Optimal Policies for Selling New and Remanufactured Products

2019-03-11

Topic£ºOptimal Policies for Selling New and Remanufactured Products

Speaker: YAN Xiaoming

Time: 3:00pm, Friday,  March 15,2019

Site: EMS B249

Abstract£ºBecause of environmental and economic reasons, an increasing number of original equipment manufacturers (OEMs) nowadays sell both new and remanufactured products. When both products are available, customers will buy the one that gives them a higher (and non-negative) utility. Thus, if the firm does not price the products properly, then product cannibalization may arise and its revenue may be adversely impacted. In this paper, we study the pricing problem of a firm that sells both new and remanufactured products over a finite planning horizon. Customer demand processes for both new and remanufactured products are random and price-sensitive, and product returns (also called cores) are random and remanufactured upon receipt. We characterize the optimal pricing and manufacturing policies that maximize the expected total discounted profit. If new products are made-to-order (MTO), we show that when the inventory level of remanufactured product increases, the optimal price of remanufactured product decreases while the price difference between new and remanufactured products increases; however, the optimal selling price of new product may increase or decrease. If new products are made to stock (MTS), then the optimal manufacturing policy is of a base-stock policy with the base-stock level decreasing in the remanufactured product inventory level. To understand the potential benefit in implementing an MTO system, we study the difference between the value functions of the MTO and MTS systems, and develop lower and upper bounds for it. Finally, we study several extensions of the base model and show that most of our results extend to those more general settings.

Introduction to the Speaker£º

Yan xiaoming is an associate professor at the School of Management, University of Science and Technology of China. He received his doctorate in Academy of Mathematics and Systems Science Chinese Academy of Sciences. He has been committed to the research on supply chain operation and inventory management. As the first author or corresponding author, he has published more than ten papers in internationally renowned journals such as Operations Research, Production and Operations Management, Naval Research Logistics and European Journal of Operational Research. He has presided over one youth project of the National Natural Science Foundation of China and one general project, among which the youth project was concluded and evaluated as "excellent". The research results won the best paper award of the 8th International Conference of Chinese Scholars Management Science and Engineering Association (CSAMSE).