A remanufacturing supply chain network with differentiated new and remanufactured products considering consumer preference, production capacity constraint and government regulation

Abstract

Remanufacturing is a sustainable product reutilization strategy to realize responsible consumption and production. However, remanufacturing practice can be subject to deficient consumer perception, production capacity constraint, uncertain demand and government intervention. This paper considers outsourced remanufacturing mode to establish and investigate a remanufacturing supply chain (RSC) network consisting of multiple manufacturers, retailers and remanufacturers. Optimality conditions with RSC network members are derived utilizing variation inequality. Numerical examples based on data accumulated from a remanufacturing enterprise and questionnaire survey on consumer perception for remanufactured products, are presented to put the proposed model into practice. Influences of product heterogeneity (new and remanufactured products), consumer preference, production capacity constraint, product price competitiveness, market demand fluctuation, and government financial measures on RSC network production and pricing strategies are investigated through numerical analyses. Analytical results indicate that pricing for the remanufactured product would be equivalent to that of the new product when consumers value the remanufactured product at a relatively high level, however an excessive penchant for the remanufactured product is less profitable especially from the perspective of the remanufacturer. In general, an upper-middle level of consumer preference for the remanufactured product is the most favourable scenario. When remanufacturing industry is just emerging, a high tax will be imposed on the manufacturer to accumulate remanufacturing subsidy for the government to achieve its balanced budget. As the remanufacturing industry develops and consumer environmental awareness enhances, it is especially essential for the government to establish a levy-subsidy mechanism to maintain sustainable progress of the industry. Combining main conclusions with the background of Chinese remanufacturing industry, managerial implications are provided from respective perspectives of enterprises’ remanufacturing operation, government financial regulation, and consumer awareness enhancement. The analyses and results are especially relevant as a reference for remanufacturing decision-makings as well as government financial regulations, thus enhancing production sustainability as well as environmental benefits.