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The bright side of manufacturing-remanufacturing conflict in a decentralised closed-loop supply chain

Research Output: Contribution to journal Article Peer-review

Sustainable Development Goals

  • SDG 9 - Industry, Innovation, and Infrastructure
    SDG 9 Industry, Innovation, and Infrastructure

Abstract

Researchers and managers broadly agree that original equipment manufacturers (OEMs), which have opportunities to produce both new and remanufactured products, are better off by centrally controlling their manufacturing and remanufacturing activities. Thus, OEMs should not remanufacture used products until the remanufacturing cost is sufficiently low to overcome the negative impact of new product cannibalisation. In this paper, we present a contrasting view of the manufacturing–remanufacturing conflict: OEMs sometimes benefit from the decentralised control mode under which they ignore the internal cannibalisation rather than the remanufacturing option. We consider a decentralised closed-loop supply chain in which one OEM can purchase new components from one supplier to produce new products and collect used products from consumers to produce remanufactured products. The key feature of our model is that the OEM can select a centralised or decentralised control mode to manage its manufacturing and remanufacturing activities before the supplier prices the new component. In a steady state period setting, we analyse the players’ optimal decisions and compare the OEM's profits under centralised and decentralised control modes. Our analytic results reveal that the decentralised control within the OEM can outperform the centralised control when the cost structure of producing new and remanufactured products satisfies certain conditions. Finally, the key findings are distilled in a conceptual framework and its managerial implications are discussed.

Publication Information

Output type

Research Output: Contribution to journal Article Peer-review

Original language

English

Pages from-to (Number of pages)

Pages 2639-2651

Journal (Volume, Issue Number)

International Journal of Production Research (Volume 51, Issue 9)

Publication milestones

  • Published - 01/05/2013

Publication status

Published - 01/05/2013

ISSN

0020-7543

External Publication IDs

  • handle.net: 10547/594465
  • Scopus: 84876121636

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