Centralized Production and Return Disposal Decisions for a Reverse Supply Chain Model with Product Returns

This paper considers a reverse supply chain model with a production facility and a recovery facility for products returned after usage. We address the joint production and disposal decisions which maximize the profits to manage this hybrid production system. Market demands are satisfied from on-hand inventory of serviceable products which indicate manufactured or remanufactured finished goods. Sold products may be returned after usage and each return is accepted for recovery or disposed of. Accepted returns, after recovered, are converted into serviceable products. We examine the structure of the optimal production and disposal policy as two monotone switching curves, and analyze how parameters change affects the optimal policy. Performance comparison is numerically implemented between the models with and without disposal option under different operating conditions of the system. We develop a simple heuristic and numerical test results demonstrate its effectiveness.