Distribution Channel Choice and Divisional Conflict in Remanufacturing Operations

We consider a firm consisting of two divisions, one responsible for designing and manufacturing new products and the other responsible for remanufacturing operations. The firm will sell these new and remanufactured products either directly to the consumer (direct selling) or through an independent retailer (indirect selling). Our study demonstrates that a firm’s organizational structure can affect its marketing decisions. Specifically, a decentralized firm with separate manufacturing and remanufacturing divisions can benefit from indirect selling with higher firm profit, supply chain profit, and total consumer demand than direct selling. Moreover, this structure also induces a remanufacturable product design. In contrast, a centralized firm in which the manufacturing and remanufacturing divisions are consolidated is intuitively better off by choosing direct selling than indirect selling. Furthermore, we show that, surprisingly, when the focal firm sells through an independent retailer, a decentralized internal structure can result in higher supply chain profit than a centralized internal structure. We further investigate the case of dual dedicated channels and conclude that, while direct selling of remanufactured products and indirect selling of new products can better induce a remanufacturable product design and higher supply chain profit, it is not in the best interest of the firm in terms of total sales and firm profit

On how the acquisition of recoverable parts influences the profitability of spare parts management for durables

In the management of spare parts for durables OEMs often face a sharp decline in sales of spare parts when the warranty period of their products ends. One reason for this effect is given by the high profitability of the after sales market which attracts competitors. If the competitors’ main sourcing option consists of repairing used or broken parts, an acquisition of those parts by the OEM might lower competition and increase sales. The purpose of this paper is to provide a case-based framework to offer insights on the opportunity of recovering parts. We consider a two-stage supply chain, where independent repair shops are responsible for handling the repair process. There are two options to meet spare parts demand: repair shops may replace the part with a new one (ordered from the OEM) or they may use a part that they repaired before. While repair shops achieve a larger profit by repairing parts, the OEM would prefer the use of new parts. However, he has no control on demand which might be obtained through buyback of broken parts. Furthermore, the OEM could recover these parts on a higher level, thus reducing production/procurement of new parts. The main contribution of this paper is to elaborate the important effects of recoverable items acquisition on spare parts demand by using a simple deterministic framework thus outlining the impact of different parameters on the profitability of spare parts management.Closed-Loop Supply Chains, Spare Parts, Competition in Product Recovery, Case Study

Dynamic buy-back for product recovery in end-of-life spare parts procurement

The efficient supply of spare parts is of prime concern for OEMs. Next to the traditional spare parts sources in form of final order and remanufacturing, the option to buy back broken products prevents the OEM from fulfilling his spare parts availability obligation in the end-of-life phase and increases his ability to remanufacture. This contribution seeks to identify optimal buy-back strategies for different settings regarding information availability and buy-back flexibility. A numerical study analyzes circumstances under which buy-back is especially beneficial for the OEM.Inventory Management, Spare Parts Management, Reverse Logistics, Buy-back

A Portfolio Pricing Model and Contract Design of the Green Supply Chain for Home Appliances Industry Based on Retailer Collecting

From the perspectives of the operational objectives of the green supply chain management and in consideration of its economic efficiency, social and environmental impact as well as its unique characteristics, this paper examines the pricing issues of the green supply chain for home appliances industry by using game theory and contract coordination theory. Considering the influences of the effective recycle behavior of the used home appliances to the whole supply chain, the paper proposes a game model for the portfolio pricing for the wholesale, retail and recycle price based on retailer recycling model. Then a revenue and expense-sharing contract model is designed to improve the game effects, by allocating both total revenues and expenses related to the manufacturing, retailing and recycling operations in the green supply chain among all participating players, thus maximizing the profits and effectiveness of the supply chain as a whole. The pricing models presented in this paper provide a practical and theoretical guidance for home appliances enterprises in making pricing decisions and supply chain contracts

