Remanufacturing of electronic products in bonded port area across home and foreign markets. Approach based on closed-loop supply chain model

• DOI: https://doi.org/10.1108/IJLM-08-2014-0132
• Date: 08 August 2016
• Pages: 309-334
• Published date: 08 August 2016
• Author: Hong Chen,Nan Liu,Yuxuan He
• Subject Matter: Management science & operations,Logistics

Remanufacturing of electronic

products in bonded port area

across home and foreign markets

Approach based on closed-loop

supply chain model

Hong Chen, Nan Liu and Yuxuan He

School of Management, Zhejiang University, Hangzhou, China

Abstract

Purpose –This study proposes a process for remanufacturing waste electrical and electronic

equipment, and exporting part of the remanufactured products, which are processed in bonded port

areas, to less developed countries by using a closed-loop supply chain (CLSC). The purpose of this

paper is to verify the profitability of remanufacturing and to find conditions under which exporting

remanufactured products can increase and maximize the home manufacturer’s total profit while

performing his environmental responsibility.

Design/methodology/approach –The authors use the CLSC approach to construct the model, which

involves two different markets where a Stackelberg game exists. The study derives an equilibrium under

which an optimal quantity for exporting increases and maximizes the home manufacturer’s profits.

Findings –The authors discussthe influences of seven factors, and three aredeterminant parameters

on whether the home manufacturer should export its remanufactured products: the privileges of the

bonded port area, the home market consumers’green awareness, and the degree of competence in

products in the foreign market. If the marketconditions at home and abroad meet the requirements of

these threedeterminant parameters, enteringthe foreign market can alwayshelp the home manufacturer

make more profits regardless of whether its home market increases or decreases, how many used

products can be collected, and whether the foreign local manufacturer is technically competitive.

Originality/value –The authors expand previous studies on CLSC by considering two different

markets that allow the home manufacturer to either sell remanufactured products to the home market

or export to the foreign market.

Keywords Competition, WEEE, Closed-loop supply chain, Bonded port area, Foreign market

Paper type Research paper

1. Introduction

With the rapid development of technology, a large amount of waste electrical and

electronic equipment (WEEE) has increasingly become an environmental concern.

WEEE refers to “electronic devices ranging from large household devices, such as

refrigerators, air conditioners, cell phones, personal stereos, and consumer electronics,

to computers which have been discarded by their users”(Puckett et al., 2002).

An alarming increase in the quantity of WEEE has raised many concerns around the

world. Although exact data on the amount of WEEE generated globally is unavaila ble,

except in few countries, such as Switzerland (Ongondo et al., 2011), Greenpeace

estimates 20-50 million tons of WEEE is discarded globally every year, 12 million of

which is disposed by Asian countries, such as China and India.

The International Journal of

Logistics Management

Vol. 27 No. 2, 2016

pp. 309-334

©Emerald Group Publis hing Limited

0957-4093

DOI 10.1108/IJLM-08-2014-0132

Received 25 August 2014

Revised 7 November 2014

Accepted 24 December 2014

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

The authors are grateful to two anonymous reviewers and Dr Ted T.C. Lirn, the Guest Editor of

the journal, whose insightful comments contributed greatly to improving the quality of our work.

The research reported in the paper was conducted utilizing a project of the National Nature

Science Foundation of China (Grant No. 71471162).

309

Closed-loop

supply chain

model

The problems associated with WEEE are serious in China, where more than

70 percent of WEEE fromdeveloped countries is dumped (Yoshida,2005), not to mention

the huge amount generated domestically. For example, in Guiyu, a town in Guangdong

Province and an established WEEE recycling center in China, residents’drinking water

is heavily polluteddespite substantial profitsfrom the WEEE processing industry(Basel

Action Network and Greenpeace China et al., 2002). Other provinces, such as Zhejiang,

Jiangsu, and Shandong, are in similar situations (Liu et al.,2006).

Many countries have established environmental policies and legislations to tackle the

WEEE problem (Nnorom and Osibanjo, 2008a, b; Ongondo et al.,2011).InChina,

however, even though great efforts have been made by the central government to deal

with the management of WEEE from both the infrastructure construction and

technology promotion perspectives and to formulate many policies and legislations, the

market of WEEE recycling and processing remain difficult to regulate (Yu et al.,2010;

Guo et al., 2005) given the existence of many small and private informal electronic

recycling sectors, which are often low cost and profitable. Aside from the perspective of

legislation, landfilling, exporting to developing countries, reusing, recycling, and simply

storing in homes or offices by consumers are the usual technical methods of handling

WEEE (Ongondo et al., 2011). However, the application of these methodsin China is still

limited because of the lack of large formal and government-supported recycling sectors

to take on these processesto gain profit and environment-friendliness (Hicks et al., 2005).

Fortunately, the concept of remanufacturing provides an alternative to dealing with

WEEE issues from the perspective of both environmental protection and profit

maximization because remanufacturing can “generate profits by taking back products

from customers andrecovering the remaining added value”(Atasu et al., 2008a). It meets

the requirements of the environmental policy extended producer responsibility well in

that, which is proposed by Organization for Economic Co-operation and Development,

the responsibilityfor products of a producer “is extended to thepost-consumer stage of a

product’slifecycle”(OECD, 2014). In other words, the manufacturers should consider

their products’environmental issues across whole product life cycle, from the beginning

of the designation to the collection of used products from consumers. In this way,

remanufacturing can increase the manufacturer’s total profits considering the entire

product life cycle while reducing the total amount of WEEE.

In reality, many companies do have already made money through remanufac turing.

For example, Nextant Aerospace, a company in the database, remanufactures aircraft.

It has 200 employees and its annually sales reaches $100 million (Lund, 2012).

Moreover, the database of remanufacture involves 7,000 American and Canadian

remanufacture firms representing 121 product sectors. Among these sectors, 29 belong

to electronic and electrical industries (Hauser and Lund, 2012). HP does well in its own

recycling program. By 2012, HP has recycled 2.8 billion pounds of electronic products

and supplies. This amount is equivalent to the weight of 45 Statue of Liberty

monuments. HP builds its global recycling network through the co-operation with

specialist third-party companies. This program of HP pays much attention to the

“closed loop”recycling process, which is the very concept of remanufacturing.

The used products HP collects which cannot be reused are recycled to recover most

materials in the process. But those which can be reused are remanufactured to become

new ones. The original HP ink and LaserJet toner cartridges being reduced to raw

materials to make new cartridges is an example (HP Development Company, 2014).

In fact, the theory of remanufacturing has gone out of practice for over a decade. In this

case, guidance has already been well prepared, which is one motivation of our research.

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