Product Design and Supply Chain Coordination Under Extended Producer Responsibility

Production and Operations Management, Forthcoming

Ross School of Business Paper No. 1008

34 Pages Posted: 8 Aug 2007 Last revised: 29 Oct 2015

See all articles by Ravi Subramanian

Ravi Subramanian

Georgia Institute of Technology - Scheller College of Business

Sudheer Gupta

Simon Fraser University

F. Brian Talbot

University of Michigan - Stephen M. Ross School of Business

Date Written: December 1, 2008

Abstract

Extended Producer Responsibility (EPR) legislation focuses on the life-cycle environmental performance of products and has significant implications for management theory and practice. In this paper, we examine the influence of EPR policy parameters on product design and coordination incentives in a durable product supply chain. We model a manufacturer supplying a remanufacturable product to a customer over multiple periods. The manufacturer invests in two design attributes of the product that impact costs incurred by the supply chain -- performance, which affects the environmental impact of the product during use, and remanufacturability, which affects the environmental impact post-use. Consistent with the goals of EPR policies, the manufacturer and the customer are required to share the environmental costs incurred over the product's life-cycle. The customer has a continuing need for the services of the product and optimizes between the costs of product replacement and the costs incurred during use. We demonstrate how charges during use and post-use can be used as levers to encourage environmentally favorable product design. We analyze the impact of supply chain coordination on design choices and profit and discuss contracts that can be used to achieve coordination, both under symmetric and asymmetric information about customer attributes.

Keywords: Extended Producer Responsibility, Product Design, Supply Chain Coordination, Information Asymmetry, Contracts

JEL Classification: C72, D21, L22, Q38

Suggested Citation

Subramanian, Ravi and Gupta, Sudheer and Talbot, F. Brian, Product Design and Supply Chain Coordination Under Extended Producer Responsibility (December 1, 2008). Production and Operations Management, Forthcoming; Ross School of Business Paper No. 1008. Available at SSRN: https://ssrn.com/abstract=902359 or http://dx.doi.org/10.2139/ssrn.902359

Ravi Subramanian (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Sudheer Gupta

Simon Fraser University ( email )

Burnaby, British Columbia V5A 1S6
Canada

F. Brian Talbot

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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