Inventory Management in Closed Loop Supply Chains

Abstract

Inventory management is playing a key role in setting up efficient closed loop supply chains. Companies are recognizing product returns as a critical supply source, which they need to integrate into their material management. Uncertainty and a limited span of control add to the complexity of managing this particular source. In this chapter we review inventory management issues related to closed loop supply chains. We start by discussing different roles of inventories in this context and by proposing an overall framework. Subsequently, we review literature on corresponding mathematical inventory control models. To this end, we follow a standard structuring of traditional inventory theory and discuss applications to closed loop settings for each case. Our analysis is centered around highlighting novel characteristics entailed by a closed loop supply chain structure, in terms of both mathematics and business implications.