A data-driven distributionally robust optimization approach for the core acquisition problem

Abstract

Reusing electric vehicles (EV) batteries that reach the end of their useful first life is an environmental and cost-competitive option; however, the process of recycling EV batteries is not yet mature. Due to complex electrochemical reactions and physical conditions, the quality of used EV batteries (cores) is highly uncertain. The remanufacturer needs to make the acquisition decision under quality distributional ambiguity. Perfect quality distribution of cores cannot be known to the remanufacturer in practice. We develop distributionally robust optimization models based on phi-divergence measures and the imprecise Dirichlet model (DRO-IDM) to derive robust decisions. First, we find that the bounds of quality probability intervals are identified solely based on the collected data by introducing the imprecise Dirichlet model. The derived finite-sample boundary can reduce the scope of the uncertainty set and avoid the no-direction search issue. Second, our models can hedge against distributional uncertainty, reduce the probability of a robust solution that deviates from the optimal solution, and correct bias in decision making. Third, we extend the DRO-IDM to develop data-driven models, that can reassess the value of multisource quality information to improve the estimation accuracy of core quality and maximize the remanufacturer’s profit. Our study provides new insights for remanufacturers: the new remanufacturing process proposed in our work can assist remanufacturers in utilizing the values of cores without disassembly; the information-aware algorithm can offer the remanufacturing sector a valuable tool for efficiently filtering out invalid information in optimizing acquisition decisions; this capability empowers decision-makers to leverage multiple sources of information and expedite the process of digital transformation in remanufacturing; our approach can also provide a manner of integrating information fusion and distribution learning into remanufacturing.