Analysis and optimization of inventory variance and bullwhip in a manufacturing/remanufacturing system

Quantitative analysis of closed-loop supply chains is often based on a specified cost function;dynamical performance of the system is rarely considered.This paper adopted a control theory approach to build a simple dynamic model of a hybrid manufacturing/remanufacturing system.It highlights the effect of remanufacturing(and return) lead-time and the return rate on the inventory variance and bullwhip produced by the ordering policy.The results show that a larger return rate leads to less bullwhip and less inventory variance.Thus returns can be used to improve dynamic performance by absorbing some of the demand fluctuations.Longer remanufacturing(and return) lead-times have less impact on reducing inventory variance and bullwhip than shorter lead-times.It is concluded that within our specified system the inventory variance and bullwhip is always less in supply chain with returns than that without returns.