Optimal core acquisition and pricing strategies for hybrid manufacturing and remanufacturing systems

In this study, we combine two aspects of remanufacturing, namely product acquisition management and marketing (pricing) of the remanufactured products. We consider an original equipment manufacturer (OEM) who decides on the acquisition prices offered for returns from different quality types and on selling prices of new and remanufactured products, in a single period setting. We develop a procedure for determining the optimal prices and corresponding profit of the OEM, and conduct a sensitivity analysis to understand the effect of different model parameters on the optimal strategies and profit. An important managerial insight is that the optimal solution is not to have the same profit per remanufactured item for all return types, but to if the minimum cost for acquisition and remanufacturing of some core type is lower.