Research On Optimization Of Remanufacturing Decisions With Considering Hedging Strategy

With the increasing constraints of energy,resources and environment,the concept of green manufacturing has gradually become a global consensus.As an important way to realize low-carbon economy,remanufacturing can not only increase the profits of the enterprises,but also improve the efficiency of resource utilization and reduce carbon emissions,which is bound to get the maximum development.However,compared with the traditional manufacturing,there are more uncertainties in the remanufacturing,such as the uncertain recovery rate of waste products,unstable production and processing time and product quality,and large fluctuations in the price and demand of remanufactured products.These uncertain factors in the remanufacturing process make the remanufacturing enterprises face greater uncertainty.For this reason,remanufacturing enterprises need to find ways to manage the operational risk.In finance,risk hedging refers to the investment that deliberately reduces the risk of another investment,which is a very effective way to manage interest rate risk,price risk and commodity risk.Risk hedging can reduce the risk to the expected level by adjusting the hedging ratio according to the risk tolerance and preference of investors.Broadly speaking,risk hedging includes operational hedging and financial hedging.Operational hedging refers to the management and avoidance of risks through the adjustment of business strategies,while financial hedging refers to the avoidance of risks through investing in financial derivatives.Therefore,this paper introduces operational hedging and financial hedging into the remanufacturing production decision optimization model with considering remanufacturers’risk preference,in order to integrate the logistics and capital flow in the production operation process,and reduce the impact of uncertain factors on the remanufacturing process,so as to achieve the overall optimization in the remanufacturing operation process.The research contents of this paper are as follows.First,remanufacturing production decision optimization model considering the risk aversion of remanufacturers is constructed in the mean-variance utility modeling framework,which is proved that it is necessary to consider the risk aversion of remanufacturers in the process of optimizing remanufacturing production decisions.The results show that the quantity of remanufacturing,expected profit,mean-variance utility and effective boundary utility decrease with the increase of demand risk,supply risk and remanufacturer risk aversion.Second,the operational hedging strategy is introduced into the remanufacturing decision optimization model.The remanufacturing production decision optimization model considering multi-source procurement flexibility and the optimization model of remanufacturing production decision considering backup procurement flexibility are constructed,respectively.The role and value of multi-source and backup procurement flexibility in mitigating operational risk for remanufacturers are discussed.The results show that,on one hand,the greater the risk aversion degree of remanufacturers,the more significant the role of procurement flexibility;on the other hand,within a certain range,the greater the supply risk faced by remanufacturers,the more significant the value of procurement flexibility is.However,the value of procurement flexibility will be weakened when the operation risk is particularly high for the reproducer chooses to reduce its total output in order to avoid the risk.In addition,through the comparative analysis of the two procurement flexibility strategies,it is found that the backup procurement flexibility is superior to the multi-source procurement flexibility when the backup procurement/manufacturing cost is relatively low or the output rate variance of recovered raw materials is relatively large.Conversely,the multi-source procurement flexibility is superior to the backup procurement flexibility.Third,the financial hedging strategy is introduced into the remanufacturing decision optimization model.The remanufacturing production decision optimization model considering investment in one financial derivative and the remanufacturing production decision optimization model considering investment in a variety of financial derivatives are constructed respectively.The results show that the financial hedging can effectively mitigate the operational risk in the remanufacturing process,but the effect of financial hedging strategy decreases with the increase of the remanufacturer’s risk avoidance degree or operational risk.Finally,the remanufacturing production decision optimization model of integrated operational hedging and financial hedging strategies is constructed,and the relationship between operational hedging and financial hedging is analyzed.The results show that the operational hedging and financial hedging can effectively reduce the risk of remanufacturing,and they are substitution relations.The remanufacturers don’t have to use both strategies all the time,whereas they should choose the appropriate risk hedge strategy according to their own situation.The innovation of this paper mainly includes the following points:(1)Considering the risk aversion of remanufacturers.The production decision of remanufacturing enterprises is directly related to the risk preference of remanufacturing enterprises.So remanufacturing enterprises need to take into account both profit and risk when making production decisions.2)Introducing operational hedging strategy and financial hedging strategy into the remanufacturing production decision optimization model.The production operation and financial operation of remanufacturing enterprises influence each other.The introduction of operational hedging strategy and financial hedging strategy into the remanufacturing production decision optimization model not only conforms to the actual operation of remanufacturing enterprises,but also helps to improve the overall production and operation efficiency of remanufacturing enterprises.(3)Demonstrating the relationship between operational hedging and financial hedging,and providing management suggestions for relevant remanufacturing enterprises.