Joint Life‐Cycle Dynamics of New and Remanufactured Products

Many products considered for remanufacturing are durables that exhibit a well‐pronounced product life cycle—they diffuse gradually through the market. The remanufactured product, which is a cheaper substitute for the new product, is often put on the market during the life cycle of the new product and affects its sales dynamics. In this paper, we study the integrated dynamic management of a portfolio of new and remanufactured products that progressively penetrate a potential market over the product life cycle. To this end, we extend the Bass diffusion model in a way that maintains the two essential features of remanufacturing settings: (a) substitution between new and remanufactured products, and (b) a constraint on the diffusion of remanufactured products due to the limited supply of used products that can be remanufactured. We identify characteristics of the diffusion paths of new and remanufactured products. Finally, we analyze the impact of levers such as remanufacturability level, capacity profile and reverse channel speed on profitability.     

An Analysis of the Eco‐Efficiency of Remanufactured Personal Computers and Mobile Phones

Remanufacturing, long perceived as an environmentally friendly initiative, is supported by a number of governments. Yet, the assumption that remanufacturing is desirable to society has never been systematically investigated. In this paper, we examine the effectiveness and eco‐efficiency of remanufacturing in the personal computer and mobile phone industries. We investigate whether remanufacturing substantially reduces the environmental impact, as measured by cumulative energy demand (CED), generated over the life cycles (LCs) of these products, and the size of any reduction. We also examine the relative eco‐efficiency of remanufacturing compared with virgin manufacturing for these two products, where eco‐efficiency includes both willingness‐to‐pay (WTP) for the products as well as the energy consumed in producing the products. Our main findings are the following. One, remanufacturing is an effective way to reduce the total energy consumed during the LCs of personal computers and mobile phones, with one notable exception, when the life spans of remanufactured products are substantially shorter than the life spans of their new counterparts. Two, a remanufactured personal computer or mobile phone is not always more eco‐efficient than a corresponding new product. Three, the WTP for remanufactured personal computers and mobile phones, and consequently, their eco‐efficiencies, are a function of the prices of the correspondent new products at launch and years elapsed between launch and remanufacturing. Four, remanufactured units are sold at a discount relative to the price of new personal computers and mobile phones. Five, on the whole, the market for remanufactured mobile phones is more eco‐efficient than the market for new mobile phones. Six, the market for remanufactured computers is more eco‐efficient than the market for new computers. Lastly, because the group of remanufactured products is heterogeneous, not all remanufactured units are more eco‐efficient than the average new computer and mobile phone. We conclude with a discussion of the impact of our findings on European WEEE and WEEE‐like legislation.     

Revenue and Cost Management for Remanufactured Products

This paper considers pricing and remanufacturing strategy of a firm that decides to offer both new and remanufactured versions of its product in the market and is concerned with demand cannibalization. We present a model of demand cannibalization and a behavioral study that estimates a key modeling parameter: a fraction of consumers who switch from new to remanufactured product. As we show, this fraction has an inverted‐U shape, and, thus, the underlying consumer behavior cannot be modeled using the standard methodologies that rely on consumers' willingness to pay (WTP). We find that by incorporating the inverted‐U‐shaped consumer behavior, the firm remanufactures under broader conditions, charges a much lower price, and typically remanufactures more units—leading to an increase of profits from remanufacturing by up to a factor of two as compared with making decisions based on the WTP only. Lastly, we find that the behavior of the low‐price market segment plays an important role because the firm reacts to it differently than the WTP‐based logic would suggest.     

Closed‐Loop Supply Chains: An Introduction to the Feature Issue (Part 2)

Closed‐loop supply chain management is the design, control and operation of a system to maximize value creation over the entire life‐cycle of a product with dynamic recovery of value from different types and volumes of returns over time. The research in this feature issue furthers our understanding of this rich area and serves as a starting point for another round of research which continues to dig deeper still into relevant industry issues.     

Closed‐Loop Supply Chains: An Introduction to the Feature Issue (Part 1)

Closed‐loop supply chains (CLSC) have product returns at the center of attention. Our view is that CLSC are best managed from a business perspective where organizations seek to maximize value recovery. The research in the feature issue, and our experiences, shows that there are still numerous, unresolved, managerially relevant issues that deserve further investigation. We also observe that there is a pressing need to validate the assumptions in our models using interdisciplinary, industry‐driven research. The time is right for production and operations management to play a central role in the sustainability movement slowly taking hold in practice.     

