Reverse Channel Design: Profitability vs. Environmental Benefits

TitleReverse Channel Design: Profitability vs. Environmental Benefits
Publication TypeConference Paper
Year of Publication2015
AuthorsWang, L, Cai, G, Tsay, A, Vaharia, A
EditorKersten, W, Blecker, T, Ringle, CM
Title of ProceedingsSustainability in Logistics and Supply Chain Management
Conference LocationHamburg
ISBN Number978-3-7375-6206-5
Other NumbersISSN (print) 2365-4430, ISSN (online) 2365-5070
KeywordsEnvironmental Impact, Outsourcing, Remanufacturing, Reverse Channel Design

Environmental issues are a growing priority in supply chain management, which has
heightened the interest in remanufacturing. A key attribute of a remanufacturing
strategy is the division of labor in the reverse channel, especially whether the remanufacturing
should be performed in-house or outsourced to a third party. We investigate
this decision for a retailer who accepts returns of a remanufacturable product.
Our formulation considers the relative cost-effectiveness of the two approaches, uncertainty
in the input quality of the collected/returned used products, consumer willingness-
to-pay for remanufactured product, and the extent to which the remanufactured
product cannibalizes demand for new product. Our analysis predicts the retailer's
propensity to remanufacture, which provides a metric of the environmental impact
of each strategy.