Retailer or the third-party remanufacturer: Which is the greener contractor for outsourcing remanufacturing?

Abstract

The aim of this paper is to understand how outsourcing remanufacturing operations to different OEMs agents (i.e., the retailer or third-party remanufacturer) affected a supply chain's sustainable issues. Although outsourcing strategies have been well studied in the remanufacturing literature, existing research has focused primarily on operational options between original equipment manufacturers (OEMs) and third-party remanufacturers (3PRs). In practice, however, many brand name retailers have recently created business models in which product remanufacturing is an integral part. The question showed the retailer or the third-party, which was the right remanufacturer for OEM's remanufacturing outsourcing? To answer this question, we developed two models for an OEM that had two options for remanufacturing outsourcing: (1) outsourcing remanufacturing to a 3PR (Model T) or (2) to its retailer (Model R). Using these two models, we addressed the questions: from the profit-maximizing perspective, how does outsourcing remanufacturing operations to retailers create strategic issues that are different from those with 3PRs? Which is more profitable for the OEM, 3PR, retailer, and the total supply chain? From an environmental impact perspective, how does outsourcing remanufacturing operations to retailers create strategic issues different from those with 3PRs? Which is more beneficial for our environment? Our analysis revealed that if the OEMs cared about economic performance, outsourcing the remanufacturing operations to the 3PR was a practical strategy. Conversely, if they cared about environmental sustainability, outsourcing the remanufacturing to the retailer was the preferred strategy. Numerical studies further validated our conclusions