Buffering from material recovery uncertainty in a recoverable manufacturing environment

Remanufacturing is becoming an increasingly important alternative to firms as they develop environmentally sound strategies aimed at minimizing waste and resources. Remanufacturing helps minimize costs through such methods as extending product life cycles via refurbishments and technical upgrades which require only a fraction of the resources and energy associated with a new product. The remanufacturing environment is characterized by a far greater degree of uncertainty than new manufacturing, due to such factors as material recovery uncertainty and probabilistic routings. In this study the use of safety stocks, with a material requirement planning system, to deal with the high inherent uncertainty in the system is examined. It is shown that some safety stocks must be kept in the system but have limited applicability. Additional safety stocks do not provide the manager in this environment with any added benefit beyond that obtained by keeping a minimum recommended level. The results obtained are somewhat counter-intuitive, since adding additional levels of safety stock does not add additional coverage when lead times are greater than one planning period. This lead time effect is explained fully and recommendations as to safety stock level to invest in are made.