Zhongkai Xiong

Don’t forget your supplier when remanufacturing

A popular assumption in the current literature on remanufacturing is that the whole new product is produced by an integrated manufacturer, which is inconsistent with most industries. In this paper, we model a decentralised closed-loop supply chain consisting of a key component supplier and a non-integrated manufacturer, and demonstrate that the interaction between these players significantly impacts the economic and environmental implications of remanufacturing. In our model, the non-integrated manufacturer can purchase new components from the supplier to produce new products, and remanufacture used components to produce remanufactured products. Thus, the non-integrated manufacturer is not only a buyer but also a rival to the supplier. In a steady state period, we analyse the performances of an integrated manufacturer and the decentralised supply chain. We find that, although the integrated manufacturer always benefits from remanufacturing, the remanufacturing opportunity may constitute a lose–lose situation to the supplier and the non-integrated manufacturer, making their profits be lower than in an identical supply chain without remanufacturing. In addition, the non-integrated manufacturer may be worse off with a lower remanufacturing cost or a larger return rate of used products due to the interaction with the supplier. We further demonstrate that the government-subsidised remanufacturing in the non-integrated (integrated) manufacturer is detrimental (beneficial) to the environment.

“Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods

In durable goods markets, many brand name manufacturers, including IBM, HP, Epson, and Lenovo, have adopted dual-channel supply chains to market their products. There is scant literature, however, addressing the product durability and its impact on players’ optimal strategies in a dual-channel supply chain. To fill this void, we consider a two-period dual-channel model in which a manufacturer sells a durable product directly through both a manufacturer-owned e-channel and an independent dealer who adopts a mix of selling and leasing to consumers. Our results show that the manufacturer begins encroaching into the market in Period 1, but the dealer starts withdrawing from the retail channel in Period 2. Moreover, as the direct selling cost decreases, the equilibrium quantities and wholesale prices become quite angular and often nonmonotonic. Among other results, we find that both the dealer and the supply chain may benefit from the manufacturer’s encroachment. Our results also indicate that both the market structure and the nature of competition have an important impact on the player’s (dealer’s) optimal choice of leasing and selling.

The bright side of manufacturing–remanufacturing conflict in a decentralised closed-loop supply chain

Researchers and managers broadly agree that original equipment manufacturers (OEMs), which have opportunities to produce both new and remanufactured products, are better off by centrally controlling their manufacturing and remanufacturing activities. Thus, OEMs should not remanufacture used products until the remanufacturing cost is sufficiently low to overcome the negative impact of new product cannibalisation. In this paper, we present a contrasting view of the manufacturing–remanufacturing conflict: OEMs sometimes benefit from the decentralised control mode under which they ignore the internal cannibalisation rather than the remanufacturing option. We consider a decentralised closed-loop supply chain in which one OEM can purchase new components from one supplier to produce new products and collect used products from consumers to produce remanufactured products. The key feature of our model is that the OEM can select a centralised or decentralised control mode to manage its manufacturing and remanufacturing activities before the supplier prices the new component. In a steady state period setting, we analyse the players’ optimal decisions and compare the OEMs profits under centralised and decentralised control modes. Our analytic results reveal that the decentralised control within the OEM can outperform the centralised control when the cost structure of producing new and remanufactured products satisfies certain conditions. Finally, the key findings are distilled in a conceptual framework and its managerial implications are discussed.

Designing contracts for a closed-loop supply chain under information asymmetry

This paper studies the problem of designing contracts in a closed-loop supply chain when the cost of collection effort is the retailers private information. We investigate four cases: two contracts (a two-part nonlinear contract and a collection effort requirement contract), each under complete information and asymmetric information. We derive the manufacturers optimal contracts for all four cases and analyze the impact of information on the equilibrium results of supply chain members.

Bricks vs. clicks: Which is better for marketing remanufactured products?

The economical and environmental benefits are the central issues for remanufacturing. Whereas extant remanufacturing research focuses primarily on such issues in remanufacturing technologies, production planning, inventory control and competitive strategies, we provide an alternative yet somewhat complementary approach to consider both issues related to different channels structures for marketing remanufactured products. Specifically, based on observations from current practice, we consider a manufacturer sells new units through an independent retailer but with two options for marketing remanufactured products: (1) marketing through its own e-channel (Model M) or (2) subcontracting the marketing activity to a third party (Model 3P). A central result we obtain is that although Model M is always greener than Model 3P, firms have less incentive to adopt it because both the manufacturer and retailer may be worse off when the manufacturer sells remanufactured products through its own e-channel rather than subcontracting to a third party. Extending both models to cases in which the manufacturer interacts with multiple retailers further reveals that the more retailers in the market, the greener Model M relative to Model 3P.

