The impact of orbit dependent return rate on the control policies of a hybrid production system

Abstract

Reprocessing of products at the end of their useful lives has become a profitable business option for many markets. Both original equipment manufacturers and third party remanufacturers collect products back from the end users and reprocess them to satisfy the demand. Demand flows for new and reprocessed products are distinct in some cases, while in others the demand is only interested in the functionality and the warranty of the product. In both cases the amount of reprocessed products are bounded by the amount of new products sold. Furthermore, the uncertainty in quality, quantity and timing of product returns generates a yield of less than one. The literature on the analysis and control of return flows does not consider the correlation between demand flow and return flow except for a few studies. None of these studies regard the satisfied demand for new products as potential returns that can satisfy the second hand demand. On the other hand, because remanufacturing is usually less costly and faster than manufacturing by its definition, remanufactured products are expected to bring more profit than a new product. Therefore, in this study it is aimed to consider the production decision of new products based on the correlation among demand and return processes. To this end, the supply chain structure will be modeled as a queueing network and optimal stationary decision policies are going to be sought for production control by using Markov decision process models.