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Capacity and production decisions under a remanufacturing strategy

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  • Bulmuş, Serra Caner
  • Zhu, Stuart X.
  • Teunter, Ruud

Abstract

In this paper, we investigate the effect of remanufacturing on capacity and production decisions. Inspired by the situation for a specific car company, we analyze a two-period model with manufacturing in both periods and the option in the second period to remanufacture products that are returned/collected at the end of the first period. We first and foremost focus on the case where remanufacturing is less costly and less capacity intensive than manufacturing. This setting is realistic and obviously the one where remanufacturing is most beneficial. Optimal manufacturing and remanufacturing quantities are derived and it is analyzed under what conditions (specified by costs, capacity restrictions and demand) remanufacturing leads to increased total production. We also consider the cases where remanufacturing is either more costly or more capacity intensive than manufacturing, and contrast the results the those of our main case. One particularly insightful find is that remanufacturing is seldom (very) profitable if it is more costly than manufacturing, and hence that companies should focus their attention on situations where remanufacturing lowers costs.

Suggested Citation

  • Bulmuş, Serra Caner & Zhu, Stuart X. & Teunter, Ruud, 2013. "Capacity and production decisions under a remanufacturing strategy," International Journal of Production Economics, Elsevier, vol. 145(1), pages 359-370.
    • Handle: RePEc:eee:proeco:v:145:y:2013:i:1:p:359-370
    DOI: 10.1016/j.ijpe.2013.04.052
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    References listed on IDEAS

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    1. Geraldo Ferrer & Jayashankar M. Swaminathan, 2006. "Managing New and Remanufactured Products," Management Science, INFORMS, vol. 52(1), pages 15-26, January.
    2. Atalay Atasu & Miklos Sarvary & Luk N. Van Wassenhove, 2008. "Remanufacturing as a Marketing Strategy," Management Science, INFORMS, vol. 54(10), pages 1731-1746, October.
    3. Bayindir, Z. Pelin & Erkip, Nesim & Gullu, Refik, 2003. "A model to evaluate inventory costs in a remanufacturing environment," International Journal of Production Economics, Elsevier, vol. 81(1), pages 597-607, January.
    4. Fleischmann, Moritz & Bloemhof-Ruwaard, Jacqueline M. & Dekker, Rommert & van der Laan, Erwin & van Nunen, Jo A. E. E. & Van Wassenhove, Luk N., 1997. "Quantitative models for reverse logistics: A review," European Journal of Operational Research, Elsevier, vol. 103(1), pages 1-17, November.
    5. Franke, C. & Basdere, B. & Ciupek, M. & Seliger, S., 2006. "Remanufacturing of mobile phones--capacity, program and facility adaptation planning," Omega, Elsevier, vol. 34(6), pages 562-570, December.
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    Cited by:

    1. Xiong, Yu & Zhao, Quanwu & Zhou, Yu, 2016. "Manufacturer-remanufacturing vs supplier-remanufacturing in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 176(C), pages 21-28.
    2. Vladimir Polotski & Jean-Pierre Kenne & Ali Gharbi, 2017. "Set-up and production planning in hybrid manufacturing–remanufacturing systems with large returns," International Journal of Production Research, Taylor & Francis Journals, vol. 55(13), pages 3766-3787, July.
    3. Yantao Ling & Jing Xu, 2021. "Price and greenness competition between duopoly firms considering consumer premium payments," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(3), pages 3853-3880, March.
    4. Luo, Ruiling & Zhou, Li & Song, Yang & Fan, Tijun, 2022. "Evaluating the impact of carbon tax policy on manufacturing and remanufacturing decisions in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 245(C).
    5. Wang, Qifei & Li, Jianbin & Yan, Hong & Zhu, Stuart X., 2016. "Optimal remanufacturing strategies in name-your-own-price auctions with limited capacity," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 113-129.
    6. Alibeiki, Hedayat & Lotfaliei, Babak, 2022. "To expand and to abandon: Real options under asset variance risk premium," European Journal of Operational Research, Elsevier, vol. 300(2), pages 771-787.
    7. Xuemei Zhang & Jian Cao & Yang Zhao & Jiansha Lu, 2022. "Fairness Concern in Remanufacturing Supply Chain—A Comparative Analysis of Channel Members’ Fairness Preferences," Sustainability, MDPI, vol. 14(7), pages 1-23, March.
    8. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.
    9. Xiaofeng Long & Tong Shu & Shou Chen & Shouyang Wang & Kin Keung Lai & Yan Yang, 2017. "Strategy Analysis of Recycling and Remanufacturing by Remanufacturers in Closed-Loop Supply Chain," Sustainability, MDPI, vol. 9(10), pages 1-29, October.
    10. Bulmus, Serra Caner & Zhu, Stuart X. & Teunter, Ruud, 2014. "Competition for cores in remanufacturing," European Journal of Operational Research, Elsevier, vol. 233(1), pages 105-113.
    11. Gu, Wenjun & Chhajed, Dilip & Petruzzi, Nicholas C. & Yalabik, Baris, 2015. "Quality design and environmental implications of green consumerism in remanufacturing," International Journal of Production Economics, Elsevier, vol. 162(C), pages 55-69.

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