We consider a joint manufacturing / remanufacturing environment with remanufacturing yield loss. Demand and return follow independent stationary Poisson processes. Returns can be disposed off upon arrival to the system. Manufacturing and remanufacturing operations performed in the same facility at exponential rates. Yield information becomes available after remanufacturing. Demands that are not directly satisfied are lost. We investigate what inventories to consider when making production and disposal decisions, with the objective of maximizing the long-run average expected profit. Four different policies are compared that base disposal decisions on either the local (returns) inventory or the global inventory, and production decisions on either the local (serviceable) inventory or the global inventory. By modelling the system as a Markov process, expressions for the profit associated with each policy are derived. An extensive numerical study shows that it is always optimal to base disposal decisions on the local inventory and production decisions on the global inventory within the parameter sets considered. A sensitivity analysis reveals further insights.

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Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics

Bayindir, Z.P, Teunter, R.H, & Dekker, R. (2005). A comparison of inventory control policies for a joint manufacturing/Remanufacturing environment with remanufacturing yield loss (No. EI 2005-10). Report / Econometric Institute, Erasmus University Rotterdam. Retrieved from http://hdl.handle.net/1765/2006