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Optimal Control of Inventory Systems with Multiple Types of Remanufacturable Products


Author Info

  • Sean X. Zhou

    (Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong)

  • Zhijie Tao

    (Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong)

  • Xiuli Chao

    (Department of Industrial and Operations Engineering, University of Michigan, Ann Arbor, Michigan 48109)

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    Product returns have become a significant feature of many manufacturing systems. Because products are returned under different operational conditions, they usually require different remanufacturing effort/costs. Motivated by a project with a major energy company that manages its inventory through options of ordering and remanufacturing returned products (cores) in various condition, in this paper, we study a single-product, periodic-review inventory system with multiple types of cores. The serviceable products used to fulfill stochastic customer demand can be either manufactured from new parts or remanufactured from the cores, and the objective is to minimize the expected total discounted cost over a finite planning horizon. We show that the optimal manufacturing-remanufacturing-disposal policy has a simple structure and can be completely characterized by a sequence of constant control parameters when manufacturing and remanufacturing leadtimes are the same. To demonstrate the value of the optimal policy, we conduct a numerical study that compares its performance with two simple heuristics, namely, pull policy without and with sorting. The results show that the reduction in system cost by using the optimal policy can be significant. When manufacturing and remanufacturing leadtimes are different, we develop a heuristic method for computing the near-optimal control policy that performs quite well as demonstrated numerically.

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    Bibliographic Info

    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 13 (2011)
    Issue (Month): 1 (March)
    Pages: 20-34

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    Handle: RePEc:inm:ormsom:v:13:y:2011:i:1:p:20-34

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    Keywords: inventory system; product returns; reverse logistics; remanufacturing; optimal manufacturing and remanufacturing strategies; base-stock policies;


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    Cited by:
    1. Cai, Xiaoqiang & Lai, Minghui & Li, Xiang & Li, Yongjian & Wu, Xianyi, 2014. "Optimal acquisition and production policy in a hybrid manufacturing/remanufacturing system with core acquisition at different quality levels," European Journal of Operational Research, Elsevier, vol. 233(2), pages 374-382.
    2. Xiong, Yu & Li, Gendao & Zhou, Yu & Fernandes, Kiran & Harrison, Richard & Xiong, Zhongkai, 2014. "Dynamic pricing models for used products in remanufacturing with lost-sales and uncertain quality," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 678-688.
    3. Kim, Eungab & Saghafian, Soroush & Van Oyen, Mark P., 2013. "Joint control of production, remanufacturing, and disposal activities in a hybrid manufacturing–remanufacturing system," European Journal of Operational Research, Elsevier, vol. 231(2), pages 337-348.
    4. Tang, Christopher S. & Zhou, Sean, 2012. "Research advances in environmentally and socially sustainable operations," European Journal of Operational Research, Elsevier, vol. 223(3), pages 585-594.
    5. Choi, Tsan-Ming & Li, Yongjian & Xu, Lei, 2013. "Channel leadership, performance and coordination in closed loop supply chains," International Journal of Production Economics, Elsevier, vol. 146(1), pages 371-380.
    6. Flapper, Simme Douwe & Gayon, Jean-Philippe & Lim, Lâm Laurent, 2014. "On the optimal control of manufacturing and remanufacturing activities with a single shared server," European Journal of Operational Research, Elsevier, vol. 234(1), pages 86-98.


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