基于异质性消费群体的再制造产品的定价策略研究

消费者对新产品和再制造产品具有不同支付意愿。在此基础上,对再制造产品具有不同接受度的异质性消费群体分别建立了再制造产品差异化定价模型和单一定价策略模型。研究了制造商对新产品和再制造产品进行差异化定价时,新产品和再制造产品的最优定价和与之相对应的产品回收率,并与单一定价策略进行了比较分析。通过数值仿真,讨论了不同参数对单一定价策略和差异化定价策略的利润和产品回收率的影响,并给出了相关结论。     

Product Reuse Economics in Closed‐Loop Supply Chain Research

This paper provides a critical review of analytic research on the business economics of product reuse inspired by industrial practice. Insights and critical assumptions are provided for each paper. We further classify the research into four streams: industrial engineering/operations research, design, strategy, and behavioral, and present a framework linking these streams. We find that some modeling assumptions risk being institutionalized, and suggest a renewed exploration of industrial practice. Future research should also include empirical work on consumer behavior, product diffusion, and valuation of returns.     

The Impact of Product Lifecycle on Capacity Planning of Closed‐Loop Supply Chains with Remanufacturing

Product recovery operations in reverse supply chains face rapidly changing demand due to the increasing number of product offerings with reduced lifecycles. Therefore, capacity planning becomes a strategic issue of major importance for the profitability of closed‐loop supply chains. This work studies a closed‐loop supply chain with remanufacturing and presents dynamic capacity planning policies developed through the methodology of System Dynamics. The key issue of the paper is how the lifecycles and return patterns of various products affect the optimal policies regarding expansion and contraction of collection and remanufacturing capacities. The model can be used to identify effective policies, to conduct various “what‐if” analyses, and to answer questions about the long‐term profitability of reverse supply chains with remanufacturing. The results of numerical examples with quite different lifecycle and return patterns show how the optimal collection expansion/contraction and remanufacturing contraction policies depend on the lifecycle type and the average usage time of the product, while the remanufacturing capacity expansion policy is not significantly affected by these factors. The results also show that the collection and remanufacturing capacity policies are insensitive to the total product demand. The insensitivity of the optimal policies to total demand is a particularly appealing feature of the proposed model, given the difficulty in obtaining accurate demand forecasts.     

How Collection Cost Structure Drives a Manufacturer's Reverse Channel Choice

This note discusses the impact of collection cost structure on the optimal reverse channel choice of manufacturers who remanufacture their own products. Using collection cost functions that capture collection rate and collection volume dependency, we show that the optimal reverse channel choice (retailer‐ vs. manufacturer‐managed collection) is driven by how the cost structure moderates the manufacturer's ability to shape the retailer's sales and collection quantity decisions.     

Remanufacturing and the Component Commonality Decision

Firms often determine whether or not to make components common across products by focusing on the manufacturing and sales of new products only. However, component commonality decisions that ignore remanufacturing can adversely affect the profitability of the firm. In this article we analyze how remanufacturing could reverse the OEM's commonality decision that is based on the manufacturing and sales of new products only. Specifically, we determine the conditions under which the OEM's optimal decision on commonality may be reversed and illustrate how her profit can be significantly higher if remanufacturing is taken into account ex ante. We illustrate the implementation of our model for two products in the Apple iPad family.     

Cost Allocation in Manufacturing–Remanufacturing Operations

For firms remanufacturing their products, the total life‐cycle costs and revenues from new and remanufactured products determine their profitability. In many firms, manufacturing/sales and remanufacturing/remarketing operations are carried out in different divisions. Each division is responsible for only part of the product's life cycle. Practices regarding transfer pricing across divisions vary significantly among companies, affecting the life‐cycle profit performance of the product. In this research, we identify characteristics of transfer prices that achieve the firm‐wide optimal solution. To this end, we consider a manufacturer who also undertakes remanufacturing operations and we focus on price (quantity) decisions. We determine that a cost allocation mechanism that allocates a portion of the initial production cost to each of the two stages of the product life cycle should be used. We also conclude that cost allocation should be implemented as a fixed cost allocation, where charges to the remanufacturing division should be determined independently of the actual quantity of units remanufactured.     

