Value of information forecasting in a hybrid manufacturing/remanufacturing system with stochastic returns: A control engineering perspective

Our paper addresses the value of information forecasting (VOIF) the returns in a hybrid system with production leadtime larger than remanufacturing leadtime. We develop transfer function models by using control engineering methodology and then analyze the system´s behavior in the case of using forecast information of returns or not. With the dynamic simulation data, we evaluate the VOIF by measuring the reduction in total expected costs. We find that under low uncertainty of returns, VOIF increases with increasing variance of returns; that is the larger the uncertainty, the larger the potential VOIF. However, under high uncertainty of returns, the larger the uncertainty, the less the potential VOIF is. In our opinion, the latter is caused by the substantial information distortion due to the high uncertainty of returns. Moreover, we also find that the larger the discrepancy between the production leadtime and remanufacturing leadtime, the larger the VOIF is. Our study shows that the discrepancy between leadtimes is very important for manufacturers´ decision making, even more important than the uncertainty of returns.