Technical Note—Optimal Control Policy for Capacitated Inventory Systems with Remanufacturing

Abstract

This paper studies the optimal control policy for capacitated periodic-review inventory systems with remanufacturing. The serviceable products can be either manufactured from raw materials or remanufactured from returned products; but the system has finite capacities in manufacturing, remanufacturing, and/or total manufacturing/remanufacturing operations in each period. Using L-natural convexity and lattice analysis, we show that, for systems with a remanufacturing capacity and a manufacturing/total capacity, the optimal remanufacturing policy is a modified remanufacture-down-to policy and the optimal manufacturing policy is a modified total-up-to policy. Our study reveals that the optimal policies always give production priority to remanufacturing for systems with a remanufacturing capacity and/or a total capacity; but this priority fails to hold for systems with a manufacturing capacity.