Inventory Control for Deteriorating Items in Closed-loop Supply Chain with Stochastic Demand

Abstract

Products such as ICs, computers, and cell phones can become out of date due to technology development; but they can be remanufactured and returned to market for sale. Determining the optimal inventory control policy for remanufactured products, that is considered in the closed loop supply chain, is one of the important problems in the supply chain management of deteriorating items (in closed loop supply chain, the customer is able to return the used products to the reverse flow for remanufacturing or reusing). In this paper, we analyze an inventory system for closed-loop supply chain with multi-manufacturing and multi-remanufacturing cycles under stochastic demands. The manufacturing cycle is used for direct flow of supply chain; while the remanufacturing cycle is applied for reverse flow, in which the used products return to the production system. The supply chain is for echelons including retailer, manufacturer, collector, and material supplier in which shortage is allowed and completely backlogged. The decision is made initially by the down-stream player (from retailer to supplier). We generalize three different cases: 1. Single manufacturing cycle and single remanufacturing cycle, 2. Single manufacturing cycle and multi-remanufacturing cycles, and 3. Multi-manufacturing cycles and single remanufacturing cycle. Moreover, a heuristic algorithm is presented to obtain the optimal solution. Finally, a numerical example is described to prove the applicability of the model and its solution algorithm.