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Core Acquisition Management in Remanufacturing: Current Status and Modeling Techniques
Linköping University, Department of Management and Engineering, Production Economics. Linköping University, The Institute of Technology.
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Remanufacturing is an important product recovery option that benefits our sustainable development. Cores, i.e. the used products/parts, are essential resources for remanufacturing. Without cores, there will not be any remanufactured products. Challenges in the core acquisition process are mainly caused by the uncertainties of: return volume, timing and core quality. Core Acquisition Management actively attempts to reduce these uncertainties and achieve a better balance of demand and return for the remanufacturers. The aim of this dissertation is to extend the knowledge of Core Acquisition Management in remanufacturing, by investigating the current status of research and industrial practice, and developing quantitative models that assist the decision making in the core acquisition process.

In the dissertation, a literature review is firstly conducted to provide an overview about the current research in Core Acquisition Management. Possible further research interests, for example, more studies based on non-hybrid remanufacturing systems and imperfect substitution assumption are suggested. Through an industrial survey carried out in a fast developing remanufacturing market - China, environmental responsibility and ethical  concerns, customer orientation and strategic advantage are identified as the most important motives for the remanufacturers, while customer recognition is their most serious barrier at present. Suggestions for further improving the Chinese remanufacturing industry from the policy-makers’ perspective are provided. After the above investigation, mathematical models are then developed to assist the acquisition decisions in two aspects: to deal with the uncertainties of return volume and timing, and to deal with the uncertainties of core quality.

Acquisition decision about volume and timing is firstly studied from a product life cycle perspective, where the demands for remanufactured products and the core availability change over time. According to industrial observations, the remanufacturing cost decreases with respect to its core inventory. Using optimal control theory, core acquisition and remanufacturing decisions are derived to maximize the remanufacturer's profit. It is found that besides a simple bang-bang type control policy (either collecting as much as possible, or nothing), a special form of synchronizing policy (adjusting the core collection rate with demand rate) also exists. Furthermore, the acquisition decision depends greatly on the valuation of cores, and Real Option Valuation approaches are later used to capture the value of flexibility provided by owning cores when different aspects of remanufacturing environment are random. More specifically, the value of disposing a core earlier is investigated when the price of remanufactured product is uncertain, and the impact of the correlation between stochastic demand and return is also studied.

To deal with the uncertainties of core quality, refund policies with different numbers of quality classes are studied. Under the assumption of uniformly distributed quality, analytical solutions for these refund policies are derived. Numerical examples indicate that the customers’ valuation of cores is an important factor influencing the return rates and the remanufacturer’s profit. Refund policies with a small number of quality classes could already bring major advantages. Credit refund policies (without deposits) are included for comparisons. In addition, within a game theory framework, the trade-off of two types of errors of the quality inspection in a deposit-refund policy is studied. The salvage values of different cores show great influences on the remanufacturer’s policy choices. The value of information transparency about the inspection errors are studied under different conditions. Interestingly, the customer may actually return more low quality cores when the inspection accuracy is improved.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2015. , 42 + Appendix A and B p.
Series
Linköping Studies in Science and Technology. Dissertations, ISSN 0345-7524 ; 1637
Keyword [en]
Core acquisition, remanufacturing, closed-loop supply chain, quantitative modeling, return uncertainties
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:liu:diva-113251DOI: 10.3384/diss.diva-113251ISBN: 978-91-7519-167-6 (print)OAI: oai:DiVA.org:liu-113251DiVA: diva2:779872
Public defence
2015-02-06, ACAS, Hus A, Campus Valla, Linköpings universitet, Linköping, 10:15 (English)
Opponent
Supervisors
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2016-04-12Bibliographically approved
List of papers
1. Core (product) Acquisition Management for remanufacturing: a review
Open this publication in new window or tab >>Core (product) Acquisition Management for remanufacturing: a review
2015 (English)In: Journal of Remanufacturing, ISSN 2210-4690, no 4Article, review/survey (Refereed) Published
Abstract [en]

Core acquisition is essential for the success of remanufacturing business. To describe the current status of the quantitative research in Core Acquisition Management and to indicate possible future research directions, a literature review is conducted in this paper about the quantitative modeling in Core Acquisition Management research area. The activities included in Core Acquisition Management are categorized into topics such as acquisition control, forecasting return, return strategies, quality classification and reverse channel design. While most of the studies focus on acquisition control, studies on return strategies and return forecast are relatively limited. Furthermore, this paper analyzes the research papers according to the key assumptions such as, hybrid/non-hybrid remanufacturing systems, acquisition functions, quality classification methods and perfect/imperfect substitutions. In conclusion, studies based on the assumptions of non-hybrid remanufacturing systems and imperfect substitution should gain more attentions, since these situations frequently occur in practice but are less investigated in the existing literature. In addition, empirical validation of the various forms of the acquisition function (relations between acquisition incentives and acquisition volume) should be important for further investigations.

