Matching Demand and Supply to Maximize Profits from Remanufacturing

TLDR

Remanufacturing profitability hinges on the quantity and quality of product returns and the demand for remanufactured goods, which can be steered through acquisition pricing and selling price adjustments. The authors aim to develop a simple framework to determine optimal acquisition and selling prices that maximize remanufacturing profitability. The framework is motivated and illustrated with a cellular telephone industry example.

Abstract

The profitability of remanufacturing depends on the quantity and quality of product returns and on the demand for remanufactured products. The quantity and quality of product returns can be influenced by varying quality-dependent acquisition prices, i.e., by using product acquisition management. Demand can be influenced by varying the selling price. We develop a simple framework for determining the optimal prices and the corresponding profitability. We motivate and illustrate our framework using an application from the cellular telephone industry.