Applying Revenue Management to the Reverse Supply Chain

We study the disposition decision for product returns in a closed-loop supply chain. Motivated by the asset recovery process at IBM, we consider two disposition alternatives. Returns may be either refurbished for reselling or dismantled for spare parts. Reselling a refurbished unit typically yields higher unit margins. However, demand is uncertain. A common policy in many firms is to rank disposition alternatives by unit margins. We show that a revenue management approach to the disposition decision which explicitly incorporates demand uncertainty can increase profits significantly. We discuss analogies between the disposition problem and the classical airline revenue management problem. We then develop single period and multi-period stochastic optimization models for the disposition problem. Analyzing these models, we show that the optimal allocation balances expected marginal profits across the disposition alternatives. A detailed numerical study reveals that a revenue management approach to the disposition problem significantly outperforms the current practice of focusing exclusively on high-margin options, and we identify conditions under which this improvement is the highest. We also show that the value recovered from the returned products critically depends on the coordination between forward and reverse supply chain decisions.remanufacturing;revenue management;onderdelen;revenues;spare parts inventory

Dynamic buy-back for product recovery in end-of-life spare parts procurement

The efficient supply of spare parts is of prime concern for OEMs. Next to the traditional spare parts sources in form of final order and remanufacturing, the option to buy back broken products prevents the OEM from fulfilling his spare parts availability obligation in the end-of-life phase and increases his ability to remanufacture. This contribution seeks to identify optimal buy-back strategies for different settings regarding information availability and buy-back flexibility. A numerical study analyzes circumstances under which buy-back is especially beneficial for the OEM

Collaborative Rebate Strategy of Business-to-Customer Platforms Considering Recycling and Trade-Ins Simultaneously

B2C (business to customer) platforms like JD.com and Suning.com often cooperate with professional recycling companies, and implement recycling programs and trade-in programs simultaneously, especially for electronic products. The former means that platforms recycle old products from customers with cash, whereas the latter means that platforms allow customers to trade in old products for new ones. Under this background, we discuss how to develop the optimal rebate strategy for B2C platforms based on the market recovery price of old products, and give the optimal rebate prices and feasible conditions of single-rebate, dual-rebate, and none-rebate strategies. The results show that the single-recycling rebate strategy is dominant when the residual value of old products is low, and when the residual value of old products is high, platforms should choose in turn the single-trade-in rebate strategy, dual-rebate strategy, single-recycling rebate strategy, and non-rebate strategy with the increase in the cost of new products. In order to obtain higher profits, B2C platforms should provide appropriate rebates to better coordinate the recycling program and the trade-in program on the basis of the market recovery price, the residual value, and the durability of old products as well as the cost, the selling price, and the upgrade range of new products

A Bi-Objective Tactical Planning Model for the Reverse Supply Chain of Durable Products

Recent environmental legislations and customer awareness on environmental impacts of landfill activities as well as the profitability of reverse supply chains (RSC) have drawn the attention of researchers and companies to RSC management. RSCs include the series of activities from acquiring a used product until its recovery and sending it back to the market. In this thesis, we propose an integrated RSC tactical planning model under the context of complex durable products. The durable products consist of various types of components. This attribute makes them subject to the all disposition options, including remanufacturing, part harvesting, material and bulk recycling. The proposed model decides on the coordinated decisions on acquisition, disassembly, grading, and disposition activities in the reverse supply chain. Unlike the majority of works in the literature, our contributions include two objective functions addressing both financial and environmental criteria. Furthermore, we also consider two quality levels for returns, as well as a multi-indenture structure for the end-of-life (EOL) products, and consequently all possible recovery options in the RSC. We formulate the problem as a bi-objective, multi-period mixed integer linear programming (MILP) model. We applied the proposed model to an academic case study in the context of an EOL electronic device. The bi-objective model is solved by the aid of the epsilon-constraint method and a set of non-dominated solutions are provided. Finally, we conduct a set of sensitivity analysis tests for each objective function in order to determine the most significant parameters that affect the financial and environmental criteria in this problem