Optimal Reutilization of the Leased Products in a Closed Loop Supply Chain

The life cycle of products has become much shorter because of the rapid technological development. When the products are out of market, it can be attributed to not only the physical deterioration but also the functional obsolescence. Therefore, product recovery remains valuable. Nowadays, take-back legislation based on extended producer responsibility is critical to a company. Moreover, the business models have gradually changed from traditional product selling to functional sales. Leasing is an example of functional sales that provides an alternative business strategy to cope with the uncertainty in quantity, quality, and time for the returned products. In this chapter, we propose an analytical model, namely Periodical Leasing Model (PLM), to solve the reutilization planning problem under a Closed-loop Supply Chain (CLSC) system which includes multiple products with common components in multiple-periods. The PLM is divided into two phases. The first phase is a pricing model in the form of Integer Non-linear Program (INLP), and the second phase is a production model in the form of Integer Linear Program (ILP). According to the different characteristics of the components, the model can be used to support the manager’s decision regarding the optimal combinations of components from different products for reuse and upgrade possibilities. Finally, numerical results are presented to illustrate the procedure and the validity of the proposed model with the sensitivity analysis.