Inventory lot sizing policies for a closed-loop hybrid system over a finite product life cycle

Abstract

In this paper, we propose inventory lot sizing policies for a closed-loop hybrid system over a finite product life cycle, which consists of three phases: introduction, maturity, and decline. Assuming the demand rate is a trapezoidal type function of time and return rate increases linearly over the finite production horizon. Newandremanufacturedproducts are perfect substitutes, which means that customer’s demand can be satisfied by new products or remanufactured products. Different from the previous literature, this paper proposes inventory lot sizing models with variable replenishment intervals from the perspective of product life-cycle. Firstly, the inventory lot sizing models with variable replenishment intervals are established for each phase of the product life cycle. Secondly, the optimal policies and algorithms are designed for the given models. Finally, sensitivity analysis and comparative analysis are carried out through a numerical example. The results show that different inventory lot sizing policies should be adopted in different phases of the product life cycle: (1) the optimal manufacturing lot sizes increase while the replenishment intervals decreases over time in introduction phase, (2) the optimal manufacturing/remanufacturing lot sizes and the replenishment intervals are constant in maturity phase, (3) the optimal manufacturing/remanufacturing lot sizes decrease while the replenishment intervals increases over time in decline phase. The higher the return rate, the greater the advantage of the given model. Therefore, if return rate is relatively low, the firms may choose the static policy given by Hsueh (2011) with fixed replenishment intervals to simplify replenishment operations; if the return rate is relatively high, the firms may choose the given policies with variable replenishment intervals to reduce costs.