Models for Recycling and Production Policy for a Closed-Loop System

This paper deals with models for optimal recycling and production policy for a closed-loop system. A constant demand is satisfied by remanufacturing recycled products as well as new manufactured products. It is assumed that recycling rate and unit buyback cost are affected by the quality level and buyback price level of recycled items. And remanufacturing cost is decided by the quality level of recycled items. For remanufacturing, only the used products that satisfy a required minimum quality level will be recycled. Hence functions of recycling rate, buyback price and remanufacturing cost, which are related with the quality level and buyback price level of recycled products, are investigated here. Treating the required minimum quality level and the buyback price level of recycled products, the length of a cycle, the number of manufacturing lots and remanufacturing lots in a cycle as decision variables, the mathematical models with the objective of minimizing the average total cost are investigated. Through calculating examples, the values of decision variables are calculated in two cases. Based on the calculating results, the optimal recycling policy, i.e. the required minimum quality level and the buyback price level of recycled products and the optimal production policy, i.e. the length of a cycle, the number of manufacturing lots and remanufacturing lots in a cycle can be obtained. And thus, the validity of the models is illustrated.