Investing in reusability of products of uncertain remanufacturing cost: The role of inspection capabilities

We consider a firm equipped with the flexibility to produce and sell both new and remanufactured products and has to invest in (a) increasing the reusability level of its product and (b) collecting used products and remanufacturing them. Our focus is on the effects that the uncertainty in the remanufacturing cost, which originates from the uncertainty in the quality condition of used and potentially remanufacturable products, has on these investments. We show that, contrary to the general belief, the uncertainty in the remanufacturing cost does not necessarily hinder these investments, but the precise effects depend on the inspection capabilities and technologies at the firm's disposal as well as the market parameters.