Sustainable decisions on product upgrade confrontations with remanufacturing operations

In recent decades, remanufacturing is perceived to be an environmentally friendly option due to the reduced consumption of materials, energy etc. It should be noted that whether the remanufacturing operations are undertaken by the original equipment manufacturers (OEMs) or outsourced to the remanufacturers, given the size and the growth of remanufactured products, many OEMs intend to fend off the potential cannibalization of new products sales through differentiating their quality levels from those of remanufactured ones by launching upgraded versions. To understand whether and how the product upgrading strategy impacts on optimal outcomes in the context of the remanufacturing operations undertaken by OEMs or third-party remanufacturers (TPRs), in this paper, we develop two models that highlight the OEM’s product upgrading strategy under the scenarios where (1) the OEM owns its remanufacturing operations in-house (Model O) or (2) remanufacturing operations are undertaken by a TPR (Model T). Among other results, we find that, from an economic performance perspective, it is more beneficial for the OEM to perform remanufacturing operations in-house; however, from an environmental sustainability perspective, such behavior is not always good for our environment. In particular, when the level of product upgrading is pronounced, the remanufacturing operations undertaken by the OEM are always detrimental to our environment, due to indulging in remanufacturing, as seen in Model O

Pricing and Warranty Level Decisions for New and Remanufactured Short Life-Cycle Products

Remanufacturing has become more prominent as a recovery process to mitigate the massive disposal of short life-cycle product at its end-of-use. However, remanufactured product is often perceived to be inferior to new product, and it has lower value in consumer’s willingness to pay. To increase the perceived quality of the remanufactured product, manufacturer offers a warranty, since one of the three roles possessed in warranty is being a signal to product reliability. This paper studies the pricing decisions and warranty level decision for new and remanufactured products in a closed-loop supply chain consists of a manufacturer and a retailer. The optimization modeling is performed under Stackelberg game with manufacturer as the leader. We found that higher expansion effectiveness coefficient would increase the supply chain profit. Also, there is an interval of demand’s speed of change, where the total profit would be at its highest. The optimum warranty level can be achieved regardless the initial warranty level set at the beginning of retailer’s optimization. Furthermore, the remanufactured product’s wholesale and retail prices are influenced by the expansion effectiveness coefficient

Structural and Pricing Decisions in Manufacturing/Remanufacturing Systems with Vertically Differentiated Products

This research encompasses three related papers to address some of the influencing factors in structural and pricing decisions in supply chains with manufacturing and remanufactunng. We consider new and remanufactured products that are vertically differentiated, that is, the consumers perceive the remanufactured product as of a lower quality and thus they are not willing to pay for them as much as they would for the new product. Examples of such products are seen in computer systems, automotive parts and office equipment. In the first paper, we consider a closed loop supply chain that includes a manufacturer, a remanufacturer and a retailer. We investigate the pricing decisions for the new and remanufactured products under different coordination structures between members of the chain while taking into account the consumers’ perception of the remanufactured product versus new and the quality of returns as two major parameters. In addition, we find which coordination structure is a better option for the closed loop supply chain members. Particularly, we find that although a lower price is charged for the new product when the retailer and the remanufacturer are coordinated (RREMC) compared to the completely decentralized (CD) structure, a higher number of new products are sold in the completely decentralized structure. A similar result is found for the remanufactured product when comparing the CD structure with the one in which the retailer and manufacturer are coordinated (MRC). We also find that MRC results in the highest total profit while RREMC results in the lowest. In the second paper, we analyze the pricing decisions for a firm that produces both new and remanufactured products and also collects the used product returns (known as cores, which are used in remanufacturing). The firm needs to define the core acquisition price as well as the selling prices for both new and remanufactured products. In our models, we capture the quality of returns (by assuming a stochastic collection yield rate) and the competition between new and remanufactured products, and show how they influence the optimal expected prices and profit of the firm. We provide managerial insight on how varying the optimal prices could help the firm optimally accommodate for different conditions (i.e. with respect to changes in the consumers’ perceptions of the products, the yield rate, and the salvage value of the cores). For example, we find that when the firm sells low margin products, a small change in the consumers’ perception of the remanufactured products versus new could increase the firm’s expected profit by more than 10%. Finally, in the third paper, we consider two core collection structures for a firm that produces both new and remanufactured products. In the first structure (known as the centralized channel), the firm collects the cores directly from the consumers, while in the second structure (known as the decentralized channel), the firm uses a third-party collector to take care of the core acquisition We assume that the demands for new and remanufactured products are influenced by the product prices and also by a stochastic component. We jointly find the optimal prices and lot sizes for each product and investigate the impact of the competition between products (i.e. consumers’ perception of the remanufactured product versus new), the quality of returns (i.e. the collection yield rate) and the demand uncertainties on the optimal solution in each channel. Furthermore, we compare the channels on the amount of change in their optimal values and expected profits with respect to changes in the parameters We also provide managerial insight on how the firm should change the optimal prices and lot sizes in each channel considering possible changes in the consumers’ perception of the products, the collection yield rate and the demand uncertainties. For example, we find that when the demand uncertainties for the new and remanufactured products are higher, the reduction in the firm’s profit is about 2-3% less in the centralized channel compared to the decentralized one

