Carbon emission reduction and coordination in a closed-loop supply chain with outsourcing remanufacturing

Abstract

Outsourcing remanufacturing is a major form of remanufacturing, and emission reduction is an important part of a manufacturer's production. This paper aims to investigate carbon emission reduction strategies in a closed-loop supply chain (CLSC) with outsourcing remanufacturing and design a contract to coordinate the CLSC. The authors establish two-period game models between an original equipment manufacturer (OEM) and third-party remanufacturer (TPR) in different scenarios, including decentralized decision, centralized decision and coordinated decision. Furthermore, the authors study the optimal decisions by maximizing the profit model. The authors also investigate the impact of a carbon tax and emission reduction on the optimal decisions through comparative analysis. Emission reduction increases the quantity of new products and the OEM's profit. However, emission reduction decreases the outsourcing fee, which is not conducive to remanufacturing; thus, the TPR's profit does not necessarily increase. Compared with a decentralized scenario, the output of remanufactured products and the total profit increase. When the acceptance level of remanufactured products is high enough or when emissions from remanufacturing are low enough, the total carbon emissions are reduced in the centralized scenario. For the coordination of the CLSC, the OEM needs to increase the outsourcing fee and the TPR needs to share part of the emission reduction costs. The TPR can choose three different remanufacturing strategies, namely, no remanufacturing, partial remanufacturing or full remanufacturing. For the majority of firms, it is difficult to remanufacture all used products. Therefore, the analysis is based only on partial remanufacturing. The results provide insights for remanufacturing and emission reduction decisions, as well as a decision basis for the cooperation between the OEM and TPR. The authors combine the OEM's carbon emission reduction with outsourcing remanufacturing, and investigate the impact of technological spillover on the TPR's profit.