Strategic Remanufacturing Decision in a Supply Chain with an External Local Remanufacturer

This paper develops a model for remanufacturing decisions in a two-stage supply chain with one manufacturer, one retailer and one external local remanufacturer, who collects used products and then reproduces them into a new one if the manufacturer does not join in remanufacturing process. This paper is different from most of the extant studies about remanufacturing because they consider decisions of firms rather than supply chains. We mainly focus on the remanufacturing strategy of the manufacturer when there is a local remanufacturer. We derive the equilibrium results for all players and do some comparative studies under different cases. We find that product substitutability can invert the effect of manufacturer’s extension decision on the retailer’s profit. We also consider the effect of channel structure by comparing the decentralized channel with the centralized channel. We find that the manufacturer has a higher incentive to extend its product line in the centralized channel than the decentralized channel; and the competition can strengthen its motivation to extend the line.