Lot sizing decisions in a closed-loop supply chain system with remanufacturing

Abstract

We propose a closed-loop supply chain model consisting of a supplier, a manufacturer and a retailer under deterministic demand and quality dependent return rate. The manufacturer performs all of the operations regarding used/returned item management, including collection, inspection, sorting, recovery, and also waste disposal. The retailer's demand is fulfilled either by newly manufactured items or by remanufactured items. Two recovery processes are considered in the model, which are remanufacturing and refurbishing. The recoverable items which cannot be recovered as-good-as-new-one will be classified as refurbishable items and then sold to the secondary market at a lower price. We use multiple remanufacturing cycle and multiple production cycle policy to develop the proposed model. An iterative procedure is proposed to determine the optimal solutions. A numerical example is then presented for illustrative purpose and a sensitivity analysis is performed to show the effects of the changes in key parameters on the model's behaviour. The results from sensitivity analysis show that the optimal value of each decision variables is influenced by the demand and raw material buying price, while the joint profit is influenced by the demand, customer purchasing price, and the regular production cost.