Remanufacturing of used products in a closed-loop supply chain with quantity discount

Abstract

An extended joint economic lot size problem is studied which incorporates the return flow of repairable (remanufacturable) used products. The supply chain under consideration consists of a single supplier and a single buyer. The buyer orders a single product from the supplier, uses it for her own needs, and collects a certain fraction of used items for the subsequent remanufacturing. The product is shipped to the buyer in the lot-for-lot fashion by a vehicle which also returns the collected used items to the supplier for remanufacturing and subsequent service of the buyer’s demand in the next order cycle. To satisfy the buyer’s demand, the supplier can remanufacture used items as well as manufacture new ones. For the given demand, productivity, disposal, setup, ordering and holding costs for serviceable and nonserviceable items at the supplier and the buyer, the optimal lot sizes and collection rates are determined which minimize the joint as well as individual total costs. Further, a problem of coordinating this supply chain by a type of quantity discount is addressed.

Imre Dobos

Imre Dobos gratefully acknowledges the financial supports by the TÁMOP-4.2.1.B-09/KMR-2010-0005 research program and the Deutscher Akademischer Austauschdienst (DAAD).