Optimization of a Single-Item Repairable Inventory System with New and Warranty Demand

Product returns play an important role in the economy and have attracted more and more attention both from industry and academia in the past few years. Motivated by enormous economic potential of and dramatic legislation pressure on product returns, companies today actively integrate product-return processes with their existing forward supply-chain processes, but must confront the considerable challenge of production planning and inventory control problems compared to traditional problems without returns and repairs.;This thesis analyzes a multi-period single-item repairable inventory system with stochastic new and warranty demands. The system investigated has the following features: (i.) perfect substitution of supply sources. Newly-procured items are indistinguishable from items repaired from repairable warranty returns. (ii.) demand priority. New demand has higher priority than warranty demand within a period and thus needs to be satisfied first. (iii.) properties on the processes of purchasing and repairing. We assume zero lead-time for both processes. Further we capture the "repair loss" in repairing returns in each period. We identify the optimal inventory replenishment and disposal policies for the investigated system.