Mathematical Models for Sustainable Inventory and Production Plans for Component Remanufacturing Problems of OEM with Break-Even Period Determination

Abstract

To make products and processes sustainable, Original Equipment Manufacturers (OEM) adopt remanufacturing practices. Component Remanufacturing (CR) problems arise for any OEM that produce durable products and acquires returns. Returns are of three categories: Commercial Returns, End-of-Use Returns and End-of-Life Returns for remanufacturing components, which are equivalent in all aspects as compared to the manufactured and/or purchased components. The final product assembled using manufactured and/or purchased and/or remanufactured components by OEM are also equivalent in all aspects to satisfy the demand. The remanufacturing of components from the return will be carried out by installing required capacities for both dismantling the returns and remanufacturing the various components (called together as Reverse Flow Capacities (RFC)). Moreover, the final products’ demand can be satisfied by the same product and/or by Backordering (BO) and/or by Product Substitution (PS). With these problem characteristics of CR, this study focuses on three research problems. Accordingly, the first problem of focus is on the “Multi-Products-CR (MP-CR) system with RFC&Break-Even Period problem”, where the strategic decisions of RFC installations and the break-even period for the capital investments are determined. In the second problem, demand management by BO along with the real-life procurement restrictions are incorporated into the MP-CR System and are termed as “MP-CR System with BO problem”. Finally, the additional and important problem characteristics on PS mechanism are incorporated in the third problem, and this is the “MP-CR System with BO&PS problem”. A systematic 5-step methodology, in which the MP-CR system is modelled as an Integer Linear Programme, is proposed to address the first problem. For the second and third research problems, Integer Non-Linear Programming models are proposed. All the proposed models determine the optimal inventory and production decisions for the MP-CR system. A suitable numerical example, based on data from a real-life Indian Automobile OEM, is developed for representing each of the three research problems and for demonstrating the workability of the proposed models. Finally, managerial insights are presented from the solutions obtained.