Remanufacturing authorization strategy for an original equipment manufacturer-contract manufacturer supply chain: Cooperation or competition?

Qin Zhou, Chao Meng, Kum Fai Yuen and Jiuh-Biing Sheu

International Journal of Production Economics, 2021, vol. 240, issue C

Abstract: Due to the supply chain globalization, technology-oriented original equipment manufacturers are focusing on their core competencies by outsourcing the production to contract manufacturers. Many contract manufacturers also engage in remanufacturing and provide high quality remanufactured products in the market posing competition to the new products. This paper considers a supply chain with an original equipment manufacturer and a contract manufacturer. The contract manufacturer produces new products for the original equipment manufacturer and may compete with the original equipment manufacturer by producing and selling remanufactured products. The original equipment manufacturer can determine whether to authorize the contract manufacturer's remanufacturing. This paper investigates the wholesale price and retail price decisions for the new product and the conditions under which an authorization agreement can be reached between the two parties. In the analysis, two wholesale price settings are considered, the exogenous wholesale and endogenous wholesale price settings. In addition, three authorization decision bargaining scenarios are examined, including the original equipment manufacturer determining the authorization fee, the contract manufacturer determining the authorization fee, and two parties negotiating the authorization fee, to analyze the authorization cooperation outcomes via the generalized Nash bargaining framework. The results show that when the contract manufacturer determines the authorization fee, an authorization cooperation can never be reached whether in the exogenous or endogenous wholesale price setting. The original equipment manufacturer is more likely to set an authorization fee that leads to an authorization cooperation between the original equipment manufacturer and the contract manufacturer, especially when the contract manufacturer collects and remanufactures all the used products. Multiple factors influencing authorization cooperation decision are investigated, including the exogenous and endogenous wholesale price, production cost of new and remanufactured products, bargaining power of the two parties, and consumers' preference for remanufactured products.

Keywords: Contract manufacturing; Remanufacturing authorization; Competitive CM; Nash bargaining game (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527321002140
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:240:y:2021:i:c:s0925527321002140

DOI: 10.1016/j.ijpe.2021.108238

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().