Design for product upgradability considering remanufacturing outsourcing: A three-level joint optimization approach

Product design and business models play a pivotal role in the transition to a circular economy, emphasizing waste reduction and the preservation of valuable materials. Upgrading products by selectively replacing components that devalue over time proves to be an effective strategy for achieving competitive reutilization. This approach, known as product design for upgradability (DfU), not only enhances product value but also avoids whole product replacement, contributing to the realization of a sustainable society. The prevailing practice of DfU is often examined as a life-cycle characteristic, focusing on configurations of functional, physical, and architectural features to achieve competitive reutilization and extend service life. However, the upgradability of a product is strongly influenced by the practices of remanufacturing enterprises, which commonly adopt outsourcing strategies. Coordinating DfU decisions with remanufacturing and outsourcing presents a critical challenge for the effective operation of product upgrades. To address this challenge, this paper proposes a nonlinear mixed-integer decision model emphasizing a three-level joint optimization (TJO) based on a Stackelberg game. This model aims to determine the optimal solution that maximizes profit for the manufacturer, multiple remanufacturers, and outsourcers. To solve for the optimal decisions, a solution approach combining analytical methods with a nested genetic algorithm (NGA) is developed. The feasibility and effectiveness of the proposed TJO model are illustrated through a practical case study focusing on engine DfU considering remanufacturing outsourcing. The study identifies optimal DfU, remanufacturing, and outsourcing schemes simultaneously and conducts a sensitivity analysis of key parameters. The results demonstrate that our proposed DfU considering remanufacturing outsourcing strategy effectively improves production efficiency and the competitive advantage of enterprises. Moreover, the proposed TJO model successfully addresses coordination and conflicts between different stakeholders. Overall, this research provides valuable insights into the integration of DfU, remanufacturing, and outsourcing, offering a practical approach to optimizing decisions and improving the overall performance of enterprises in the context of remanufactured products.