Atalay Atasu

Remanufacturing as a Marketing Strategy

The profitability of remanufacturing systems for different cost, technology, and logistics structures has been extensively investigated in the literature. We provide an alternative and somewhat complementary approach that considers demand-related issues, such as the existence of green segments, original equipment manufacturer competition, and product life-cycle effects. The profitability of a remanufacturing system strongly depends on these issues as well as on their interactions. For a monopolist, we show that there exist thresholds on the remanufacturing cost savings, the green segment size, market growth rate, and consumer valuations for the remanufactured products, above which remanufacturing is profitable. More important, we show that under competition remanufacturing can become an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.

So What If Remanufacturing Cannibalizes My New Product Sales

Remanufactured products do not always cannibalize new product sales. To minimize cannibalization and create additional profits, managers need to understand how consumers value remanufactured products. This is not a static decision and should be re-evaluated over the entire product life cycle. While managers have a responsibility to maximize profits for the firm, this is not necessarily equivalent to maximizing new product sales. A portfolio that includes remanufactured products can enable firms to reach additional market segments and help block competition from new low-end products or third-party remanufacturers.

Remanufacturing, Third-Party Competition, and Consumers' Perceived Value of New Products

In this paper, we investigate whether and how the presence of remanufactured products and the identity of the remanufacturer influence the perceived value of new products through a series of behavioral experiments. Our results demonstrate that the presence of products remanufactured and sold by the original equipment manufacturer OEM can reduce the perceived value of new products by up to 8%. However, the presence of third-party-remanufactured products can increase the perceived value of new products by up to 7%. These results suggest that deterring third-party competition via preemptive remanufacturing may reduce profits, whereas the presence of third-party competition may actually be beneficial for an OEM. This paper was accepted by Serguei Netessine, operations management.

A Multiordering Newsvendor Model with Dynamic Forecast Evolution

We consider a newsvendor who dynamically updates her forecast of the market demand over a finite planning horizon. The forecast evolves according to the martingale model of forecast evolution (MMFE). The newsvendor can place multiple orders with increasing ordering cost over time to satisfy demand that realizes at the end of the planning horizon. In this context, we explore the trade-off between improving demand forecast and increasing ordering cost. We show that the optimal ordering policy is a state-dependent base-stock policy and analytically characterize that the base-stock level depends on the information state in a linear (log-linear) fashion for additive (multiplicative) MMFE. We also study a benchmark model where the newsvendor is restricted to order only once. By comparing the multiordering and single-ordering models, we quantify the impact of the multiordering strategy on the newsvendors expected profit and risk exposure.

Implementing Extended Producer Responsibility Legislation

The goal of this article is to contribute to the understanding of how the multiple, and sometimes conflicting, stakeholder perspectives and prevailing conditions (economic, geographic, etc.) in the implementation locality shape extended producer responsibility (EPR) “on the ground.” We provide an in‐depth examination of the implementation dimension of EPR in a specific case study by examining concrete activities at the operational front of the collection and recycling system, and probing the varying stakeholder preferences that have driven a specific system to its status quo. To this end, we conduct a detailed case study of the Washington State EPR implementation for electronic waste. We provide an overview of various stakeholder perspectives and their implications for the attainment of EPR policy objectives in practice. These findings shed light on the intrinsic complexity of EPR implementation. We conclude with recommendations on how to achieve effective and efficient EPR implementation, including improving design incentives, incorporating reuse and refurbishing, expanding product scope, managing downstream material flows, and promoting operational efficiency via fair cost allocation design.

Efficient Implementation of Collective Extended Producer Responsibility Legislation

Extended producer responsibility (EPR) is a policy tool that holds producers financially responsible for the post-use collection, recycling, and disposal of their products. Many EPR implementations are collective—a large collection and recycling network (CRN) handles multiple producers’ products in order to benefit from scale and scope economies. The total cost is then allocated to producers based on metrics such as their return shares by weight. Such weight-based proportional allocation mechanisms are criticized in practice for not taking into account the heterogeneity in the costs imposed by different producers’ products. The consequence is cost allocations that impose higher costs on certain producer groups than they can achieve independently. This may lead some producers to break away from collective systems, resulting in fragmented systems with higher total cost. Yet cost efficiency is a key legislative and producer concern. To address this concern, this paper develops cost allocation mechanisms that induce participation in collective systems and maximize cost efficiency. The cost allocation mechanisms we propose consist of adjustments to the widely used return share method and include the weighing of return shares based on processing costs and the rewarding of capacity contributions to collective systems. We validate our theoretical results using Washington state EPR implementation data and provide insights into how these mechanisms can be implemented in practice. This paper was accepted by Serguei Netessine, operations management.

Modular Upgradability in Consumer Electronics: Economic and Environmental Implications

Modularly upgradable product designs have been advocated to offer environmental and economic advantages; however, they are not commonly used in the consumer electronics industry. In this article, we investigate the economic and environmental benefits and challenges of modular upgradability for consumer electronics. From an economic point of view, we posit that the limited adoption of modular upgradability in consumer electronics is due to various demand-, technology-, and competition-related issues. From an environmental point of view, we posit that modularly upgradable product designs may not necessarily lead to superior environmental outcomes. To reach meaningful conclusions regarding the environmental benefits of modular upgradability, one needs to understand how product architecture affects demand, production, and consumption patterns, which arise from endogenous consumer and manufacturer choices. It is also important to take into account that modular upgradability may have potentially differentiated effects in the production, consumption, and post-use phases of the lifecycle.

Fair cost allocation mechanisms in electronic waste collection and recycling networks

The collection and recycling of electronic waste (e-waste) has become one of the key issues in environmental protection, and many state-operated programs have been launched to mandate the recycling of e-waste state-wide in the US. The costs incurred under the state-run operations are allocated to manufacturers according to collective Extended Producer Responsibility (EPR) legislation which is widely adopted in e-waste programs. In this paper, we study the problem of allocating cost among manufacturers in a fair manner, which is essential for maintaining an efficient and stable state-operated program. We introduce a new cooperative game model where sub-coalitions can access external resources that are not owned by their members at predesigned unit prices. It is indicated in (Kalai and Zemel 1982) that the existence of external resources accessible to sub-coalitions may lead to an empty core of the resulting game and thus undermines the stability of a collaborative system. Our result shows that by proper pricing mechanisms of the external resources that are centrally controlled, such potential negative impacts on the coalition stability can be eliminated and a fair cost allocation is guaranteed to exist.

The Effect of EPR on the Markets for Waste

Extended Producer Responsibility (EPR), a widely used policy tool, requires producers to assume financial and/or operational responsibility for ensuring their end-of-life products are properly collected and treated. EPR implementation in today’s economy, however, poses a change as some basic, underlying assumptions do not hold. Today’s economy challenges assumptions that (1) waste is costly to recover, (2) waste consists only of end-of-life products, and (3) waste is homogenous with respect to its geographic location, design, or condition. In this chapter, we discuss the impact of EPR on waste markets when these assumptions are challenged.

Owls, Sheep and Dodos: Coping with Environmental Legislation

Environmental legislation affects more and more companies in different industries and is likely to continue to do so. Focusing in particular on the issue of the disposal of waste electrical and electronic equipment (WEEE), this chapter argues that firms are frequently unaware of the threats posed by such legislation, poor at anticipating its provisions and effects, and generally not very skillful at representing their interests in the political process. Contrasting such firms (political “dodos” or “sheep”) with a few (political “owls”) that have proven themselves to be successful political actors; we proceed to identify the generic ingredients of effective corporate political strategy to cope with environmental legislation.