Periodic Review, Push Inventory Policies for Remanufacturing

30 Pages Posted: 19 Feb 2003

See all articles by B. Mahadevan

B. Mahadevan

Indian Institute of Management

David F. Pyke

School of Business Administration, University of San Diego

Moritz Fleischmann

University of Mannheim, Business School

Date Written: 21 2002 3,

Abstract

Sustainability has become a major issue in most economies, causing many leading companies to focus on product recovery and reverse logistics. This research is focused on product recovery, and in particular on production control and inventory management in the remanufacturing context. We study a remanufacturing facility that receives a stream of returned products according to a Poisson process. Demand is uncertain and also follows a Poisson process. The decision problems for the remanufacturing facility are when to release returned products to the remanufacturing line and how many new products to manufacture. We assume that remanufactured products are as good as new. In this paper, we employ a "push" policy that combines these two decisions. It is well known that the optimal policy parameters are difficult to find analytically; therefore, we develop several heuristics based on traditional inventory models. We also investigate the performance of the system as a function of return rates, backorder costs and manufacturing and remanufacturing lead times; and we develop approximate lower and upper bounds on the optimal solution. We illustrate and explain some counter-intuitive results and we test the performance of the heuristics on a set of sample problems. We find that the average error of the heuristics is quite low.

Keywords: inventory, remanufacturing, environment, heuristics, reverse logistics

JEL Classification: M, M11, R4, C61

Suggested Citation

Mahadevan, B. and Pyke, David F. and Fleischmann, Moritz, Periodic Review, Push Inventory Policies for Remanufacturing (21 2002 3,). ERIM Report Series Reference No. ERS-2002-35-LIS. Available at SSRN: https://ssrn.com/abstract=370982

B. Mahadevan

Indian Institute of Management ( email )

Bannerghatta Road
Bangalore, Karnataka
India

David F. Pyke

School of Business Administration, University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-4886 (Phone)

Moritz Fleischmann (Contact Author)

University of Mannheim, Business School ( email )

University of Mannheim
P.O. Box 10 34 62
Mannheim, 68131
Germany

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