Strategic analysis of product recovery management by using system dynamics approach

Abstract

In this study, by using system dynamics approach, we aim to investigate the profitability of a company engaging in remanufacturing, which is the most advanced form of product recovery. Our motivation is to find out (i) whether investing in remanufacturing is advantageous for a company in terms of long term profitability and (ii) what should be the quality and price levels of the remanufactured and manufactured products. The model shows that a company offering new and remanufactured products in the market generates interesting long term customer-base dynamics endogenously. Different from the studies in the literature that deal with micro level issues, we analyze the effects of being involved in remanufacturing of electronic products on the profitability of the firm in the long term, at macro level, by also taking into account the green image factor and the government incentives for the firms that perform product recovery.