Product Cannibalization Effect and Environmental Impact of Remanufacturing Outsourcing

Abstract

More and more original product manufacturers (OPM) outsource to independent third party remanufacturers, due to the lack of remanufacturing infrastructure and technology, which also leads to the cannibalization effect of remanufactured products on new products. OPMs often adopt different channel strategies to deal with the problem of cannibalization. Therefore, this study constructs a supply chain model consisting of original product manufacturers and outsourced independent remanufacturers. OPM can adopt recycling strategy or remarketing strategy to deal with the cannibalization effect of remanufacturing outsourcing products, and explore the impact of recycling cost coefficient and other factors on supply chain equilibrium decision, economic benefits and environmental benefits. The results show that: (1) When the recycling cost coefficient is small, the recycling strategy can better cope with the problem of product erosion, that is, to increase the proportion of remanufactured products in the market. In addition, regardless of the recycling cost, the recycling strategy can increase the demand for new products compared with the remarketing strategy. (2) From the perspective of profit maximization, when the recycling cost coefficient , the OPM's profit is higher under the recycling strategy, that is,, the OPM prefers to choose the recycling strategy when the recycling cost is small. At that time, remarketing can create a win-win outcome for both OPMs and outsourced independent remanufacturers, thus achieving Pareto improvement. (3) From the perspective of environmental impact, when the recycling cost coefficient is greater than a certain threshold, the recycling channel strategy is more environmentally friendly. (4) With the increase of remanufacturing cost, the profitability of original product manufacturers and outsourced independent remanufacturers will decrease, and the adverse impact on the environment will increase.