9th IFAC/IFIP/IFORS/IISE/INFORMS Conference Manufacturing Modelling, Management and Control, Berlin, Germany, 28 - 30 August 2019, pp.1
EFFECTS OF COMPETITION ON PRODUCT RECOVERY DECISIONS
Z. Pelin Bayindir, Can Baris Cetin, Ismail Serdar Bakal
One of the commonly implemented value recovery method is remanufacturing. Remanufacturability of end-of-life product is proportional to its remanufacturability level, which is set at the beginning of life cycle of the product by the original equipment manufacturer (OEM). Firms can make remanufacturing at the later periods of product’s life cycle since end of life products should be accumulated. Another issue is not knowing which returned items are suitable for remanufacturing operations, i.e., sorting information is not readily available, hence remanufacturing process to have yield loss. When the original product is designed and produced for remanufacturing, other firms also engage in remanufacturing. These are called independent remanufacturers (IR). As a result, competition arise in the remanufactured product market. The design decisions by OEM affect IR’s remanufacturing process efficiency as well. In this study, we have the following main research questions: 1.What are the equilibrium manufacturing quantity, remanufacturability level and remanufacturing quantities of OEM and IR? 2.How does the following affect the economic and environmental performances of OEM and IR? a)entry of a competitor in remanufactured product market, b)availability of sorting information c)OEM ignoring a potential entrant. In order to gain insights on these, we introduce several stylized models. We consider a two-period setting. In the first period, the OEM determines the level of investment on the remanufacturability of the product and the number of new products to manufacture. In the second period, a certain fraction of manufactured items by OEM are shared by OEM and IR and thy determines number of units to remanufacture. The yield of the remanufacturing process depends on the investment made by the OEM. A quantity sensitive price function is used. We build models for both monopolistic and duopolistic settings with and without perfect sorting information. Our results reveal that competition has negative effects on profits. Sorting information increases the profits unless it is available for only OEM. Effects of competition and sorting information to environmental performance is sensitive to the problem parameters. Lack of competition awareness of OEM always decreases OEM’s profit and always increases remanufacturability investment.