Revenue and Cost Sharing Mechanism for Effective Remanufacturing Supply Chain

Abstract

Remanufacturing has become popular as a mean to realize a sustainable society. In the remanufacturing process, two types of uncertainty reside; uncertainty of the amount of used products to be collected and that of the demand of remanufactured products. Therefore, deciding how many to collect and how many to procure is the key to success but double marginalization problem is observed if the remanufacturing process consists of two companies. To solve this problem, this study proposes a revenue and cost sharing mechanism to realize a higher expected profit as a channel and brings higher expected profits to both companies. We show its effectiveness by using numerical example. The higher expected profit brought by this proposal would make it feasible to operate remanufacturing supply chains and help accelerate the sustainable society.