On the trade‐off between remanufacturing and recycling

Motivated by interactions with two reverse‐logistics firms, we analyse the trade‐off between two product‐recovery approaches: recycling and remanufacturing. We consider a manufacturer who produces and markets a product with the objective of maximising profit. A unit of the product consists of two modules: A and B. After recovery, Module A can be recycled to recover its raw material, which can then be used to produce new units of either module. A recovered Module B is remanufactured and can be used in a remanufactured unit. Under this setting, we investigate three options: 1) only recycling of Module A; 2) only remanufacturing of Module B; 3) recycling of Module A and remanufacturing of Module B. We provide a complete theoretical characterisation of the regions of optimality of each option. Useful insights are offered by examining the influence of the fraction of green consumers, the take‐back fraction, and product design characteristics.