Managing Demand Uncertainty through Core Acquisition in Remanufacturing

We discuss the optimal raw material acquisition strategy for a third party remanufacturer (3PR). We specifically investigate whether a 3PR should acquire used products or cores in bulk with uncertain quality levels, or in sorted grades with known quality levels; and whether to acquire and remanufacture cores before the demand is realized (planned acquisition), or after the demand is realized (reactive acquisition), or on both occasions (sequential acquisition). When only sorted cores are acquired, we find that, (i) it is optimal to acquire cores in multiple grades to balance acquisition and remanufacturing costs; (ii) if reactive acquisition is possible, it reduces the assortment size (number of grades in which cores are acquired) and the total inventory acquired in the planned acquisition; and (iii) the optimal portfolio of grades to acquire and the optimal acquisition and remanufacturing quantities of these grades can be determined analytically. When bulk cores are acquired in addition to sorted cores, the property of reduction in assortment size of the planned acquisition is preserved. We also show that the 3PR should acquire only a fraction of the demand in planned acquisition, and leave the rest for reactive acquisition. This fraction changes during the lifecycle of a remanufactured product. Using a combination of empirical and realistic data from a smartphone remanufacturer we show that sequential acquisition increases expected profit by up to 8% and 27% over only planned and only reactive acquisitions respectively, and reduces the inventory acquired by up to 21% over only planned acquisition.     

考虑奢侈与环保偏好的再制造品最优定价策略

把奢侈、环保偏好消费者考虑到再制造品市场需求中,研究了奢侈与环保消费者构成市场的再制造品最优定价策略,发现奢侈与环保偏好消费者比例不同的市场再制造品最优定价存在差异,并且差异价格随着消费者比例不同有所不同;同时发现在价格歧视的边界上,即奢侈消费者与绿色消费者比例存在某种特定关系时,差异价格可以获得相同的利润,却可以得到不同再制造品数量,这为制造商在利润不受损下,实现社会环保目标、提升绿色形象创造了一条路径。然后根据上述的不同的市场结构特征,建议制造商采取相应价格歧视策略,并通过算例验证了上述的结论。     

回收模式相异的零售商主导型闭环供应链竞争模型研究

随着经济全球化的推进,同行业竞争已逐渐由企业间的竞争转化为供应链间的竞争。在此背景下,本文围绕MR、MT和RT三种相异的回收模式组合,构建了两条零售商主导型闭环供应链的竞争博弈模型,运用逆向归纳法得到三种回收模式组合下各条链的均衡价格、回收率、渠道成员利润、单条链利润与双链总利润,然后结合链间竞争强度将不同回收模式组合的结果进行比较,研究表明:(1)在三种回收模式组合下,链间竞争强度的增加将使批发价、零售价与回收率均提高,市场需求量增大,各渠道成员的收益均得到改善,但却损害了消费者利益;(2)MR与MT组合下四条链的产品售价、单链回收率、制造商利润、零售商利润与单链总利润排序均与链间竞争强度无关,而RT组合两条链的变量均衡解、利润与MR、MT组合的数量关系与链间竞争强度密切相关;(3)对于两条竞争性闭环供应链的任一条链,若其竞争链是制造商回收链(零售商回收链),则在选择相异回收模式时,从整条链利润视角其应形成零售商回收链(制造商回收链);若其竞争链是第三方回收链,当双链竞争不是极为剧烈时,其应形成制造商回收链,否则应形成零售商回收链;(4)当链间竞争较平稳时,MR组合的双链总利润优于M...     

Sustainable Operations Management

Operations management researchers and practitioners face new challenges in integrating issues of sustainability with their traditional areas of interest. During the past 20 years, there has been growing pressure on businesses to pay more attention to the environmental and resource consequences of the products and services they offer and the processes they deploy. One symptom of this pressure is the movement towards triple bottom line reporting (3BL) concerning the relationship of profit, people, and the planet. The resulting challenges include integrating environmental, health, and safety concerns with green‐product design, lean and green operations, and closed‐loop supply chains. We review these and other “sustainability” themes covered in the first 50 issues of Production and Operations Management and conclude with some thoughts on future research challenges in sustainable operations management.     

