Reverse Logistics: a stochastic EOQ-based inventory control model for mixed manufacturing/remanufacturing systems with return policies

Abstract

This paper focuses on mixed manufacturing/remanufacturing systems, where manufacturing or purchase of new items integrates product reuse or remanufacturing, with the purpose to achieve a complete and timely demand satisfaction. We formulate a stochastic Economic Order Quantity (EOQ)-based inventory control model for a mixed manufacturing/remanufacturing system. The model is intended to identify the need of placing a manufacturing/purchasing order, to avoid the occurrence of stock-out situations. We then formulate a total cost minimisation problem, to derive the optimal return policy, this latter being a financial incentive paid to customers to increase the flow of returned items. The model developed is investigated through simulations, in order to assess the effect of stochasticity (of demand, return fraction and return delay) on the optimal return policy of the system; then, it is validated through a case study, to derive indications concerning its practical application in real cases. Our study ultimately provides a framework for practitioners to establish EOQ policies in reverse logistics contexts and to evaluate the opportunity of establishing a return policy in those contexts.