Supply planning models for a remanufacturer under just-in-time manufacturing environment with reverse logistics

We study a supply planning problem in a manufacturing system with two stages. The first stage is a remanufacturer that supplies two closely-related components to the second (manufacturing) stage, which uses each component as the basis for its respective product. The used products are recovered from the market by a third-party logistic provider through an established reverse logistics network. The remanufacturer may satisfy the manufacturer’s demand either by purchasing new components or by remanufacturing components recovered from the returned used products. The remanufacturer’s costs arise from product recovery, remanufacturing components, purchasing original components, holding inventories of recovered products and remanufactured components, production setups (at the first stage and at each component changeover), disposal of recovered products that are not remanufactured, and coordinating the supply modes. The objective is to develop optimal production plans for different production strategies. These strategies are differentiated by whether inventories of recovered products or remanufactured components are carried, and by whether the order in which retailers are served during the planning horizon may be resequenced. We devise production policies that minimize the total cost at the remanufacturer by specifying the quantity of components to be remanufactured, the quantity of new components to be purchased from suppliers, and the quantity of recovered used products that must be disposed. The effects of production capacity are also explored. A comprehensive computational study provides insights into this closed-loop supply chain for those strategies that are shown to be NP-hard.