On the necessity of a disposal option for returned items that can be remanufactured

We study a single item hybrid production system with manufacturing and remanufacturing. It is assumed that remanufacturing is profitable and that, on average, there are more demands than returns. We investigate using simulation, for a variety of cases with different demand, return, manufacturing, and remanufacturing characteristics, what the cost reduction associated with having a disposal option for returned items is. The results show that there is only a considerable cost reduction if an item is very slow-moving, the recovery rate is high, and remanufacturing is almost as expensive as manufacturing.