Economic and Environmental Implications of Quality Choice under Remanufacturing Outsourcing

Wei He, Lan Liang and Kai Wang
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Wei He: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Lan Liang: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Kai Wang: Business School, Huaihai Institute of Technology, Lianyungang 222005, China

Sustainability, 2020, vol. 12, issue 3, 1-18

Abstract: Although many studies have recently investigated how the product quality impacts on economic and environment performance under remanufacturing, all of them assume that remanufacturing operations are undertaken by the original equipment manufacturers (OEMs) or independent remanufacturers (IRs). However, many OEMs such as Lexmark, Canon, and Epson filed lawsuits with those IRs without licensing, but outsourced the remanufacturing operations to several contracted remanufacturers (CRs). We therefore extend the prior research to investigate the economic and environmental implications of OEMs’ strategic desired quality level choices under remanufacturing outsourcing. That is, we develop two models corresponding to two scenarios where OEMs (1) undertake remanufacturing in-house or (2) outsource it to a CR. Our results show that, to create a less intense cannibalization problem for new products sales, OEMs would be likely to choose a lower product quality when outsourcing remanufacturing to a CR. More importantly, from the economic perspective, we find that outsourcing remanufacturing to a CR hurts the OEM and the industry. However, from the environmental angle, our results reveal that there is a ratio threshold for environmental impact for different life cycle phases, above which remanufacturing in-house is definitely beneficial for OEM in economics and environment, but for the rest, outsourcing is equally or more environmental-friendly, despite cutting down the profit.

Keywords: quality choice; remanufacturing outsourcing; economic performance; environmental sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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