Purchasing new for remanufacturing: Sourcing co-opetition, tax-planning and data validation

In practice, to guarantee remanufactured products to be “the same as new”, many remanufacturers purchase the core component and then assemble it with the remanufactured non-core components. Doing so enables the remanufacturer to keep the high product quality and achieve an overall cost saving, but the core component supplier like LG usually has the self-brand business that competes with the remanufacturer. We refer to their relationship as sourcing co-opetition in this study, under which the core component supplier determines its production location: overseas production for tax-planning benefit vs. domestic production for centralized supply efficiency. We reveal that the core component supplier's inclination towards overseas/domestic production is non-monotonic, depending on both the cost disadvantage and the corporate income tax disparity between the production and sales countries/regions. When the new product's cost disadvantage is not significant, overseas production is preferred under either limited or very large tax disparity. Interestingly, we find that overseas production can lead to a higher system profit and better environmental performance, indicating a win-win situation for the Pareto improvement of profitability and environmental sustainability.