Manufacturing Network Configuration in Supply Chains with Forward Flexibility for Product Recovery Based on Simultaneous Design

To study the network design problem of a firm that manufactures new products and remanufactures returned products in its facilities when demand and return flows are both uncertain, we examine the capacity decisions and expected performance of two alternative manufacturing network configurations with forward flexibility for product recovery based on simultaneous design which is to redesign the entire network including simultaneously forward and reverse operations. Concerning the market structure, we further distinguish between the case where newly manufactured and remanufactured products are sold on the same market and the case where recovered products have to be sold on a secondary market. We consider network structures where manufacturing and remanufacturing are both conducted in common plants as well as structures that pool all remanufacturing activities in a separate plant. Two-stage stochastic programs with recourse are formulated. Based on numerical studies with normally distributed demands and returns, our results indicate that the investigated structures can lead to very different expected profits and investment costs of (re-)manufacturing capacity, and market structure have a strong impact on the choice of a network configuration but the forward flexibility for product recovery has a weak impact when increasing the network size n. We also examine the sensitivity of network performance to changes in return volumes, return variability. Based on these results, we find that decentralized plants are both more beneficial in the two market settings, thus investing in more specialized, dedicated resources should be considered.