Collect to resell: a profitable strategy for green electronic product manufacturers

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2008-01-01
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Lin, Wen
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Jo Min
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Industrial and Manufacturing Systems Engineering
The Department of Industrial and Manufacturing Systems Engineering teaches the design, analysis, and improvement of the systems and processes in manufacturing, consulting, and service industries by application of the principles of engineering. The Department of General Engineering was formed in 1929. In 1956 its name changed to Department of Industrial Engineering. In 1989 its name changed to the Department of Industrial and Manufacturing Systems Engineering.
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Industrial and Manufacturing Systems Engineering
Abstract

This thesis models and analyzes a closed loop supply chain for electronic products such as cell phones. In this supply chain, there exists an original equipment manufacturer (OEM) who sells new products and collects used products. Also there exists a reseller who procures the used products from the OEM. The reseller refurbishes these used products and then resells them as refurbished products. Besides reselling, the OEM is assumed to have an option to sell the used products to recyclers for recycling. In the thesis, we model this as a two-period Stackelberg game with the OEM as the leader and the reseller as the follower (OEM-Reseller model). We then compare this model with the centrally coordinated model. We solve equilibrium prices, production quantities as well as profits using backwards induction in both OEM-Reseller model and centrally coordinated model. Managerial insights are derived from numerical analysis. We show that under some conditions, OEM's profit from reselling refurbished products exceeds the loss of profit due to reduced new products sales from the competition of refurbished products. That is to say, selling the collected used products to the reseller can be a profitable strategy for the OEM.

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Tue Jan 01 00:00:00 UTC 2008