The effect of product substitution at non-boundary inventory states

In this study, we aim to analyze the effect of substitution policies on the on-hand inventory of finished goods for hybrid manufacturing/remanufacturing systems, where both new and remanufactured versions of a product coexist. We consider the case where the remanufactured products are offered to the market for a fraction of the new product price. Here we propose a model that quantitatively measures the pros and cons of supplying a particular demand for a version of the product with a different version in terms of immediate and average long-run costs and benefits. Then using this model we compare the effectiveness of one way and mutual substitution policies both at boundary and non-boundary inventory states.

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