Optimization of a Reverse Manufacturing System with Multiple Virtual Inventories

Abstract This paper deals with a cost management problem of a remanufacturing system with stochastic variability such as demand. We model the system with consideration for two types of inventories. One is the actual product inventory in a factory. The other is the virtual inventory that is used by customer. For this virtual inventory, it should be required to consider an operational cost that we need in order to observe and check the quantity of the inventory. We call it the virtual inventory cost and model the system including it. We define the state of the remanufacturing system by the both of the inventory levels. It is assumed that the cost function is composed of various cost factors such as holding, backlog and some kinds of manufacturing costs etc. We obtain the optimal production policy that minimizes the expected average cost per period. Numerical results show the effects of the factors on the optimal policy.

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