Research On Contract Coordination And Decision Models For Truck Engine Remanufacturing Supply Chains

Scrapped automobiles contain huge available resources. If the scrapped cars abandoned randomly, it would be a huge waste of China's "urban mines" resources. "Remanufacturing" has become an important means of mining "urban mines". According to China Association of Automobile Manufacturers' statistics, it has more than 9 million scrapped vehicles in 2015, but the amount recovered was only 1.87 million, and remanufactured engines for only 80 million units. Chinese government strongly support the remanufacturing industry, and national remanufacturing industry output value reached 50 billion RMB in the year 2015. However many practical problems exists in the development of remanufacturing industry in China.Firstly, serious supply and demand uncertainty exists in the remanufacturing supply chain. On the supply side, the quality of recycled used pieces varies significantly. It can lead to its remanufacturability facing highly uncertainty, which affects the quantity of remanufacturing and the remanufacturing costs. At the same time, remanufacturers face difficulties in remanufacturing production planning and quality control. On the demand side in the market, due to low acceptance of remanufactured products and consumers'concerns about its quality, the demand in the market also exists uncertainty. The disturbances of supply and demand uncertainties bring more severe challenges to the remanufacturing supply chain management than the forward supply chain. Secondly, the decentralized decision-making status among different supply chain parties in the internal remanufacturing supply chain rises a "double marginalization effect" problem when it faces the interference of supply and demand uncertainty, which requires the use of supply chain contract coordination. Finally, in terms of the remanufacturing market demand, due to the increased environmental awareness of consumers, the consumer groups outside of remanufacturing supply chain are not whole. Some consumers have a higher environmental preferences than the normal consumer groups, and its environmental preferences varies significantly, which affects the acceptance of remanufacturing products and the market demand. In order to deal with the situation of consumers' different environmental preferences, how to formulate proper price, or what proportion of government subsidies transferred to consumers to stimulate its demand have become a realistic decision-making problem for the remanufacturing supply chain.Based on the realistic problems existed in the external and internal remanufacture supply chain above, this study selected heavy truck engine remanufacturing supply chain as the research object, which focuses on the supply and demand uncertainty. Adopting supply chain contract, risk measurement, mathematical optimization and demand-price relationship theory, this research builds a mathematical model to achieve research objectives.Firstly, this research adopts the supply chain contract theory to build a multi-uncertainties remanufacturing supply chain coordination model, which reveals how to coordinate and sharing risk with each other in the interference and conflict between remanufacturing supply and demand uncertainty for the stakeholders inside of heavy truck engine remanufacturing supply chain. Contract coordination helps to balance the mismatch between supply and demand in the remanufacturing supply chain. The solution of the mismatch problem can improve the expected profit of each remanufacturing supply chain participants, and reduce the degree of slow-moving and other losses in remanufacturing supply chain. The mathematical proof results show that remanufacturing contract helps to eliminate the "double marginalization effect" caused by the decentralized decision-making; further this model discusses the uncertainties affect towards the contract model parameters; then this research proves the existing problem of "the pair of contract parameters" under revenue-sharing contract when one has a strong bargaining power, which helps to expand the applicability of the proposed contract; this research shows that achieving the proposed contract helps retailers to increase its enthusiasm of recycling used products, and this recycling enthusiasm has been strengthened when government subsidies involved in remanufacturing supply chain. The strengthened recovery enthusiasm comes from the contract mutually incentive mechanism of the relevant participants to pursue government subsidies as an "extra profits".Secondly, based on Mean-Variance as a risk measure, a risk aversion remanufacturing supply chain contract coordination model under the interference of multiple sources of uncertainties is established. As risk attitude would affect the remanufacturing participants' decision-making and its risk attitude is different, it is necessary to explore the parameters of the proposed revenue-sharing contract in the case of risk aversion condition. This research shows how to motivate the risk-averse remanufacturing stakeholders to participate in the supply chain contract coordination mechanism. Mathematical proof results indicate that in risk aversion case remanufacturing stakeholders get lower expected profit than the risk neutral scenario. This research discusses the impact of risk attitude of the remanufacturing stakeholders on the quantity of used products recovered, expected profit as well as the determination of the range of contract parameters.Finally, in order to deal with the demand of consumers market outside of remanufacturing supply chain, this research establishes a decision-making model for remanufacturing supply chain, which considers the interaction among consumers'environmental preferences, the price of remanufactured products and the transferring proportion of government subsidies towards consumers. Facing the consumer groups with different environmental preferences in the external of remanufacturing supply chain, through the enterprise field research, it has been observed that when the price of remanufactured product increases, non-green consumers have the tendency to strong substitution effect, that is, it has higher price elasticity towards remanufactured products. In order to enhance its own profits from remanufacturing market, considering the hypothesis of "consumers'environmental preference affects demand", the pricing decision of remanufactured products needs to consider the difference of consumers segment on price elasticity of demand. Therefore, by using investigation research and mathematical optimization method, this research builds a decision model for remanufacturing supply chain, which considers both consumers'environmental preference and the government subsidy policy. This model balances the trade-off among the price of remanufactured products, the transferring proportion of government subsidies to consumers and the internal environmental preferences of consumers. The model shows that the optimal decision on subsidies sharing ratio and the price of remanufactured product should follow the certain rules. The research finds that the optimal price is inversely proportional to the weighted-sum of PED and the optimal subsidy-sharing percentage is proportional to the weighted-sum of PED. This research points out the effectiveness of the adoption of "the weighted-sum of PED" as a measure to indicate current consumers' environmental preference. The proposed model considers the impact of trends in consumers' environmental preferences on remanufacturing supply chain's pricing and subsidy allocation decision behaviour. Finally, managerial implications and applicability of the proposed decision-making model is interpreted by an industry-leading heavy-duty truck engine remanufacturing enterprise.