturing competition

As an effective mode for product recovery, trade-in programs have been widely implemented in practice. With a trade-in program, an original equipment manufacturer (OEM) often faces a dilemma of determining the quality of new products, where quality is defined as an observable characteristic that increases consumers' willingness to pay for a product. On the one hand, for the OEM, a choice of higher quality can increase the perceived value of new products; on the other hand, it can also raise the cost of product recovery. In response, we develop game models considering the duopoly situation where an OEM offers a trade-in program to collect used products and faces competition from a third-party remanufacturer (TPR). Specifically, the proposed models capture how an OEM utilizes product quality to compete with a TPR under the presence and absence of a trade-in program. We derive the OEM's optimal quality choice and investigate the effect of the trade-in program and third-party remanufacturing in the Nash equilibrium. Furthermore, we examine how firms' profits and consumer surplus change in the trade-in program through a numerical study. Results indicate that the OEM almost always increases product quality in the trade-in context. Therefore, it is profitable for the OEM to implement the trade-in program to exploit repeat consumers and achieve price discrimination. Interestingly, the trade-in program is a profitable strategy against the TPR, but it is not necessarily detrimental to the TPR. Besides, the trade-in program can offset the positive effect of third-party remanufacturing on consumer surplus.

Outsourcing remanufacturing and collecting strategies analysis with information asymmetry

Outsourcing remanufacturing as a strategy for original equipment manufacturers (OEMs) to implement extended producer responsibility policy has become an important research problem. Considering information asymmetry caused by a third-party remanufacturer (3PR) misreporting remanufacturing production cost, this paper examines outsourcing collecting strategy through evolutionary game approach, and further obtains the long-term outsourcing remanufacturing strategy. The remanufacturing modes explored include in-house (OEM) and outsourcing (3PR) remanufacturing. The collecting modes explored include in-house (OEM), outsourcing (3PR) and secondary outsourcing (third-party collector, 3PC) collecting. Moreover, this paper provides optimal decision-making based on misreporting and further discusses the impact of information asymmetry on outsourcing strategy. Meanwhile, this paper proposes a series of insights of long-term strategy by integrating the dimensions of economy, society and environment. Finally, an information sharing strategy to deal with 3PR misreporting is further analyzed. The major conclusions indicate that under outsourcing remanufacturing with OEM collecting, the 3PR prefers to misreport the remanufacturing production cost information downward, which will lead to a result that information asymmetry is beneficial to both OEM and 3PR. However, misreporting in other collecting modes is only beneficial for 3PR. The evolutionary stability strategy of collecting depends on the difficulty of collecting and whether the information is symmetrical, which also affects outsourcing remanufacturing strategy. Under a certain condition, Pareto improvement in economic, social and environmental dimensions can be achieved by the information sharing strategy.

Competitive strategy and production strategy of the original equipment manufacturer and the third-party remanufacturer in remanufacturing

ABSTRACT Many researchers have examined the relationship between the original equipment manufacturer (OEM) and the third-party remanufacturer (TPR) and found that is mutually beneficial or competitive. This paper aims to study the competitive strategy and production strategy of the OEM and the TPR. The OEM’s competitive strategy is to change their competitive intensity by investing in pricing power of new components. For this problem, two different competitive strategies are proposed: Investment strategy and Non-investment strategy. Two models are established based on competitive strategies, and their analytical solutions are obtained by Stackelberg game. Comparing the two competitive strategies found that only when the investment cost and cost of new components both are low, can the OEM adopt Investment strategy. The Investment strategy have a threefold effect on the OEM: increasing profit, reducing cannibalization, and blocking the TPR’s entry. It is also found that as the cost of new components increases, the OEM may shift its competitive strategy from Investment to Non-investment. At the moment of competitive strategy shift, the production strategy may change discontinuously. Finally, comparing the environmental effect found that which competitive strategy is environmentally friendly only depend on the discount factor and the environmental advantages of the remanufactured product.

Distribution Channel and Remanufacturing Strategy Selection

Remanufacturing has become an important and fast-growing industry. Many original equipment manufacturers (OEMs) cooperate with third-party remanufacturers (3PRs) through either outsourcing or licensing. They sell the new and remanufactured products either directly to the consumer or indirectly through a retailer. Our study compares the OEM’s remanufacturing strategy selection in different distribution channel structures. We demonstrate that outsourcing remanufacturing benefits the OEM when the new products are sold directly and remanufactured products, with a relatively low valuation, are sold indirectly; otherwise, licensing remanufacturing is more beneficial for the OEM. We further find that when consumers perceive the remanufactured products with a sufficiently high value, the selection of remanufacturing strategies benefits consumers, society, and the environment.