Abstract
Remanufacturing is becoming an important business as market demand for remanufactured products increases and environmental legislation puts further enforcement on Original Equipment Manufacturers (OEMs). However, profitability of salvaging operations is still a challenge in remanufacturing industry. Several factors influence the cost effectiveness of remanufacturing operations, including variability in the quality of received used items and uncertainty in the quantity of return flows and the market demand for those products. Remanufacturing companies need to handle these sources of uncertainties in order to improve their profitability. The current paper develops a Stochastic Optimization method to model these sources of uncertainties in take-back and inventory planning systems. The main purpose of the model is to determine the best upgrade level for a received product with certain quality level with the aim of profit maximization. An example of personal computer is provided to show the application of the method.
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