Enterprise Strategies for Remanufacturing in the Presence of Competition and Environmental Regulation

Georgia Tech Research Corporation, Atlanta GA

Investigators

Abstract

This grant provides funding for the development of analytical models for determining the optimal design, price, and quantity decisions a firm must make when considering whether to remanufacture its product in the presence of potential competition and environmental legislation. The developed numerical tool will determine the optimal price and quantity of remanufactured product a firm should offer to the market based on such input factors as collection cost, refurbishing cost, perceived customer quality differential between the new and remanufactured product, competitive landscape, and presence of environmental legislation. An optimization algorithm incorporating game theory techniques and stochastic dynamic programming will be used and Life Cycle Analysis on selected case studies and scenarios will be performed to quantify the environmental impact. An industry partner will provide data and products to help validate the models. If successful, the results of this research will lead to an increase in the understanding of the strategic importance of the remanufactured product market. Profitable remanufacturing involves the joint optimization of design, recovery, manufacturing and marketing decisions for both the new and remanufactured product lines that take into account the product-line cannibalization effect. For many firms, the remanufactured product is a low-price substitute for the new product and is targeted at low-income customers. Therefore, manufacturers need to determine the target customer segments and product prices for both products jointly to maximize profit. In addition, the initial design decision should take the ease of disassembly and remanufacturing into account. The primary goal of this work is to develop a set of decision support tools that assist the firm in these decisions, thus removing some of the uncertainty and fear of excess product-line cannibalization that currently keeps many firms from remanufacturing today. The proposed work will also directly impact society by pursuing research that aims to reduce the environmental impact of industry while increasing its competitiveness, creating an economic and ecological win-win situation.