Optimising quantity of manufacturing and remanufacturing in an electric vehicle battery closed-loop supply chain
| Published date | 05 February 2018 |
| Pages | 283-302 |
| DOI | https://doi.org/10.1108/IMDS-04-2017-0132 |
| Date | 05 February 2018 |
| Author | Xiaoyu Gu,Petros Ieromonachou,Li Zhou,Ming-Lang Tseng |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Optimising quantity of
manufacturing and
remanufacturing in an
electric vehicle battery
closed-loop supply chain
Xiaoyu Gu, Petros Ieromonachou and Li Zhou
Department of Systems Management and Strategy, Business School,
University of Greenwich, London, UK, and
Ming-Lang Tseng
Institute of Innovation and Circular Economy, Asia University, Taichung, Taiwan
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 analyse s suggest that first, amo ng the variables that af fect the (re-)
manufacturing decisi on, the purchase price f or returned batteries pl ays a critical role. In pa rticular, the
price of low-quality re turns has more influence than the price of hig h quality returns. Second, the higher
purchase price for re-us able returns does not necess arily lead to a higher return rate of reusable returns .
Third, the manufacturer ’s profit is normally highe r than the remanufacturer’s. This suggests the need to
design incentives to pro mote the remanufacturi ng sector. And finaly, altho ugh it is appreciated tha t
maximising the utilisati on of batteries over the life-cyc le would benefit the environme nt, 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.
Keywords Closed-loop supply chain, Recycle, Profit, Reuse, Electric vehicle battery, Purchasing price
Paper type Research paper
1. Introduction
With the aim of achieving sustainable development, electric vehicles (EVs) are considered
one of the future directions for the automotive industry. One of the earliest studies regarding
EV’s history, progress and advantages can be found in Turner and Heusinger (1984).
In the twenty-first century, the EV industry is developing and the uptake of EVs is
increasing rapidly. According to the International Energy Agengy (2016), from 2005 to 2010
the number of EV sales, including pure battery EVs and plug-in hybrid EVs (PHEVs),
Industrial Management & Data
Systems
Vol. 118 No. 1, 2018
pp. 283-302
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-04-2017-0132
Received 1 April 2017
Revised 11 August 2017
Accepted 27 September 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
283
EVs CLSC
increased from 1670 to 12,480 worldwide. Since then, the number of new-energy vehicles has
been increased even more sharply. By 2015, the stock of EVs was 1,256,900, which is almost
752 times higher than ten years ago.
One of the most important components of an EV is the battery. The high uptake of EVs
leads to a high demand for EV batteri es. The battery’s operating life affects the EV’smileage
directly. For example, Tesla model S P90D’s battery duration is 430 km with an embedded
95kWh battery (Tesla, 2016). The working mileage of an EV battery may affect the desirability
to customers of buying an EV. Unlike gasoline vehicles, EVs cannot use their batteries until
they reach the end of their life-cycle. Instead, the batteries have to be removed when their
capacity fall to around 70-80 per cent due to performance and safety concerns
(McIntire-Strasburg, 2015). In early 2010, the US National Renewabl e Energy Laboratory
undertooka project on EV battery reuse (Neubauer and Pesaran,2010). The report shows that
a recycled battery can be reused in the following ways: grid-based stationary, for example
energy time shifting, renewables capacity firming; off-grid stationary, for example backup
power and remote installations; and mobile, for example commercial idle management or
public transportation. Those applications for EV second use could significantly increase the
total lifetime value of money, and thus reduce the cost to the electric automotive user.
Most of the research studying the reuse of EV batteries has focussed on the technical
aspects (e.g. Lih et al., 2012; Neubauer and Pesaran, 2011; Patten et al., 2011; Yu et al., 2013).
How reuse of EV batteries affects the operational performance and profit of the closed-loop
supply chain (CLSC) remains untouched. From an operations management point of view,
research lags behind the industry. In response to automotive batteries being banned from
landfill or incineration, EV battery collection and recycling networks have been built.
Nevertheless, most of the returned batteries are recycled into materials rather than being
reused. Todeal with this issue, someindustrial initiatives exist, forinstance in North America,
Tesla, working with Kinsbursky Brothers, recycled about 60 per cent of its battery packs; in
Europe, Tesla started working with Umicore on recycling (Kelty, 2011); and Nissan and
Volkswagen require their EV customers to return used batteries to licensed points or local
authority battery collection schemes (Nissan, 2015; Volkswagen, 2016). Now more and more
EV manufacturers are involved in reusing EV batteries. For example, BMW and Nissan are
expected to reuse returned batteries as home energy storage (Ayre, 2016; Dalton, 2016).
Chevrolet has set up an energy storage station by using used EV batteries at the General
Motors facility in Michigan (Voelcker, 2016).
Inspired by these applications, we built a three-period model to describe the EV CLSC
process. There are two participants in the model: the manufacturer, who produces new EV
batteries (over the three periods); and the remanufacturer, who collects used batteries and sorts
them into reusable and recyclable based on the quality of the returns in period 2. The reused
batteries will be recycled in period 3. In period 1, batteries are only made from raw materials.
There are no returned or recycled batteries in this period. In period 2, returned batteries are
sorted into low quality and high quality. The high-quality returns are further sorted into
reusable and recyclable. The recyclable returns will be recycled into materials. In period 3, those
reusedbatteriesreachtheendoftheirlifeandwillbecollectedandrecycledintomaterials.
The paper is organised as follows. The next section reviews some relevant literature and
clarifies our contribution to the literature. Section 3 describes the model and derives the
optimal quantity, the optimal purchase price and the maximised profit for manufacturer and
remanufacturer, respectively. Section 4 conducts a numerical study. Finally, Section 5
concludes our findings and discusses the limitations as well as future research.
2. Closely related literature
ThemodeldevelopedinthispaperisrelatedtoEVbatteryreuseandrecyclinginamulti-period
CLSC. In this section, the relevant literature on battery reuse and multi-period SC is reviewed.
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