Place, publisher, year, edition, pages
Springer, 2015
Keyword
Remanufacturing, acquisition, core, closed-loop supply chain, review
National Category
Economics and Business Other Mechanical Engineering
Identifiers
urn:nbn:se:liu:diva-113243 (URN)10.1186/s13243-015-0014-7 (DOI)
Note

At the time for thesis presentation publication was in status: Manuscript

Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2017-12-05Bibliographically approved
2. Motives and barriers of the remanufacturing industry in China
Open this publication in new window or tab >>Motives and barriers of the remanufacturing industry in China
2015 (English)In: Journal of Cleaner Production, ISSN 0959-6526, E-ISSN 1879-1786, ISSN 0959-6526, Vol. 94, 340-351 p.Article in journal (Refereed) Published
Abstract [en]

Realizing the importance of remanufacturing for sustainable development due to the large scale of the economy and its increasing pressure on the environment, the Chinese government has been strongly promoting its remanufacturing industry since 2008. The objective of this paper is to identify the motives and barriers for remanufacturing in China. According to the survey conducted among remanufacturers in China, environmental and ethical responsibility, customer orientation and strategic advantage are the three most important motives, while customer recognition is the most serious barrier at present. This survey also shows that there are many differences between car part and machinery remanufacturers in China. For example, car part remanufacturers are more motivated by subsidies, at the same time, they are also more restricted by legislation, while lack of sales channels is a more serious barrier for the machinery remanufacturers. The differences exist partly due to the Chinese remanufacturing environment, for example the policies from different government departments that regulate the related industries. Suggestions for improving the remanufacturing industry, in particular from the policy makers’ perspective, are provided according to the survey results.

Place, publisher, year, edition, pages
Elsevier, 2015
Keyword
Remanufacturing, drivers, challenges, China, survey
National Category
Economics and Business
Identifiers
urn:nbn:se:liu:diva-113244 (URN)10.1016/j.jclepro.2015.02.014 (DOI)000353741400034 ()
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2017-12-05
3. Managing cores for remanufacturing during the product life cycle
Open this publication in new window or tab >>Managing cores for remanufacturing during the product life cycle
(English)Manuscript (preprint) (Other academic)
Abstract [en]

In this paper, we develop a strategic decision model for a remanufacturer who faces the constraints of changing demands for remanufactured products and changing availability of cores. The remanufacturer decides on core collecting and remanufacturing to maximize its profit over the whole product life cycle. In the objective function, the remanufacturing cost is set as a convex decreasing function with respect to core inventory, to reflect the observations from industrial practice. Possible forms of the optimal control policies are analyzed using the optimal control theory. According to such properties and also the observations from numerical examples, a heuristic method is developed and shown to perform well. We further use this heuristic method in various numerical experiments with the background of component remanufacturing. According to the experiments, the remanufacturer should collect as many cores as possible in the beginning, with the exception of a high price of collecting cores; not all demand should be met at the beginning until enough cores are collected. In the late stage of the product life cycle, the time to stop collecting cores can be greatly affected by different remanufacturing costs and different life lengths of original products as well. Moreover, cores from failed parts need more attention than cores from disposed products, because they are more effective in balancing the demand for remanufactured products and the availability of cores.

