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Dr. Yunchuan (Frank) Liu
Associate Professor of Business Administration
College of Business
University of Illinois at Urbana-Champaign
 

We consider a firm consisting of two divisions, one responsible for designing and manufacturing new products and the other responsible for remanufacturing operations. The firm may either directly sell to the consumers both new and remanufactured products (direct selling) or sell through an independent retailer (indirect selling). Our paper demonstrates that an internally decentralized firm with separate manufacturing and remanufacturing divisions can benefit from indirect selling with higher firm profit, supply chain profit, total consumer demand than direct selling. Moreover, this structure also induces a remanufacturable product design. In contrast, an internally centralized firm in which the manufacturing and remanufacturing divisions are consolidated is intuitively better off by choosing direct selling than indirect selling. Furthermore, we show that, when the focal firm sells through an independent retailer, a decentralized binternal structure can result in higher supply chain profit than a centralized internal structure. We further investigate the case of dual dedicated channels and conclude that, while direct selling of remanufactured products and indirect selling of new products can better induce a remanufacturable product design and higher supply chain profit, it is not in the best interest of the firm in terms of total sales and firm profit.