Capacity Sharing and Capacity Investment of Environment-Friendly Manufacturing: Strategy Selection and Performance Analysis

Lei Xie and Hongshuai Han
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Lei Xie: School of Management, Shandong University, Jinan 250100, China
Hongshuai Han: College of Management and Economics, Tianjin University, Tianjin 300072, China

IJERPH, 2020, vol. 17, issue 16, 1-20

Abstract: Many small manufacturing factories suffer insufficient environment-friendly capacity after eliminating the outdated and environmental-harmful production capacity according to stringent environmental rules and regulations. This paper analyzes two strategies that the manufacturer with limited environment-friendly capacity may take to tackle this problem, i.e., investing in building environment-friendly capacities and collaborating with the manufacturer with sufficient environment-friendly capacity in capacity sharing. In a supply chain with two competing manufacturers, this paper builds game-theoretical models and investigates equilibrium solutions under three scenarios (no capacity investment or sharing, capacity investment, and capacity sharing). Then this research investigates the feasible regions of these two strategies and compares the performance of each manufacturer under each scenario. The findings show that both capacity investment and capacity sharing can effectively reduce the profit loss of the manufacturer with limited capacity, while only capacity sharing benefits both manufacturers. The feasibility of these two strategies depends on the initial capacity volume and the capacity investment cost coefficient of the manufacturer with limited capacity. Moreover, the preference of the manufacturer with limited capacity for each strategy depends on the capacity investment cost coefficient. When the capacity investment cost coefficient is relatively high, the win-win situation exists for supply chain members. Furthermore, with the use of chaos theory, the paper shows how to adjust the capacity investment in each period to keep the system stable.

Keywords: capacity sharing; capacity investment; environment-friendly manufacturing; co-opetitive game; stackelberg game (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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