Coordination of a dual-channel supply chain after demand or production cost disruptions

Coordinating a dual-channel supply chain could not only achieve the integrated profit of the supply chain but also alleviate the channel conflict. Although some researches addressed this area, there is scant literature to discuss the coordination issue in the situations of disruption. To fill this void, we utilise a contract with a wholesale price, a direct channel’s price and a lump sum fee to coordinate a dual-channel supply chain under the cases of demand disruptions and production cost disruptions. After deriving the optimal contract for each case, we find that the manufacturer can achieve coordination of the disrupted supply chain by adjusting the parameters of the coordination contract used in a normal environment. We also show that after disruptions, there exists a contract adjustment benefit zone, in which both the manufacturer and the retailer can benefit from the adjustment of coordination contract when demand increases or production cost decreases. A further analysis of the production and distribution strategies in the coordinated dual-channel supply chain after disruptions suggests that the adjustment of the total production and sales of each channel depends heavily on the level of disruptions and the degree of consumers’ loyalty to both channels.

The impact of product upgrading on the decision of entrance to a secondary market

In this paper, we examine the impact of manufacturers upgrading strategy of durable products on the decision of third-party entrant in a secondary market. To do so, we develop a two-period model in which a monopolistic manufacturer sells new durable products directly to end consumers in both periods, while a third-party entrant operates a reverse channel selling used products in the secondary market. The manufacturer releases an upgraded product (i.e., one that is technologically superior to the version introduced in the first period). We derive conditions under which it is optimal (1) for the manufacture to release an upgraded product in the second period and (2) for a third party entrant to enter a secondary market. We also find, through numerical analysis, that when upgrades are typically small or moderate, the upgrading of new products can increase a third party entrant’s profitability in the secondary market but it does not benefit the third party entrant when upgrades are typically large.

Clicks versus Bricks: The role of durability in marketing channel strategy of durable goods manufacturers

We develop a two-period dual-channel model for a durable goods manufacturer to investigate how product durability and the channel structure create strategic issues that are significantly different from those in managing a dual channel for nondurables. The manufacturer can sell directly by its own e-channel and indirectly via an independent reseller. Our game-theoretic model nests Arya et al. (2007) as a special case when product durability reduces to zero and thus generalizes it to the durable goods setting. The equilibrium solutions indicate that, when the product is durable, both parties’ profitability strongly depends on product durability and direct selling cost. In particular, we find that, compared to encroaching the reseller’s market by direct selling online, it is optimal for the manufacturer to open an inactive e-channel that serves only as an information medium. Moreover, we find that, contrary to Arya et al.’s (2007) results, if product durability is moderate, for any direct selling cost, manufacturer’s encroachment is always detrimental to the reseller, and thus its bright side disappears. We test our model’s theoretical predictions of the effects of product durability on manufacturer’s and reseller’s profitability with data from the U.S. x86 computer server market, and find strong empirical support-profitability of both parties is higher when product durability is sufficiently low or sufficiently high, and lower when durability is intermediate.

ROBUST DYNAMIC PRICING OVER INFINITE HORIZON IN THE PRESENCE OF MODEL UNCERTAINTY

This paper studies a problem of dynamic pricing faced by a retailer with limited inventory, uncertain about the demand rate model, aiming to maximize expected discounted revenue over an infinite time horizon. The retailer doubts his demand model which is generated by historical data and views it as an approximation. Uncertainty in the demand rate model is represented by a notion of generalized relative entropy process, and the robust pricing problem is formulated as a two-player zero-sum stochastic differential game. The pricing policy is obtained through the Hamilton-Jacobi-Isaacs (HJI) equation. The existence and uniqueness of the solution of the HJI equation is shown and a verification theorem is proved to show that the solution of the HJI equation is indeed the value function of the pricing problem. The results are illustrated by an example with exponential nominal demand rate.

Remanufacturer-Manufacturer Collaboration in a Supply Chain: The Manufacturer Plays the Leader Role

This paper adds to the growing remanufacturing literature by investigating a collaborative model in which the manufacturer serves as the remanufacturers distributor while selling its own product. The paper extends the collaborative model that we have studied previously by characterizing it as a channel power structure under which the manufacturer plays the leader role in the collaboration. Furthermore, the paper compares this collaborative model with a competitive model in which the manufacturer competes with the remanufacturer in the market on pricing, sales volume and profit and finds that even if the manufacturer chooses to collaborate with the remanufacturer, it does not give up its market position; the manufacturer keeps the price of its product unchanged as the remanufactured product becomes increasingly acceptable to the consumer, and its products sales volume remains unchanged in both models. Finally, this paper observes that the collaborative model benefits the manufacturer more than the competitive model, whereas the competitive model benefits the remanufacturer more than the collaborative model. Obviously, if collaboration benefits both of the manufacturer and remanufacturer, they will choose to collaborate, and the manufacturer will transfer part of its profit to the remanufacturer, but if competition brings them more profit, they will choose to compete in the market, and the remanufacturer will transfer part of its profit to the manufacturer.