Shantanu Bhattacharya, V. Daniel R. Guide Jr., Luk N. Van Wassenhove
We address the problem of determining the optimal retailer order quantities from a manufacturer who makes new products in conjunction with ordering remanufactured products from a remanufacturer using used and unsold products from the previous product generation. Specifically, we determine the optimal order quantity by the retailer for four systems of decision-making: (a) the three firms make their decisions in a coordinated fashion, (b) the retailer acts independently while the manufacturer and remanufacturer coordinate their decisions, (c) the remanufacturer acts independently while the retailer and manufacturer coordinate their decisions, and (d) all three firms act independently. We model the four options described above as centralized or decentralized decision-making systems with the manufacturer being the Stackelberg leader and provide insights into the optimal order quantities. Coordination mechanisms are then provided which enable the different players to achieve jointly the equivalent profits in a coordinated channel. © 2006 Production and Operations Management Society.
Depatment of Operations Management, INSEAD, Singapore 138676, 1 Ayer Rajah Avenue, Singapore; Department of Supply Chain and Information Systems, Smeal College of Business, Pennsylvania State University, University Park, PA 16802, United States; Department of Manufacturing, INSEAD, 77305 Fontainebleau Cedex, Blvd de Constance, France
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