Optimal Control for Advertised Production Planning in a Three-Level Stock System with Deteriorating Items: Case of a Continuous-Review Policy

Abstract

We consider in this paper a reverse-logistics problem chain with three stock categories where the production system is boosted by advertisement campaigns. Newly manufactured items are stored in the first stock category. The second stock category is reserved for remanufactured items, while the third contains items that are returned from the market. We assume that remanufactured items are not necessarily as-good-as-new. We also assume that new and remanufactured items are subject to deterioration and to dynamic demands, that customer return rate is also dynamic, and that the firm adopts a continuous-review policy. We use an optimal control approach to obtain optimal manufacturing rate, remanufacturing, rate, disposal rate and inventory levels in all three stock categories. Numerical examples and sensitivity analyses illustrate the results obtained.