Managing Product Reusability under Supply Disruptions

28 Pages Posted: 3 Aug 2022

See all articles by Prashant Chintapalli

Prashant Chintapalli

Ivey Business School, Western University

Kumar Rajaram

University of California, Los Angeles - Anderson School of Business

Nishant Kumar Verma

Indian Institute of Management Bangalore (IIMB)

Date Written: July 27, 2022

Abstract

We model and analyze product reusability (executed through either refurbishing or remanufacturing), in the presence of supply disruptions. By assuming that consumers could exchange their used units for new ones and firms can attract consumers to do so through an exchange fee, we develop a discrete-time stochastic model to determine the degree of product-reusability, price, and exchange fee in steady state.

Our analysis of this model shows that increasing product's reusability through better product design is beneficial to a certain extent when the probability of supply disruption increases. However, increasing reusability further, when the disruption probability is high, could hurt a firm's profit due to increasing design costs. We further show that, when consumers are more likely to exchange used units, increasing product-reusability is beneficial only when the price is high. Next, we discuss how a manufacturer should set the exchange fee to entice consumers to exchange their old units and set the discounted price for refurbished units that it sells in the market. We also show that increasing product-reusability need not be always beneficial even when manufacturer can set its product's price. Hence, a firms needs to carefully choose the right level of product-reusability to maximize manufacturer's profits.

Finally, we compare product refurbishing and remanufacturing and observe that refurbishing could be more viable than remanufacturing when supply disruption is less likely, because of the additional expenditure that remanufacturing incurs when compared to refurbishing.

Keywords: Product reusability, refurbishing, remanufacturing, supply disruption, product design, product exchanges

Suggested Citation

Chintapalli, Prashant and Rajaram, Kumar and Verma, Nishant Kumar, Managing Product Reusability under Supply Disruptions (July 27, 2022). Available at SSRN: https://ssrn.com/abstract=4174631 or http://dx.doi.org/10.2139/ssrn.4174631

Prashant Chintapalli (Contact Author)

Ivey Business School, Western University ( email )

1255
Western Rd
London, Ontario N6G 0N1
Canada

HOME PAGE: http://www.ivey.uwo.ca/faculty/directory/prashant-chintapalli/

Kumar Rajaram

University of California, Los Angeles - Anderson School of Business ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Nishant Kumar Verma

Indian Institute of Management Bangalore (IIMB) ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

HOME PAGE: http://https://www.iimb.ac.in/user/157/nishant-kumar-verma

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