New product diffusion in closed-loop supply chains

Abstract

In this thesis, we develop a dynamic model for sales planning of a manufacturer who sells new and remanufactured versions of a product. Demand arrives over a finite life cycle according to the slightly modified Bass diffusion process. End-ofuse product returns required for remanufacturing are constrained by the earlier sales. In this setting the manufacturer may simultaneously improve its economic and environmental performance by partially satisfying the initial demand. This can indeed occur when innovators contribute more heavily than imitators to the diffusion process, remanufacturing has a significantly large profit margin, or an unmet demand is very likely to be backlogged to be satisfied with a remanufactured product. But a very large backlogging rate may in ate the future demand if the initial sales volume is low, making it difficult to ensure a sufficient returns volume for remanufacturing. The manufacturer thus sells more under a very large backlogging rate, and a poorer environmental performance results. The optimal sales plans also differ across product types: The manufacturer of a search good has the advantage of keeping the future demand intact regardless of the initial sales, compared to the manufacturer of an experience good. Partially satisfying the demand can thus be desirable for search goods under a greater number of imitators, a lower margin from remanufacturing, or a lower backlogging rate. However, if partially satisfying the demand is desirable for both product types, the manufacturer of a search good sells more to enable a sufficient returns volume for the larger future demand.