Does Remanufacturing Always Benefit the Manufacturer and Hurt the Supplier?

Weisheng Deng
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Weisheng Deng: School of Development Studies, Yunnan University, Kunming 650091, China

Sustainability, 2019, vol. 11, issue 6, 1-13

Abstract: Traditional wisdom claims that remanufacturing operations always benefit the manufacturer in monopolistic cases and hurt the supplier in a supply chain system. However, we show that this claim does not hold when firms face a mature market. In particular, we consider a case in which some consumers in the market possess old products before the selling season, i.e., some consumers are holders. A monopolistic manufacturer collects used products from holders and then sells the products to non-holders after furbishing and remanufacturing. In the integrated case, the manufacturer performs manufacturing and remanufacturing together. We find that remanufacturing may hurt the manufacturer when the fraction of non-holders in the market and the production cost are both low. In the separated case, in which an upstream supplier provides the core component to a downstream manufacturer, the downstream manufacturer undertakes the remanufacturing operation as well as manufacturing. We find that the supplier can benefit from the manufacturer’s remanufacturing operation under a specific condition, even if the manufacturer always receives a higher profit.

Keywords: remanufacturing; closed-loop supply chain; market segment; recycling (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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