EURO 2024 Copenhagen
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1077. Delegate or Not? When Divisional Conflict Exists in Remanufacturing Operations

Invited abstract in session WA-23: Game theory for the circular economy, stream Circular Economy, Remanufacturing and Recycling .

Wednesday, 8:30-10:00
Room: 82 (building: 116)

Authors (first author is the speaker)

1. Qin Zhou
Decision Analytics and Risk, University of Southampton
2. Fangsheng Ge
Decision Analytics and Risk, University of Southampton

Abstract

Alongside the practice of offering new and remanufactured products through distinct marketing channels, manufacturers have implemented diverse internal channel structures upon establishing a dedicated remanufacturing division. Some firms, like Caterpillar and Volvo Group, opt for a decentralized structure by delegating remanufacturing-related decisions to the dedicated division. In contrast, companies like General Electric and John Deere choose to retain decision-making at the firm level, encompassing both manufacturing and remanufacturing, following an integrated structure. Motivated by the observed industrial practices, we analytically investigate the manufacturer’s internal channel structure decision within a manufacturer-retailer supply chain. Using a game theoretic model, our analysis demonstrates that while the decentralized structure encourages manufacturers to enter remanufacturing, the optimal approach is for manufacturers to choose the integrated structure when the production costs of new products are moderate. In contrast, when the production costs of new products are polarized (i.e., either low or high), it is advantageous for decision-making authority to be delegated to the remanufacturing division. A triple-win outcome for the manufacturer, retailer, and remanufacturing division is unattainable because the retailer can never benefit from the manufacturer's decisions made under the decentralized structure.

Keywords

Status: accepted

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