Flexible versus simple trade-in strategy for remanufacturing

Some enterprises recently start to offer the flexible trade-in option to attract customers from competitors, in contrast to the simple one that only allows them to return used products to the same manufacturers for new. Based on analytical and numerical analyses, this study compares the environmental impacts of two trade-in strategies (simple versus flexible) in combination with different carbon tax policies. From the perspective of consumer switching behaviour, a Hotelling model with two market segments is established. Under the flexible trade-in strategy, the carbon emission of enterprises turns out to be significantly higher than that under the simple trade-in strategy. An appropriate carbon tax policy, especially with preferential tax rates on green products, is capable of guiding enterprises to choose a more environment-friendly trade-in strategy included in the model. The findings fill the research gap in comparing the pros and cons of simple and flexible trade-in strategies in terms of sustainable development, and provide managers and policy-makers the insights on how to promote the healthy development of the remanufacturing industry with trade-in strategizing and carbon taxation

CANON: A Circular Economy Business Model Case

This report presents the case study of Canon’s EMEA business for Document Solutions (DS), with a focus on the business model for remanufacturing and refurbishment. It was chosen as it provided an example of a mature remanufacturing model, as well as potential for further circularity and business benefit through expansion of refurbishment activities. Canon EMEA has also been growing services such as Managed Print Service (MPS) – a service-based model for providing printer copiers – which, while not a focus of the case study, provides opportunities for both remanufacturing and refurbishment. Canon operates in a market which is currently in decline, with vendors competing intensely for market share. This is creating a stark contrast between a business model driven by new product sales, and one that emphasises the cultivation and reutilisation of existing deployed assets. In this context, it is important to emphasise that this case study focuses on the circular business models and potential for Canon EMEA, whose business is principally a combination of sales/marketing and service delivery. This is in contrast to Canon Inc. (Japan) who manufactures and supplies equipment for Canon EMEA to sell and integrate into its service offerings. This case study explores the opportunities, as well as enablers and barriers, to Canon expanding the role of remanufacturing and refurbishment within its circular business models. We believe this will have important positive implications for Canon given the broader strategic challenges it face

Price competition with OEM-remanufactured products

Abstract Despite environmental and economic advantages of remanufacturing, the potential for cannibalizing the sales of new product by OEM-remanufactured products is a key obstacle for OEMs to remanufacture their end-of-life products. In this paper, we investigate the OEM-remanufacturing strategy and its impacts on price decisions by adopting a game-theoretic framework, where there is competition between a remanufacturer who sells third-party remanufactured products and an OEM who offers new products and chooses whether to introduce OEM-remanufactured products. We formulate consumer valuation for the products in the consideration of consumers' perceived similarity between the new and OEM-remanufactured products and, moreover, characterize the chain members' equilibrium pricing behavior concerning the availability of used products for remanufacturing. We elaborate the impacts of the entry of the OEM-remanufactured products on equilibrium results and show that the provision of OEM-remanufactured products is not necessarily harmful to the remanufacturer especially when consumers perceive the less similarity between the OEM's products. Results of this study intend to provide managerial insights for managers response to the changes in competitive dynamics, consumer characteristics, and cost factors

