Coordinated Dynamic Optimization Of Inventory Control And Acquisition Management In Hybrid Manufacturing And Remanufacturing Systems

In the prevailing industry practices, many firms integrate remanufacturing activities into their logistics and also start to adopt market-driven acquisition management approach to collect used products. By acquisition management, the firm can control the uncertainty in quantity and quality in acquired product returns.Motivated by these practices, this paper in Chapter 3 studies a complicated multi-period hybrid manufacturing/remanufacturing system with price-dependent product returns. A stochastic dynamic programming model for the coordinated inventory control and acquisition pricing problem of such hybrid system to minimize the expected total cost is proposed. The analytical optimal solution for the model is then derived by applying convexity analysis method and standard value iteration method. The optimal solution structure is characterized by four period-dependent parameters in this single-quality case. It is proved that the optimal acquisition price is nonincreasing in the combined serviceable and returns inventories. Furthermore, the optimality value function is jointly convex and differentiable in the serviceable inventory and the returns inventory. And the acquisition pricing can reduce manufacturing cost and backlogging cost compared to that without consideration of the acquisition price. Conversely, the optimal acquisition price is decreasing in time in the case of homogenous demand pattern. Besides these analytical results, numerical experiments are conducted to study the behavior of the optimal solution and the performance of the hybrid system which further verify our analytical results.In Chapter 4, the paper then extends the stochastic dynamic programming model to the case where the product returns fall in either high-or low-quality grade. The acquisition pricing is quality-dependent. The optimal policy structure is found to be dependent on the quality difference between the two quality grades, which is characterized by six period-dependent parameters in the small quality difference case and seven parameters in the large quality difference case. The nonincreasing property of the high-quality and low-quality acquisition prices and the convex and differentiable property of the optimality value function in the serviceable inventory and the returns inventory are also proved. In particular, the quality difference can affect the production planning policy and acquisition prices significantly. If the quality difference is large enough, the firm will almost only acquire high-quality used products, however, manufacture large number of new products. This chapter also analyzes the sensitivity behaviors of the optimal policy. Moreover, the model is further extended to the scenario of three-quality-grade and the optimal policy is characterized too. Finally, the numerical experiments are performed to study the behavior of the optimal solution and the performance of the hybrid system which further verify the analytical results.