Coordination of manufacturing, remanufacturing and returns acceptance in hybrid manufacturing/remanufacturing systems

This paper deals with the coordination of manufacturing, remanufacturing and returns acceptance control in a hybrid production-inventory system. We use a queuing control framework, where manufacturing and remanufacturing are modelled by single servers with exponentially distributed processing times. Customer demand and returned products arrive in the system according to independent Poisson processes. A returned product can be either accepted or rejected. When accepted, a return is placed in a remanufacturable product inventory. Customer demand can be satisfied as well by new and remanufactured products. The following costs are included: stock keeping, backorder, manufacturing, remanufacturing, acceptance and rejection costs. We show that the optimal policy is characterized by two state-dependent base-stock thresholds for manufacturing and remanufacturing and one state-dependent return acceptance threshold. We also derive monotonicity results for these thresholds. Based on these theoretical results, we introduce several relevant heuristic control rules for manufacturing, remanufacturing and returns acceptance. In an extensive numerical study we compare these policies with the optimal policy and provide several insights.