Abstract
Purpose: This paper is concerned with a reverse logistic system where returns are stochastically dependents on sales. The aim of the paper is to assess the influence on optimal production capacities when is assumed that returns are stochastically independent of sales. Design/methodology/approach: This paper presents a model of the system. An approximated model where is assumed that returns are stochastically independent of sales, is formulated to obtain the optimal capacities. The optimal costs of the original and the approximated models are compared in order to assess the influence of the assumption made on returns. Findings: The assumption that returns are stochastically independent of sales is significant in few cases. Research limitations/implications: The impact of the assumption on returns is assessed indirectly, by comparing the optimal costs of both models: the original and approximated. Practical implications: The problem of calculating the optimal capacities in the original model is hard to solve, however in the approximated model the problem is tractable. When the impact of the assumption that returns are stochastically independent of sales is not significant, the approximated model can be used to calculate the optimal capacities of the original model. Originality/value: Prior to this paper, few papers have addressed with the problem of calculating the optimal capacities of reverse logistics systems. The models found in these papers assumed that returns are stochastically independent of sales.
Highlights
Interest in reverse logistics has increased in recent years with the growing concern for the environment in the industrialized world
Inventory management in a reverse logistics system differs from that in a traditional logistics system when the recovery system interacts with the existing manufacturing system, i.e., in cases where the recovered and the new product are identical
One of the important issues to consider when designing a stochastic model with reverse logistics is whether or not assuming the independence of demand and returns
Summary
Interest in reverse logistics has increased in recent years with the growing concern for the environment in the industrialized world. Assuming that demand and returns are independent can lead to the use of less-than-optimal inventory policies (Kiesmüller & van der Laan, 2001). One of the important issues to consider when designing a stochastic model with reverse logistics is whether or not assuming the independence of demand and returns. The problem of jointly managing capacities and inventory levels has been dealt with by numerous studies (Van Mieghem, 2003) This type of management approach consists of optimizing a function that contemplates manufacturing capacity acquisition and maintenance costs and production and inventory management costs.
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