Lot Sizing with Remanufacturing and One-Way Subsitution

This study considers a lot sizing problem in which a producer can meet the demand for new products by manufacturing new products and the demand for remanufactured products by remanufacturing returned products or substituting remanufactured products with the new ones. The returned products can be recovered through remanufacturing or disposed. The aim in this problem is to minimize the total cost composed of production, inventory, substitution and disposal costs by determining the amount of new items to manufacture, the amount of used items to remanufacture, the amount of remanufactured items to be substituted by new items, and the amount of used items to dispose in each time period of the planning horizon. A new mixed integer programming model is proposed and compared with the model existing in the literature. Extensive computational experiments have been performed and the results show that the new model yields superior results than the existing one. It has been shown that one-way substitution can provide cost savings compared to the case without substitution and the magnitude of cost savings is determined through computational results. The proposed model is an effective decision-making tool for manufacturers which jointly decide on the manufacturing of new products, remanufacturing of used products, substitution of remanufactured products, and disposal of used products.