Distribution Channel and Remanufacturing Strategy Selection

Abstract

Remanufacturing has become an important and fast-growing industry. Many original equipment manufacturers (OEMs) cooperate with third-party remanufacturers (3PRs) through either outsourcing or licensing. They sell the new and remanufactured products either directly to the consumer or indirectly through a retailer. Our study compares the OEM’s remanufacturing strategy selection in different distribution channel structures. We demonstrate that outsourcing remanufacturing benefits the OEM when the new products are sold directly and remanufactured products, with a relatively low valuation, are sold indirectly; otherwise, licensing remanufacturing is more beneficial for the OEM. We further find that when consumers perceive the remanufactured products with a sufficiently high value, the selection of remanufacturing strategies benefits consumers, society, and the environment.