Channel Strategies for New and Remanufactured Products: The Impact of Remanufacturing Costs

We analyze a dyadic supply chain where a manufacturer distributes new and remanufactured products through a retailer or a direct channel, resulting in three distribution models. The manufacturer can choose to remanufacture all, some, or none of the used products. By comparing profits under different channel and remanufacturing strategies, in this article, we identify the manufacturer's optimal decisions and their impact on the retailer. Our results show that remanufacturing can be used both strategically and competitively, especially when managing direct channels. While separating distribution channels often disadvantages the retailer, it can still lead to Pareto improvements. The manufacturer always benefits from directly distributing new products, but should only distribute remanufactured products directly when production costs are low. When production costs are polarized, focusing on new products is optimal; when production costs are moderate, remanufactured products should be prioritized. Finally, the three-channel strategies differ in their environmental, customer, and social welfare impacts, sometimes conflicting. To maximize the overall welfare, the manufacturer should either directly manage new product distribution or allow the retailer to handle both new and remanufactured products.