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Redesign of service modes for remanufactured products and its financial benefits

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  • Zhu, Qinghua
  • Li, Helong
  • Zhao, Senlin
  • Lun, Venus

Abstract

Remanufacturing has gained an increasing amount of attention due to its contribution to energy saving and pollution reduction. However, remanufactured products have low customer acceptance because people are concerned about quality and after-sales service. Therefore, existing innovative service modes for regular products are used as the basis in this study to develop two different types of service modes (i.e., extended warranty and free replacement service modes) for remanufactured products. Mathematical models are further developed to evaluate the financial benefits that take into consideration linear and nonlinear customer demands. With a sample of 387 customers of remanufactured heavy truck engines, if and how these two new service modes can provide financial gains to a typical leading remanufacturer will be examined in this paper. The empirical analysis results show that customers prefer to buy remanufactured products at a higher price if the new service modes are implemented. However, the profit of remanufacturers will be affected by the increased cost and defect products. Hence, it is essential to observe whether there is a balance between increased benefits and costs when determining the length of the extended warranty and the free replacement service. The empirical results indicate that remanufacturers can gain more profit with the free replacement service mode as opposed to the extended warranty service mode. This study provides practical implications by developing two innovative service modes that can be implemented by remanufacturers. The study also theoretically contributes to the field of study with the development of mathematical models to evaluate the financial benefits that take into consideration the different types of customer demands as well as other innovative service modes among remanufacturers and manufacturers.

Suggested Citation

  • Zhu, Qinghua & Li, Helong & Zhao, Senlin & Lun, Venus, 2016. "Redesign of service modes for remanufactured products and its financial benefits," International Journal of Production Economics, Elsevier, vol. 171(P2), pages 231-240.
    • Handle: RePEc:eee:proeco:v:171:y:2016:i:p2:p:231-240
    DOI: 10.1016/j.ijpe.2015.08.015
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    References listed on IDEAS

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    Cited by:

    1. Yan Zhou & Xue-Qi Liu & Kar-Hung Wong, 2021. "Remanufacturing Policies Options for a Closed-Loop Supply Chain Network," Sustainability, MDPI, vol. 13(12), pages 1-26, June.
    2. Liu, Zhuojun & Diallo, Claver & Chen, Jing & Zhang, Michael, 2020. "Optimal pricing and production strategies for new and remanufactured products under a non-renewing free replacement warranty," International Journal of Production Economics, Elsevier, vol. 226(C).
    3. Li Cui & Kuo-Jui Wu & Ming-Lang Tseng, 2016. "Exploring a Novel Agricultural Subsidy Model with Sustainable Development: A Chinese Agribusiness in Liaoning Province," Sustainability, MDPI, vol. 9(1), pages 1-15, December.
    4. Xuemei Zhang & Jiawei Hu & Suqin Sun & Guohu Qi, 2022. "Extended Warranty Strategy and Its Environment Impact of Remanufactured Supply Chain," IJERPH, MDPI, vol. 19(3), pages 1-25, January.
    5. Changhong Li & Jialuo Wang & Yifan Shi, 2022. "The Impact of Government Intervention and Cap-and-Trade on Green Innovation in Supply Chains: A Social Welfare Perspective," Sustainability, MDPI, vol. 14(13), pages 1-18, June.
    6. Feng, Yunting & Lai, Kee-hung & Zhu, Qinghua, 2020. "Legitimacy in operations: How sustainability certification announcements by Chinese listed enterprises influence their market value?," International Journal of Production Economics, Elsevier, vol. 224(C).
    7. Liu, Zhi & Li, Kevin W. & Tang, Juan & Gong, Bengang & Huang, Jun, 2021. "Optimal operations of a closed-loop supply chain under a dual regulation," International Journal of Production Economics, Elsevier, vol. 233(C).
    8. Fernando Tobal Berssaneti & Simone Berger & Ana Maria Saut & Rosangela Maria Vanalle & José Carlos Curvelo Santana, 2019. "Value Generation of Remanufactured Products: Multi-Case Study of Third-Party Companies," Sustainability, MDPI, vol. 11(3), pages 1-21, January.

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