Order Stability in Supply Chains: Coordination Risk and the Role of Coordination Stock

The bullwhip effect describes the tendency for the variance of orders in supply chains to increase as one moves upstream from consumer demand. We report on a set of laboratory experiments with a serial supply chain that tests behavioral causes of this phenomenon, in particular the possible influence of coordination risk. Coordination risk exists when individuals' decisions contribute to a collective outcome and the decision rules followed by each individual are not known with certainty, for example, where managers cannot be sure how their supply chain partners will behave. We conjecture that the existence of coordination risk may contribute to bullwhip behavior. We test this conjecture by controlling for environmental factors that lead to coordination risk and find these controls lead to a significant reduction in order oscillations and amplification. Next, we investigate a managerial intervention to reduce the bullwhip effect, inspired by our conjecture that coordination risk contributes to bullwhip behavior. Although the intervention, holding additional on‐hand inventory, does not change the existence of coordination risk, it reduces order oscillation and amplification by providing a buffer against the endogenous risk of coordination failure. We conclude that the magnitude of the bullwhip can be mitigated, but that its behavioral causes appear robust.     

Repurposing Materials and Waste through Online Exchanges: Overcoming the Last Hurdle

Online material and waste exchanges (OMWEs) provide online channels to repurpose by‐products, unused materials and waste from industrial and commercial facilities. Unfortunately, OMWE's also have challenges. First, sellers may have access to other disposal options and, as a result, may not fully commit to the exchange. Second, buyers can face high uncertainty about the product exchanged and the transaction being undertaken. Overcoming these challenges is the “last hurdle” to making OMWEs successful. This study investigates the factors that reduce the buyers' uncertainty and increase the sellers' commitment to the OMWE. We analyze novel transaction‐level data from an online exchange (MNExchange.org) combined with other archival public records on county‐level repurposing and disposal statistics. First, we find that regional repurposing policies and alternatives have a complementary effect on sellers' commitment toward OMWEs, resulting in increased OMWE exchanges. However, regional disposal policies and alternatives have a substitution effect on sellers' commitment, resulting in reduced exchange success. Further, greater product and transaction information reduce the buyer's uncertainty and increase exchange success. Finally, the analysis shows that users' (buyers and sellers) heavily rely on their prior experience with OMWEs. Specifically, higher familiarity between the buyer–seller pair and familiarity with the OMWE system leads to higher likelihood of exchange success. This study lays the foundation for understanding OMWEs and has important implications for developing policies and operations to increase online transactions of by‐products, materials and wastes.     

Strategic Grading in the Product Acquisition Process of a Reverse Supply Chain

Most recommerce providers have moved to a quality‐dependent process for the acquisition of used products. They acquire the products via websites at which product holders submit upfront quality statements and receive quality‐dependent acquisition prices for their used devices. Motivated by this development of reverse logistics practice, the aim of this study is to analyze the product assessment process of a recommerce provider in detail. To this end, we first propose a sequential bargaining model with complete information which captures the individual behavior of the recommerce provider and the product holder. We determine the optimal strategies of the product holder and the recommerce provider in this game. We find that the resulting strategies lead to an efficient allocation, although the recommerce provider can absorb most of the bargaining potential due to his last mover advantage. In a second step, we relax the assumption of complete information and include uncertainty about the product holder's valuation of the product. We show the trade‐off underlying the recommerce provider's optimal counteroffer decision and analyze the optimal strategy, using a logistic regression approach on a real‐life dataset of nearly 6,000 product submissions. The results reveal a significant improvement potential, compared to the currently applied strategy.     

基于产品时间价值的闭环供应链库存策略研究

许多被回收产品的价值会随着时间推移迅速减少,因此如何尽可能地利用库存策略减少此类产品价值的损失就成为了非常值得研究的问题.本文将EOQ模型拓展到闭环供应链中,基于产品的时间价值推导出了允许缺货和不允许缺货两种情况下回收品和成品库存的最优策略,并讨论了产品价值的流失对库存策略的影响.