A lot sizing problem in reverse for two items of different quality grades with an imperfect manufacturing process, time varying demand and return rates

Abstract

Natural resource scarcity has accelerated considerations of return logistics in manufacturing processes. Most supply chain designs now consider a closed-loop design where demand can be satisfied by both newly manufactured goods as well as remanufactured returns, allowing for maximum value creation over the entire life cycle of a product. This dissertation proposes two inventory systems, one a dynamic lot sizing model and the other a closed form solution. It is also assumed that some items fail during manufacturing and these items are treated as returns that can be remanufactured to satisfy one of two types of demand. Returns are remanufactured to one of two states such that items that may not be remanufactured to an as-good-as-new state of the first product can satisfy a secondary customer demand of a lower grade. Returns are constrained by expressing customer returns as a percentage of demand and items that fail during manufacturing as a percentage of the manufacturing batch. In the dynamic lot sizing model, the remanufacturing processes require some other components to be procured to bring the returned items back to either of the two states of reuse. A modified Wagner/Whitin model for the alternate application of remanufacturing and manufacturing for the satisfaction of the top range item demand and supplemented by a modified reverse Wagner/Whitin model for the remanufacturing of the lower variety items is derived to solve the dynamic lot sizing model proposed. The closed form solution considers that additional feedstock for the top range item can be procured in the case that the demand cannot be fully satisfied by the manufacturing and remanufacturing processes respectively. Both models aimed to minimize cost across a horizon and the total cost proves to be very sensitive to the manufacturing setup cost and the proportion of demand returned for remanufacturing in the case of the dynamic model and Type A serviceable holding cost and the Type A product yield rate from the manufacturing process in the case of the closed form solution.