Optimising quantity of manufacturing and remanufacturing in an electric vehicle battery closed-loop supply chain

Abstract

Purpose

Batteries installed on electric vehicles (EVs) should normally be removed when their capacity falls to 70-80 per cent, but they are still usable for other purposes, such as energy storage. This paper studies an EV battery closed-loop supply chain (CLSC) consisting of a battery manufacturer and a remanufacturer. The manufacturer produces new batteries by using natural resources, while the remanufacturer collects returned batteries and makes decisions based on the return quality, that is, to reuse or recycle. The purpose of this paper is to maximise the individual profits through optimising the amount of manufacturing and remanufacturing, respectively, and optimising the purchase price of returned batteries.

Design/methodology/approach

Based on the Nash equilibrium, this paper develops a three-period model in the CLSC. In period 1, batteries are made from raw materials; in period 2, returned batteries from period 1 are sorted into low quality and high quality. Some high-quality returns can be reused for other purposes while those non-reusable returns are recycled into materials. In period 3, all the returns are recycled into materials. The analytical results are derived.

Findings

The result of the analyses suggest that first, among the variables that affect the (re-)manufacturing decision, the purchase price for returned batteries plays a critical role. In particular, the price of low-quality returns has more influence than the price of high quality returns. Second, the higher purchase price for re-usable returns does not necessarily lead to a higher return rate of reusable returns. Third, the manufacturer’s profit is normally higher than the remanufacturer’s. This suggests the need to design incentives to promote the remanufacturing sector. And finaly, although it is appreciated that maximising the utilisation of batteries over the life-cycle would benefit the environment, the economic benefit needs further investigation.

Originality/value

Although the CLSC has been widely studied, studies on the EV battery CLSC are scarce. The EV battery CLSC is particularly challenging in terms of the reusability of returns because used EV batteries cannot be reused for the original purpose, which complicates CLSC operations. This paper explores the interrelationship between manufacturer and remanufacturer, explaining the reasons why recycling is still underdeveloped, and suggests the possibility of enhancing remanufacturing profitability.

Citation

Gu, X., Ieromonachou, P., Zhou, L. and Tseng, M.-L. (2018), "Optimising quantity of manufacturing and remanufacturing in an electric vehicle battery closed-loop supply chain", Industrial Management & Data Systems, Vol. 118 No. 1, pp. 283-302. https://doi.org/10.1108/IMDS-04-2017-0132