Optimal policy and holding cost stability regions in a periodic review inventory system with manufacturing and remanufacturing options

In this paper a periodic review inventory model with finite horizon and remanufacturing, manufacturing options is studied. It is assumed that demand and cost parameters are constant and a sufficiently large quantity of used products is available at the beginning of the horizon. The model is studied within the class of policies with given remanufacturing and manufacturing set up and the optimal policy is obtained within this class. The policy specifies the period of switching from remanufacturing to manufacturing (switching period), the periods where remanufacturing and manufacturing activities take place and the corresponding lot sizes. An explicit formula for the cost function and some of its properties are established. Based on these, an algorithm which partitions the set of holding cost parameters into subsets, computes the optimal policy and constructs its corresponding stability regions on every such subset is proposed.

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