A manufacturer-service provider model with remanufacturability and variable product life considerations

There has been a growing emphasis on remanufacturing as a profitable means to reduce wastage, conserve energy and costs. An alternate approach to obtain similar environmental and economic benefits is to increase the product life. We model and analyze the economic relationships among the level of remanufacturing, product life and economic consequences under the framework of a manufacturer/remanufacturer and a service provider who utilizes the manufacturer’s product to provide service to his/her customers. In our framework, the remanufacturability is defined as the fraction of used products that can be economically remanufactured, and it is assumed that the remanufacturability can be increased via fixed cost investment in product and process design technologies. We also assume that the product life which is defined to be the number of units of service that is provided from the product can be increased by utilizing higher quality components with corresponding higher variable cost. Under these assumptions, we formulate three distinct supply chain scenarios. Namely, a manufacturer driven supply chain, a centrally coordinated supply chain and a service provider driven supply chain. From the subsequent equilibrium and optimality analysis, we derive several interesting managerial insights. For example, there are several conditions under which a higher technology investment in remanufacturability leads to a shorter product life.