Extending the producer responsibility under legislations: economic impact of remanufacturing on automotive manufacturers

Abstract

Increasing population and consumption drives a common sense for responsible use of resources. Therefore, waste reduction is becoming a major concern in industrialized countries. Legislations that extend producers’ responsibility are becoming an element of public environmental policy in these countries. Many countries have introduced legislations giving manufacturers the responsibility for the whole lifecycle of their products. The regulations in countries of the European Union enforce the automotive manufacturers to take back the vehicles at the end of their useful lives returned by the customers. This study concentrates on the impact of the new legislations extending the producer responsibility on the manufacturers. We analyze the economic effects of remanufacturing on manufacturers by focusing on an automotive manufacturer. We consider a manufacturing, remanufacturing, second hand sales and disposal system with a third party recycler included. Within this concept, we develop a linear program to model a manufacturer that operates under given capacity and market constraints and aims to maximize its profit. With this model, we are able to analyze the manufacturer by assigning any combination for the remanufacturing, used vehicle sales or recycling functions. We analyze the economic impact for a manufacturer that takes back the returned products and processes them for different purposes including remanufacturing. Throughout the analysis, we gather numerical insight about the manufacturer that adds the take-back function under the pressure of the legal regulations.