Selection of buyback price for OEM for efficient spare parts management in remanufacturing business

Abstract

Authors developed a two-period buyback pricing model which shows a competition between independent repair shop, third party remanufacturer (TPR) and original equipment manufacturer (OEM) for market share in spare parts business after the end of warranty period. Remanufacturing is a profitable option for OEM rather than producing new parts after finishing the warranty period for satisfying the demand of spare parts. OEM acquires damaged/broken parts from local independent repair shop to remanufacture those parts. But if there existed any Third Party Remanufacturer (TPR) then it would lead competition and would decrease the market share of OEM in sales of spare parts. TPR is basically independent remanufacturer. OEM has no control over the activity of the TPR for selling remanufactured spare parts after finishing warranty period of the products. In this paper, authors considered a supply chain model, where independent repair shop is responsible for handling the repair process and both OEM and TPR are remanufacturing spare parts. Repair shop may procure spare parts from both OEM and TPR. A discount is given on the price of the spare parts by TPR which attracts the customers. Repair shop also tries to sell repaired parts at an attractive discounted price. Both TPR and OEM need to collect broken/damaged parts to remanufacture them for maintaining an inventory of spare parts. This paper aimed to develop a deterministic framework for finding optimal buyback price for the OEM and the impact of different parameters on the profitability of spare parts management for individual players of supply chain management.

Spare parts management in industry 4.0 era: a literature review

“…The maintenance and spare parts inventory management are closely bonded together and their integrated optimization may yield profits to the organization (Mjirda et al., 2016). For most of the consumer durables, SPM is a vital extent of apprehension for Original Equipment Manufacturers (OEM) especially after End of Lief (EOL) and End of Service (EOS) period (Ray and Mondal, 2016). The efficiency and effectiveness of inventory management needs to be balanced for deciding the organizational strategy with accomplishment of customer requirements (Sirova and Rodrigues, 2019; Muniz et al., 2021).…”