A study on the inventory and pricing model for reverse logistics: An application on reuse of refillable containers

Abstract

Enterprises apply reverse logistics through recycling, repairing, and remanufacturing processes to reduce resource consumption and waste generation for the environment. To effectively manipulate reverse logistic activities of a refillable container, this paper proposes an integrated inventory and pricing model to deal with the problems of inventory control, production schedule, and pricing decisions. We formulate a profit function and then examine its concave property. Thus, an efficient iterative algorithm is developed to simultaneously search for the optimal decisions, including procurement frequency, common cycle time, and pricing policies. A case example is presented to illustrate the application of reuse containers. Sensitivity analyses show that the fluctuation of the price discount of a returned product slightly affects the optimal price of a finished product and the optimal length of common cycle time, while it significantly influences the profit generated from the reverse logistics process.