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How Optimized Remarketing and Refurbishment Can Help Grow Revenue and Improve Circularity


Çerağ Pinçe, Loyola University of Chicago
Mark Ferguson, University of South Carolina
L. Beril Toktay, Georgia Institute of Technology

Research Questions Addressed

How should manufacturers allocate refurbished consumer returns between remarketing and warranty fulfillment to extract maximum value for the manufacturer?

How does the optimal allocation of returns to remarketing and warranty fulfillment change over the product life cycle?

How do return rates, remarketing potential, refurbishing costs, failure rates, and product pricing affect optimal allocation?

Primary Findings

Original Equipment Manufacturers (OEMs) of consumer electronics should use returns primarily for remarketing and warranty fulfillment and rarely scrap them.

The value of earmarking refurbished consumer returns to fulfill warranty claims is typically larger than the value of remarketing them. This is especially true for products with significant warranty coverage and refund costs.

OEMs of consumer electronics should strategically emphasize earmarking of consumer returns at the early stages of the life cycle to build up inventory for the future warranty demand, whereas they should consider remarketing at the later stages of the life cycle after enough earmarked inventory is accumulated or most of the warranty demand uncertainty is resolved.

The optimal level of remarketed returns increases towards the end of the product life cycle but rarely surpasses the level of returns earmarked to fulfill warranty claims.