Product servicing for lifespan extension and sustainable consumption: An optimization approach

Sustainable consumption has been defined as "the consumption of goods and services that meet basic needs and quality of life without jeopardizing the needs of future generations" (OECD, 2002). Lifespan extension of durable products underpins sustainable consumption. This paper describes a novel approach to extend product lifespans by using product servicing that conceptualizes the interactions of a producer, a policy-maker, and multiple consumer segments having different price-demand relationships. We propose a multi-period mathematical optimization model that maximizes the producer's profit while optimizing the prices of different servicing options, production quantities, and inventory levels. A computational study elicits several insights about how the optimal production (or alternatively) consumption quantities are affected by the introduction of product servicing, and the effects of various product characteristics and government incentive or penalty levels on producer's profitability and on product servicing decisions. We conclude that quantitative optimization models are useful for evaluating the impacts of different regulatory policies, assessing the benefits of offering product servicing options, and investing in design for durability and serviceability. (C) 2012 Elsevier B.V. All rights reserved.