Keyword
Remanufacturing, core management, product life cycle, optimal control
National Category
Economics and Business
Identifiers
urn:nbn:se:liu:diva-113246 (URN)
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2015-01-13Bibliographically approved
4. Real option approach to evaluate cores for remanufacturing in service markets
Open this publication in new window or tab >>Real option approach to evaluate cores for remanufacturing in service markets
2015 (English)In: International Journal of Production Research, ISSN 0020-7543, E-ISSN 1366-588X, Vol. 53, no 8, 2306-2320 p.Article in journal (Refereed) Published
Abstract [en]

Acquisition of cores is important for the success of remanufacturing business, but evaluating the value of cores is difficult due to many uncertain issues in the remanufacturing system. In this paper, we examine the value of cores using the real option valuation (ROV) approach, which well captures the production flexibility and represents different operations options in remanufacturing. First, in a system where the demand of remanufactured products is low, we focus on the uncertainty of price. We compare the cases where disposing cores occurs only at the expiration time and before that. The model also identifies under which circumstances disposing core early brings in more benefit. Furthermore, we study a remanufacturing system where demand and return are both uncertain. In this case, a spread option is used for evaluating the marginal value of obtaining additional cores. This approach also brings the advantage of linking the correlation between demand and return, which in fact is often exhibited in remanufacturing. The numerical experiments indicate that this correlation has an impact on collecting policies. This study illustrates the possibility of using ROV for core pricing modelling, and the study results also provide some managerial insights in managing returned cores.

Place, publisher, year, edition, pages
Taylor & Francis, 2015
Keyword
Remanufacturing, cores, real option valuation
National Category
Economics and Business
Identifiers
urn:nbn:se:liu:diva-113247 (URN)10.1080/00207543.2014.939243 (DOI)000349395700004 ()
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2017-12-05
5. Refund policies for cores with quality variation in OEM remanufacturing
Open this publication in new window or tab >>Refund policies for cores with quality variation in OEM remanufacturing
2015 (English)In: International Journal of Production Economics, ISSN 0925-5273, E-ISSN 1873-7579, Vol. 170, 629-640 p.Article in journal (Refereed) Published
Abstract [en]

Cores are essential for the remanufacturing business. The lack of cores with proper quality is reported as a highly ranked factor that limits both third party and OEM (Original Equipment Manufacturer) remanufacturers. To encourage the return of quality cores, in practice it is common for OEMs to charge a certain amount of deposit, and refund it fully or partially depending on the quality of cores during the return process. Furthermore, the core quality varies and leads to different remanufacturing costs. The core refund policy should reflect such differences, in order to encourage the customers to return the cores with “correct” quality. In this paper, we propose three refund policies and develop profit maximization model for the remanufacturer. Under the assumption of quality following a uniform distribution, we develop analytical solutions for the refund policies and principles for quality partition. Numerical examples indicate that the customers׳ valuation of core is an important factor influencing the return rates and the economics performance of the system as well. Multiple refund policy with a small number of quality classes already brings major advantages, even with a market where the competition for collecting cores is relatively high. The study is also extended to the cases that core quality follows an adjusted normal distribution. Credit refund policies are also studied for comparison purpose.

Place, publisher, year, edition, pages
Elsevier, 2015
Keyword
Remanufacturing; Deposit; Refund policy; Quality classes
National Category
Economics and Business
Identifiers
urn:nbn:se:liu:diva-113249 (URN)10.1016/j.ijpe.2014.12.006 (DOI)000367486100025 ()
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2017-12-05Bibliographically approved
6. Refund polices for core collecting regarding the customers’ responses
Open this publication in new window or tab >>Refund polices for core collecting regarding the customers’ responses
2014 (English)Manuscript (preprint) (Other academic)
Abstract [en]

To encourage the return of cores, remanufacturers in practice commonly charge a certain amount of purchasing deposit, and refund it to the customer based on the result of quality inspection in the return process. Two types of classification errors exist and interact with each other during such an inspection process: either low quality cores are defined as remanufacturable; or high quality cores are defined non-remanufacturable. A remanufacturer has to choose a combination them and determine a proper deposit value, with the consideration of customers’ possible responses concerning purchasing and return behaviors. Within a game theory framework, the analytical solutions of these issues are firstly developed under the assumption that the customer has the inspection error information. When this information is not available, the solutions are analyzed with a given and fixed deposit. The value of information transparency in inspection errors is shown by comparing these two settings. The salvage value of different cores also has a great influence on the remanufacturer’s profit. In addition, the effect of conservatively estimating customers’ product payoff and the influences of improving inspection accuracy are investigated numerically. Interestingly, the customer may return more low quality cores when the inspection accuracy is improved.

Keyword
Remanufacturing, refund policies, core quality, inspection errors, game theory
National Category
Economics and Business
Identifiers
urn:nbn:se:liu:diva-113250 (URN)
Available from: 2015-01-13 Created: 2015-01-13 Last updated: 2015-01-13

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