Remanufacturing decisions with uncertain demand and product return yield

Abstract

In this paper, we consider a supply chain with one original equipment manufacturer (OEM) and one retailer. The OEM can process both used and new parts for the production of new products. The yield of the used parts procured for remanufacturing is random. The OEM makes procurement and production decisions and the retailer makes ordering decisions based on their own cost/incentive structures. The two parties in the supply chain use either a push or a pull contract to trade with each other. We consider both short- and long-manufacturing lead times. We develop models to obtain their optimal policies for different scenarios depending on the contract type and the information the OEM has about the random yield rate. We compare the results of different scenarios and develop managerial insights. We also carry out numerical analysis and evaluate the supply chain performance.