Extended Warranty Strategy and Its Environment Impact of Remanufactured Supply Chain

Abstract

To reduce environmental pollution, the government has issued relevant laws and regulations, and more and more enterprises engage in remanufacturing and recycling used products. Trade old for new and trade old for remanufactured have become marketing means to promote product recycling. The extended warranty service is used to promote the recycling of waste products. To design an optimal extended warranty service strategy and analyze its environment impact in a remanufactured supply chain, game theory is used to model the competitive relationship between a manufacturer and an E-commerce platform. Considering whether the E-commerce platform provides extended warranty service, four models are constructed, and the extended warranty service strategy and its environment impact can be analyzed. The results show that, when the level of substitutability between remanufactured and new products meets a certain rage, new or remanufactured products with extended warranty service strategy can increase the demand for new or remanufactured products, respectively. In the four models, the changing trends of manufacturer’s profit, E-commerce platform’s profit and supply chain’s profit, consumer surplus, environmental impact and social welfare are the same, but only the thresholds are different. From the perspectives of supply chain member, supply chain system, consumer, environment and society, the new and remanufactured products with extended warranty service strategy is the best choice.

Consumer Value Considerations: Impact of Remanufactured Products in The Supply Chain Industry

“…In addition, the researchers believe that there is still considerable room for future research, such as in-depth research on the relationship between online and offline word-of-mouth in social media and its impact on consumers' decision-making process for purchasing or adopting remanufactured products. Furthermore, referring to Zhang et al (2022), trade old for remanufactured has become a marketing tool to promote product recycling. Extended Warranty Services are used to facilitate recycling of end-of-life products.…”

Optimal Extended Warranty Strategy: Provided by Manufacturer or E-Commerce Platform?

“…Liu et al [31] considered an extended producer responsibility and investigated the relationship between fairness concerns and the pricing-based responsibility transmission. Zhang et al [32] investigated whether the E-commerce platform provides extended warranty service and found that the new and remanufactured products with extended warranty service strategy are the best choice. The existing literature on extended warranty service strategies has mostly investigated the impacts of extended warranty services provided by a specific provider on supply-chain decisions.…”

“…Cost structure. The cost of the extended warranty is dependent on the product failure probability and extended warranty coverage [8,32]. The cost of providing extended warranty is a convex function of the extended warranty coverage, and it is formulated as c e = αT 2 [36,37].…”

The retailer’s trade-in activity under the manufacturer’s upgrading strategy

“…Fan et al (2022) analyzed if and when manufacturers adopt a collect-to-consign strategy and examined optimal trade-in channel options. Zhang et al (2022) used the game theory to study the optimal extended warranty service strategy in the remanufacturing supply chain and analyzed its environmental impact.…”