Remanufacturer's downstream encroachment and incumbent brand's order shifting in Pareto improvement of economic and environmental sustainability

In the recent years, supported by Industry 4.0 techniques and government's strict quality supervision, rema-nufactured components can be of high quality as good as new. This encourages the supplier of remanufactured components to develop self-branded business and encroach on downstream market to compete with the incumbent brand. In this paper, we build a three-player game-theoretical model to investigate the pros and cons of the remanufactured component supplier's (Supplier R's) downstream encroachment, under the incumbent brand's single sourcing and order shifting strategies, respectively. We formulate Supplier R's nonlinear rema-nufacturing cost depending on the random quality of the collected components, based on which we find the incumbent brand's weak brand advantage will induce Supplier R's downstream encroachment. We also find that the incumbent brand's order shifting helps save Supplier R's remanufacturing cost and hence, limits Supplier R's downstream encroachment. Regarding the environmental sustainability, we use two indexes to measure it and show that there exist opportunities of Pareto improvement of economic and environmental sustainability for the supply chain system.

Automated summary

In recent years, remanufactured components have reached a high quality level comparable to new ones, thanks to Industry 4.0 techniques and government quality supervision. This has encouraged remanufactured component suppliers to develop their own brands and enter the downstream market to compete with established brands. A three-player game-theoretical model is used in this paper to analyze the advantages and disadvantages of the remanufactured component supplier's encroachment on the downstream market, considering the incumbent brand's strategies of single sourcing and order shifting. The study finds that the weak brand advantage of the incumbent brand leads to the encroachment of the remanufactured component supplier, while order shifting helps limit the encroachment by reducing the supplier's remanufacturing cost.