Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Management

Program Name/Specialization

Operations and Supply Chain Management

Faculty/School

School of Business and Economics

First Advisor

Ignacio Castillo

Advisor Role

Dissertation Supervisor

Abstract

This research encompasses three related papers to address some of the influencing factors in structural and pricing decisions in supply chains with manufacturing and remanufactunng. We consider new and remanufactured products that are vertically differentiated, that is, the consumers perceive the remanufactured product as of a lower quality and thus they are not willing to pay for them as much as they would for the new product. Examples of such products are seen in computer systems, automotive parts and office equipment.

In the first paper, we consider a closed loop supply chain that includes a manufacturer, a remanufacturer and a retailer. We investigate the pricing decisions for the new and remanufactured products under different coordination structures between members of the chain while taking into account the consumers’ perception of the remanufactured product versus new and the quality of returns as two major parameters. In addition, we find which coordination structure is a better option for the closed loop supply chain members. Particularly, we find that although a lower price is charged for the new product when the retailer and the remanufacturer are coordinated (RREMC) compared to the completely decentralized (CD) structure, a higher number of new products are sold in the completely decentralized structure. A similar result is found for the remanufactured product when comparing the CD structure with the one in which the retailer and manufacturer are coordinated (MRC). We also find that MRC results in the highest total profit while RREMC results in the lowest.

In the second paper, we analyze the pricing decisions for a firm that produces both new and remanufactured products and also collects the used product returns (known as cores, which are used in remanufacturing). The firm needs to define the core acquisition price as well as the selling prices for both new and remanufactured products. In our models, we capture the quality of returns (by assuming a stochastic collection yield rate) and the competition between new and remanufactured products, and show how they influence the optimal expected prices and profit of the firm. We provide managerial insight on how varying the optimal prices could help the firm optimally accommodate for different conditions (i.e. with respect to changes in the consumers’ perceptions of the products, the yield rate, and the salvage value of the cores). For example, we find that when the firm sells low margin products, a small change in the consumers’ perception of the remanufactured products versus new could increase the firm’s expected profit by more than 10%.

Finally, in the third paper, we consider two core collection structures for a firm that produces both new and remanufactured products. In the first structure (known as the centralized channel), the firm collects the cores directly from the consumers, while in the second structure (known as the decentralized channel), the firm uses a third-party collector to take care of the core acquisition We assume that the demands for new and remanufactured products are influenced by the product prices and also by a stochastic component. We jointly find the optimal prices and lot sizes for each product and investigate the impact of the competition between products (i.e. consumers’ perception of the remanufactured product versus new), the quality of returns (i.e. the collection yield rate) and the demand uncertainties on the optimal solution in each channel. Furthermore, we compare the channels on the amount of change in their optimal values and expected profits with respect to changes in the parameters We also provide managerial insight on how the firm should change the optimal prices and lot sizes in each channel considering possible changes in the consumers’ perception of the products, the collection yield rate and the demand uncertainties. For example, we find that when the demand uncertainties for the new and remanufactured products are higher, the reduction in the firm’s profit is about 2-3% less in the centralized channel compared to the decentralized one.

Convocation Year

2010

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