A triple bottom line examination of product cannibalisation and remanufacturing: a review and research agenda

Increased momentum in support of a Circular Economy (CE) has motivated the exploration of alternative production and value-retention processes that allow for the decoupling of environmental impacts from economic growth. Remanufacturing, a key value retention process, can enable significant economic, environmental and social (also known as triple-bottom line) advantages. Given their competitive value proposition, remanufactured products are often blamed by original equipment manufacturers (OEMs) for cannibalising the sale of newly manufactured products. Thus, remanufacturing is often viewed as high-risk, and potentially even a threat to conventional manufacturing activities by many OEMs, often triggering both active and passive countermeasures to protect market share. In many cases, such actions lead to reduced access to cores for remanufactures; they can also work against the uptake of remanufacturing activities that are essential for transitioning to a CE. To achieve a CE, remanufacturing activities must be scaled; however, without a clear understanding of the relationship between remanufacturing and product cannibalisation, OEMs may continue to avoid and/or interfere in remanufacturing systems. Further, in alignment with systems-thinking for CE, we posit that broadly-considered integration of CE dimensions is critical but lacking within the literature. To this end, this systematic review paper aims to clarify and organize the existing scientific literature about product cannibalisation and remanufacturing. We examine these contributions through an expanded Triple Bottom Line lens that aligns with the recognized dimensions of CE: social, environmental, economic, management, policy, and technology. A comprehensive content assessment revealed a predominant economic lens to the research, with statistical analysis, game theory, and numerical experiments as the primary methodologies employed. In addition, opportunities to more comprehensively explore social, policy, management, and technology perspectives as they relate to product cannibalisation and remanufacturing were identified. We develop and apply a new framework for considering product cannibalisation and price competition in the broader context of sustainability and the transition to CE. Finally, in addition to identifying a comprehensive range of stakeholders that need to be engaged, we recommend a future research agenda that explores the specific challenges, interactions, and relationships between product cannibalisation, remanufacturing, and the six dimensions of CE

Management of intellectual property uncertainty in a remanufacturing strategy for automotive energy storage systems

Legislative requirements are motivating vehicle manufacturers to produce innovative electric vehicle (EV), hybrid electric vehicle (HEV) and plug-in hybrid electric vehicle (PHEV) concepts. End-of-Life (EOL) for the vehicle’s battery is often taken to be the battery having 80% retained capacity. Even at this lower threshold, there is still considerable inherent value embedded within the battery system. The extraction of raw materials through recycling and the use of the battery in second life applications are widely documented. In contrast, there has been relatively little research published that investigates the options and requirements for remanufacturing the vehicle’s battery system as one means of improving the efficiency of the overall production process. This paper addresses two of the barriers, often cited, that inhibit organizations from adopting a remanufacturing strategy—ambiguity regarding the meaning of remanufacturing and uncertainty in how to manage intellectual property (IP). Based on a critical review of UK law and legal decisions pertaining to remanufacturing, the authors propose a revised set of definitions for circular economy activities, exploiting the terms: warranty and design-life to provide a clear differentiation for remanufacturing. The authors also propose a new framework for managing IP uncertainty. The model may be employed by both original equipment manufacturers (OEMs) to protect their innovations and remanufacturing activities and by independent organizations seeking to remanufacture OEM products

Pricing decision for new and remanufactured product in a closed-loop supply chain with separate sales-channel

Remanufacturing is a recovery process that transforms a used product into a “like-new” product, which usually comes with a warranty similar to that of the new product. Many manufacturers are concerned that remanufacturing might cannibalize the new products sales. Recent development shows an increasing trend in selling products through non-traditional channels, such as a manufacturers direct channel or an e-channel. A pricing decision model is developed for short life-cycle products in a closed-loop supply chain that consists of the manufacturer, retailer, and collector. The new product is sold via traditional retail stores and the remanufactured product is sold via the manufacturers direct channel. There are two scaling factors introduced in the model: (1) customer acceptance of buying a remanufactured product (reman-acceptance); (2) customer preference for buying a remanufactured product via a direct channel (direct-channel-preference). The results show that implementing a separate channel can improve the total supply chains profit compared to the single-channel approach. It is also found that the two scaling factors influence both the pricing decisions and profits of supply-chain members