Value analysis in remanufacturing
Date of Issue2010
School of Mechanical and Aerospace Engineering
Remanufacturing of used products is an important option for companies and society as it promotes sustainable use of resources and conserves energy and material. By way of remanufacturing, companies extract the economic value from used products as well. Remanufacturing requires adequate supply of used products (called cores in this thesis to be consistent with the literature). Due to the use pattern, cores returned by customers would be in different quality levels. While a core with lowest quality can only be recycled and disposed, cores with highest quality can be sent back to the market after minimum processing/packaging. All cores in between these two qualities can be classified within various quality levels as designated by the remanufacturer. Therefore, it is not only the quantity of cores, but also their quality, which determines the feasibility of remanufacturing. Cores are located at the customers' place, which are sparsely located. Cores are collected by remanufacturer itself or through outsourced companies. Customers are provided with certain incentive (money) for return of cores. If the incentive is not enough, the customers may not return cores and remanufacturing cannot take place. Even if the incentive is attractive, the number of cores and their quality would be stochastic. Remanufactured products compete with the original product of same or equivalent type. Therefore, if there are no price differences between these products, customers would not be attracted towards the purchase of remanufactured products. Also, the demand for remanufactured products can be stochastic and it can be challenging to fix incentives and supply quantities. The purpose of this research is to investigate the issue of supply of cores in order to meet demand for remanufactured products. The research focuses on: i) the flow of cores from the collection centers (as the drop point for cores by the customers) to the consolidation center (as a consolidator of cores obtained from various collection centers) and finally to the remanufacturer (to obtain the requisite number of cores); ii) on obtaining demand profile from the retailers, devising a pricing and quantity schedule (with various prices based on quality of cores) and providing that information to the consolidation center and providing the funds for the cores supplied by the consolidation center, and; iii) the consolidation center developing incentive profile and quantities for the collection centers so that cores collection can be initiated. In order to investigate the three aspects mentioned above, this thesis employs the development of models: i) for the transaction between the collection centers and the consolidation center, and the consolidation center and the remanufacturer as single period models, and; ii) the transaction of cores in terms of an integrated model in multi-period setting. The models have been tested with numerical study and the results show that optimal quantity of cores (of different quality) and the acquisition price (for different quality cores) can be developed jointly to assist the decision makers. The results also shows that when there is a change in the price of the remanufactured product, and when there is a stochastic supply and demand, the price to be paid for the cores changes significantly. The analysis shows that when a too low price is set for the remanufactured product, it may sell in the market, but it may lead to lower incentive for cores thus not attracting enough cores to meet the demand for products. Therefore, a balanced pricing mechanism becomes necessary. Also, when there are inventories, they can only be carried to a certain time horizon to avoid their obsolescence. Therefore, if the pricing mechanism does not balance the attraction of remanufactured product and the return of cores, remanufacturing cannot take place. The models proposed in this thesis provide basic analytical mechanism to adjust core price and quantities. The contribution in this thesis is in terms of first development of such analytical models that can be used by the decision makers. It is hoped that researchers can build onto this concept of using intertwining quantity, quality and price to develop specific pricing and supply models for a particular industry.
Nanyang Technological University