Distribution Channel Choice and Divisional Conflict in Remanufacturing Operations

Tianqin Shi, Dilip Chhajed, Zhixi Wan, Yunchuan Liu

Research output: Contribution to journalArticlepeer-review

Abstract

We consider a firm consisting of two divisions, one responsible for designing and manufacturing new products and the other responsible for remanufacturing operations. The firm will sell these new and remanufactured products either directly to the consumer (direct selling) or through an independent retailer (indirect selling). Our study demonstrates that a firm’s organizational structure can affect its marketing decisions. Specifically, a decentralized firm with separate manufacturing and remanufacturing divisions can benefit from indirect selling with higher firm profit, supply chain profit, and total consumer demand than direct selling. Moreover, this structure also induces a remanufacturable product design. In contrast, a centralized firm in which the manufacturing and remanufacturing divisions are consolidated is intuitively better off by choosing direct selling than indirect selling. Furthermore, we show that, surprisingly, when the focal firm sells through an independent retailer, a decentralized internal structure can result in higher supply chain profit than a centralized internal structure. We further investigate the case of dual dedicated channels and conclude that, while direct selling of remanufactured products and indirect selling of new products can better induce a remanufacturable product design and higher supply chain profit, it is not in the best interest of the firm in terms of total sales and firm profit.

Original languageEnglish (US)
Pages (from-to)1702-1719
Number of pages18
JournalProduction and Operations Management
Volume29
Issue number7
DOIs
StatePublished - Jul 1 2020

Keywords

  • channel choice
  • divisional conflict
  • product design and pricing
  • remanufacturing

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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