Shareholding operation of product remanufacturing – from a sustainable production perspective

Abstract

We consider a supply chain in which an original equipment manufacturer (OEM) authorizes the remanufacturing business to a third-party remanufacturer (TPR). The OEM may make an investment to hold equity in TPR. This operation not only enables OEM to share the profit of the TPR as a forward shareholding supply chain, but also improve the production efficiency of the TPR and consequently benefits the whole supply chain. We characterize the equilibrium production decisions of all members by using Stackelberg game in such a supply chain. We find that shareholding operation by OEM helps increase the production quantity of remanufactured products and total market volume. From the economic perspective, our results show both sides in the forward shareholding supply chain prefer the shareholding operation if the equity holding cost and remanufactured cost is relatively small. Additionally, from an environmental perspective, our results show under certain relative pollution ratio of remanufactured products, shareholding operation can reduce environmental impact. Finally, we check the key results by stimulating numerical examples and obtain some useful management insights.