Owning or outsourcing? Strategic choice on take-back operations for third-party remanufacturing

Abstract

Despite the remanufacturing process having demonstrated economic, social, and environmental benefits, many original equipment manufacturers (OEMs) have not engaged in the remanufacturing process themselves, as they often outsource it to a third party. In practice, such outsourcing usually involves two different options/modes for OEMs with consideration of take-back operations: (1) owning the reverse channel and collecting cores directly (Model D) or (2) outsourcing these operations to a third-party remanufacturer (TPR) and collecting cores indirectly (Model I). However, this raises the important question of whether OEMs should also outsource their reverse channels to third-party remanufacturers when outsourcing remanufacturing. Furthermore, there needs to be an investigation of which method is more beneficial in terms of economic, social, and environmental outcomes. This paper uses modelling to investigate the costs and benefits of these options in terms of sustainability. We found that, compared to Model I, the OEM conducting take-back operations itself can achieve the overall better outcomes for all economic, social, and environmental situations.