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Optimal Control of Inventory Systems with Multiple Types of Remanufacturable Products

Author

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  • 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)

Abstract

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.

Suggested Citation

  • Sean X. Zhou & Zhijie Tao & Xiuli Chao, 2011. "Optimal Control of Inventory Systems with Multiple Types of Remanufacturable Products," Manufacturing & Service Operations Management, INFORMS, vol. 13(1), pages 20-34, March.
    • Handle: RePEc:inm:ormsom:v:13:y:2011:i:1:p:20-34
    DOI: 10.1287/msom.1100.0298
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    References listed on IDEAS

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    23. Lin, Yizhong & Leung, Janny M.Y. & Zhang, Lianmin & Gu, Jia-Wen, 2020. "Single-item repairable inventory system with stochastic new and warranty demands," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).

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