Basuki Widodo : Pricing Decision model for new and remanufactured short life-cycle products with time-dependent demand
Prof. Dr. Basuki Widodo M.Sc.
International Journal of Operation Research Perspective
Short life cycle product Remanufacturing Closed loop supply chain Pricing Optimization
In this study we develop a model that optimizes the price for new and remanufactured short life-cycle
products where demands are time-dependent and price sensitive. While there has been very few published
works that attempt to model remanufacturing decisions for products with short life cycle, we
believe that there are many situations where remanufacturing short life cycle products is rewarding economically
as well as environmentally. The system that we model consists of a retailer, a manufacturer, and
a collector of used product from the end customers. Two different scenarios are evaluated for the system.
The first is the independent situation where each party attempts to maximize his/her own total profit and
the second is the joint profit model where we optimize the combined total profit for all three members of
the supply chain. Manufacturer acts as the Stackelberg leader in the independently optimized scenario,
while in the other the intermediate prices are determined by coordinated pricing policy. The results suggest
that (i) reducing the price of new products during the decline phase does not give better profit for
the whole system, (ii) the total profit obtained from optimizing each player is lower than the total profit
of the integrated model, and (iii) speed of change in demand influences the robustness of the prices as
well as the total profit gained.