TY - JOUR
T1 - Managing a Closed-loop Supply Chain with Process Innovation for Remanufacturing
AU - Reimann, Marc
AU - Xiong, Yu
AU - Zhou, Yu
N1 - Research funded by National Natural Science Foundation of China (71601025).
PY - 2019/7/16
Y1 - 2019/7/16
N2 - Remanufacturing is an opportunity to deliver all-round sustainability benefits when products are designed accordingly. In this paper, we focus on the link between remanufacturing and the opportunity to lower the variable remanufacturing cost via process innovation. Specifically, we analyse how the opportunity is utilized in a supply chain consisting of a manufacturer and a retailer. Only the manufacturer may undertake process innovation, while remanufacturing as such could be done by either the manufacturer or the retailer. We find that although the traditional manufacturing process accepts incremental improvement, remanufacturing in general requires stepwise innovation; thus, the optimal strategy of managing process innovation in a forward supply chain does not directly apply to manage process innovation for remanufacturing in a closed-loop supply chain. Our analytical results also show that a decentralised supply chain could be more likely to take up remanufacturing than an integrated supply chain, especially when the process innovation cost is sufficiently high. Consequently, inefficiency resulting from decentralisation of decision-making in the closed-loop supply chain may cause not only underinvestment but also overinvestment in process innovation for remanufacturing. Finally, through an extensive numerical analysis, we find that this overinvestment always reduces the environmental impact in terms of the overall production quantity, even if the decision-making process does not explicitly consider any environmental aspect.
AB - Remanufacturing is an opportunity to deliver all-round sustainability benefits when products are designed accordingly. In this paper, we focus on the link between remanufacturing and the opportunity to lower the variable remanufacturing cost via process innovation. Specifically, we analyse how the opportunity is utilized in a supply chain consisting of a manufacturer and a retailer. Only the manufacturer may undertake process innovation, while remanufacturing as such could be done by either the manufacturer or the retailer. We find that although the traditional manufacturing process accepts incremental improvement, remanufacturing in general requires stepwise innovation; thus, the optimal strategy of managing process innovation in a forward supply chain does not directly apply to manage process innovation for remanufacturing in a closed-loop supply chain. Our analytical results also show that a decentralised supply chain could be more likely to take up remanufacturing than an integrated supply chain, especially when the process innovation cost is sufficiently high. Consequently, inefficiency resulting from decentralisation of decision-making in the closed-loop supply chain may cause not only underinvestment but also overinvestment in process innovation for remanufacturing. Finally, through an extensive numerical analysis, we find that this overinvestment always reduces the environmental impact in terms of the overall production quantity, even if the decision-making process does not explicitly consider any environmental aspect.
KW - Supply chain management
KW - Closed-loop supply chain
KW - Remanufacturing
KW - Process innovation
KW - Environmental performance
U2 - 10.1016/j.ejor.2019.01.028
DO - 10.1016/j.ejor.2019.01.028
M3 - Article
SN - 0377-2217
VL - 276
SP - 510
EP - 518
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 2
ER -