When analyzing average cost (AC) inventory models, it is common use to add the discount rate times the capital tied up in a product, to the out-of-pocket holding cost rate. This way, capital costs are (roughly) included. In this paper we show that such a method may not always be appropriate for reverse logistics inventory models with both remanufacturing and disposal of returned products.

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doi.org/10.1016/S0925-5273(00)00085-2, hdl.handle.net/1765/14859
ERIM Article Series (EAS)
International Journal of Production Economics
Erasmus Research Institute of Management

Teunter, R.H, & van der Laan, E.A. (2002). On the non-optimality of the average cost approach for inventory models with remanufacturing. International Journal of Production Economics, 79(1), 67–73. doi:10.1016/S0925-5273(00)00085-2