Don’t forget your supplier when remanufacturing

A popular assumption in the current literature on remanufacturing is that the whole new product is produced by an integrated manufacturer, which is inconsistent with most industries. In this paper, we model a decentralised closed‐loop supply chain consisting of a key component supplier and a non‐integrated manufacturer, and demonstrate that the interaction between these players significantly impacts the economic and environmental implications of remanufacturing. In our model, the non‐integrated manufacturer can purchase new components from the supplier to produce new products, and remanufacture used components to produce remanufactured products. Thus, the non‐integrated manufacturer is not only a buyer but also a rival to the supplier. In a steady state period, we analyse the performances of an integrated manufacturer and the decentralised supply chain. We find that, although the integrated manufacturer always benefits from remanufacturing, the remanufacturing opportunity may constitute a lose–lose situation to the supplier and the non‐integrated manufacturer, making their profits be lower than in an identical supply chain without remanufacturing. In addition, the non‐integrated manufacturer may be worse off with a lower remanufacturing cost or a larger return rate of used products due to the interaction with the supplier. We further demonstrate that the government‐subsidised remanufacturing in the non‐integrated (integrated) manufacturer is detrimental (beneficial) to the environment.