An economic production model for multi-product manufacturing with consideration towards complementary price-dependent demand, and the possibility of product recovery

Abstract

In production industries, like stainless steel manufacturing, a shared resource can subsequently produce multiple complementary products that are consumed together. The production process results in defective outputs that can be recovered through reannealing and cutting coils into sheets on the constrained resource, while the customers’ demand for each product is impacted by the price of the complementary product. The study develops an Economic Production Quantity (EPQ) model for two mutually complementary products manufactured on a shared resource with imperfect production. Product Type A’s demand can only be satisfied through production from new feedstock, while Product Type B’s demand can be satisfied through remanufacturing non-conforming products and production from new feedstock. The model incorporates complementary price-dependent demands and remanufacturing to optimise lot sizes by minimising total cost, including setup, holding, rework and disposal. The two scenarios analysed are non-bottleneck and bottleneck scenarios, respectively. Numerical examples confirm global optimality and model feasibility. The proposed model provides an EPQ framework that can be used for industries to ensure cost efficiency and sustainability through integrated production planning.