Modular design of new products and remanufacturing of used products under mass customization

Abstract

Modular architecture design can not only increase the product variety and thus make mass customization (MC) easier, but also improve interchangeability and then lower the remanufacturing cost. This paper models a remanufacturing MC supply chain with one manufacturer and one retailer. The manufacturer, as a Stackelberg game leader, designs and then sells the new and modular MC products via its brand retailer, and meanwhile the remanufacturing of used MC products would be carried out by either the manufacturer or the retailer. We study the optimal modular design for new MC products and the best remanufacturing mode for used MC products. One centralized and two decentralized decision models are formulated, and the equilibrium solutions of proposed models are compared and analyzed. Findings show that, compared to the retailer-remanufacturing mode, the manufacturer-remanufacturing mode can be superior in terms of the ability to cope with customer customization requirements (i.e., the modularity level), total supply chain profit, and consumer surplus. Moreover, both supply chain members and consumers would prefer the manufacturer-remanufacturing mode when the parameters meet certain conditions. We also extend the model to two scenarios: the remanufacturing is bounded by cores supply and the retailer acts a leader, so as to verify the robustness of main results. The above theoretical results are verified by numerical examples.