Essays on Product Acquisition for Value Recovery

This dissertation studies decision problems facing the manufacturer that offers cash incentive to encourage a fraction of its install base to return end-of-use devices. Marketing managers often use such tactics as a promotion tool to motivate sales of new products. Supply chain managers often use such tactics to obtain used products for profitable recovery operations. The first essay, Product Acquisition for Remanufacturing: A Dynamic Analysis, analyzes the performance of buyback and trade-in policies for acquiring products to be remanufactured. A key distinguishing feature of this analysis is the consideration of time dynamics. In particular, both the quantity-condition profile of used products and the market interest in remanufactured products evolve over time, and the manner of evolution is influenced by new product sales. Essay 1 introduces and analyzes a series of models that reflect the dynamics of customer willingness-to-return and willingness-to-pay attitudes, the size and condition of the OEM product install base, the demand for remanufactured product, and the demand for new product. Conventional approaches set trade-in and buyback prices to maximize profits in a single period; however, our analysis show that companies can earn higher profits by adopting a proactive approach. The second essay Final Purchase and End-of-Use Acquisition Decisions in Response to a Component Phase-Out Announcement is motivated by informal talks with supply chain executives from the computer industry. Essay 2 investigates a problem faced by a durable-goods manufacturer of a product that is no longer manufactured but still under warranty. A supplier announces that a component of the product will be phased out and specifies a deadline for the final order. In addition to determining the final order quantity from the supplier, the manufacturer may introduce a trade-in program to generate an alternative supply of the component for the purpose of satisfying warranty claims. We analyze how industry and market characteristics influence the manufactures optimal decisions and profits. The analysis in the second essay lends insight into the determinants of the initial order quantity, the characteristics of a well-designed trade-in program to support component harvesting, and the cost of ignoring a trade-in program for component harvesting. We find that launching a trade-in program and harvesting spare-parts from the returned device is not only a viable response to a supplier\u27s component phase out announcement, under certain conditions, launching a trade-in program is actually profitable