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Optimal Line Design of New and Remanufactured Products: A Model for Maximum Profit and Market Share with Environmental Consideration

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  • Minjung Kwak

    (Department of Industrial and Information Systems Engineering, Soongsil University, Seoul 06978, Korea)

Abstract

For original equipment manufacturers (OEMs), producing a line of new and remanufactured products can be an effective strategy for improving the sustainability of their business. The potential cannibalization of new product sales and the technological obsolescence of used products, however, can create barriers for OEMs to embrace remanufacturing. In order to address these challenges in OEM remanufacturing, this paper proposes a mixed-integer programming model for the optimal line design of new and remanufactured products. Aiming at two objectives, i.e., maximizing the total profit and maximizing the total market share, the model simultaneously optimizes a line of new and remanufactured products in terms of their (1) design specifications (including an upgrade plan for the remanufactured product), (2) selling prices, and (3) production quantities and the detailed production plan. With the simultaneous optimization, the model suggests an optimal way of differentiating the new and remanufactured products in order to overcome the cannibalization and obsolescence effects and to maximize the total profit and/or market share. The model also accounts for environmental impact, stipulating that the total environmental impact of manufacturing remains under a certain limit. To demonstrate the applicability and effectiveness of the model, a case study is presented using the example of a desktop computer.

Suggested Citation

  • Minjung Kwak, 2018. "Optimal Line Design of New and Remanufactured Products: A Model for Maximum Profit and Market Share with Environmental Consideration," Sustainability, MDPI, vol. 10(11), pages 1-15, November.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:11:p:4283-:d:183899
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    References listed on IDEAS

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    1. Aydin, R. & Kwong, C.K. & Ji, P., 2015. "A novel methodology for simultaneous consideration of remanufactured and new products in product line design," International Journal of Production Economics, Elsevier, vol. 169(C), pages 127-140.
    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. Ferrer, Geraldo & Swaminathan, Jayashankar M., 2010. "Managing new and differentiated remanufactured products," European Journal of Operational Research, Elsevier, vol. 203(2), pages 370-379, June.
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    Cited by:

    1. Seoyoon Lee & Minjung Kwak, 2020. "Consumer Valuation of Remanufactured Products: A Comparative Study of Product Categories and Business Models," Sustainability, MDPI, vol. 12(18), pages 1-29, September.
    2. Muneeb, Syed Mohd & Asim, Zainab & Hajiaghaei-Keshteli, Mostafa & Abbas, Haidar, 2023. "A multi-objective integrated supplier selection-production-distribution model for re-furbished products: Towards a circular economy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 175(C).
    3. Minjung Kwak, 2021. "Monte Carlo Simulation of the Effect of Heterogeneous Too-Cheap Prices on the Average Price Preference for Remanufactured Products," Sustainability, MDPI, vol. 13(17), pages 1-11, August.
    4. Francisco Campuzano-Bolarín & Fulgencio Marín-García & José Andrés Moreno-Nicolás & Marija Bogataj & David Bogataj, 2019. "Supply Chain Risk of Obsolescence at Simultaneous Robust Perturbations," Sustainability, MDPI, vol. 11(19), pages 1-18, October.
    5. Luttiely Santos Oliveira & Ricardo Luiz Machado, 2021. "Application of optimization methods in the closed-loop supply chain: a literature review," Journal of Combinatorial Optimization, Springer, vol. 41(2), pages 357-400, February.
    6. Esmat Baghdadi & Mahmood Shafiee & Babakalli Alkali, 2022. "Upgrading Strategy, Warranty Policy and Pricing Decisions for Remanufactured Products Sold with Two-Dimensional Warranty," Sustainability, MDPI, vol. 14(12), pages 1-15, June.
    7. Wei Meng & Xiufen Zhang, 2020. "Optimization of Remanufacturing Disassembly Line Balance Considering Multiple Failures and Material Hazards," Sustainability, MDPI, vol. 12(18), pages 1-16, September.
    8. Xuhui Xia & Wei Liu & Zelin Zhang & Lei Wang & Jianhua Cao & Xiang Liu, 2019. "A Balancing Method of Mixed-model Disassembly Line in Random Working Environment," Sustainability, MDPI, vol. 11(8), pages 1-16, April.

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