Periodic Review Inventory Policies for Remanufacturing

Abstract

This research is focused on production and inventory management in a remanufacturing facility. The remanufacturing facility receives a stream of returned products according to a Poisson process. Demand for serviceable products also follows a Poisson process. The decision problems for the remanufacturing facility are when to release returned products to remanufacturing and how many new products to purchase. In this paper, we study a "push" policy that combines these two decisions. We investigate the performance of the system as a function of problem parameters, and we develop two heuristics based on traditional inventory models. We also develop approximate lower and upper bounds on the optimal solution. The average error of the two heuristics, based on a test using a set of sample problems, is 2.78% and 4.78%, respectively. These results suggest that firms that manage a number of items can safely employ simple models in this complex environment.

Keywords: Inventory, Remanufacturing, Environment, Heuristics, Simulation