Journal
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Volume 59, Issue 19, Pages 5944-5959Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/00207543.2020.1797205
Keywords
Closed-loop supply chain; operational research; remanufacturing outsourcing; cannibalisation; competition
Categories
Funding
- National Natural Science Foundation of China [71531003, 71971043, 71472026, 71562006]
- Electronic Commerce and Modern Logistics Research Center Program, Key Research Base of Humanities and Social Science, Sichuan Provincial Education Department [DSWL19-8]
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In the outsourcing of remanufacturing, two potential strategies for dealing with cannibalisation are collecting used cores from consumers or remarketing all remanufactured products. Minimising cannibalisation does not necessarily maximize profits, as aggressive responses can reduce profitability. Managers should consider both the cannibalisation issue and the costs of collecting used cores in remanufacturing operations.
Cannibalisation is still a concern for original equipment manufacturers (OEMs) when they outsource remanufacturing operations to the authorised remanufacturers (ARs). In dealing with the cannibalisation in remanufacturing outsourcing, many OEMs (such as Sun, Apple, Hewlett Packard, Bosch Tools, and Gateway) use core collecting or remanufactured product remarketing. Motivated by examples from industry, we develop two models in which an OEM produces new products but outsources remanufacturing operations to a AR. The two potential strategies for dealing with the cannibalisation from remanufacturing outsourcing are: (1) collecting used cores from consumers, or (2) remarketing all remanufactured products to consumers. Among other results, we find that minimising cannibalisation problems does not equate with maximising profits. In particular, if the collection cost coefficient is not pronounced, the aggressive response by the OEM can effectively minimise the cannibalisation problems, but will reduce the profitability for the OEM on the other hand. Further, as the collection cost coefficient is moderate, remarketing remanufactured products can secure Pareto improvements. As such, we suggest that, practising managers should combine the cannibalisation problems of remanufacturing with the costs of collecting used cores.
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