A generic stochastic model for supply-and-return network design

This paper presents a generic stochastic model for the design of networks comprising both supply and return channels, organized in a closed loop system. Such situations are typical for manufacturing/re-manufacturing type of systems in reverse logistics. The model accounts for a number of alternative scenarios, which may be constructed based on critical levels of design parameters such as demand or returns. We describe a decomposition approach to this model, based on the branch-and-cut procedure known as the integer L-shaped method. Computational results in an illustrative numerical setting show a consistent performance efficiency of the method. Moreover, the stochastic solution features a significant improvement in terms of average performance over the individual scenario solutions. A modeling and solution methodology as presented here can contribute to the efficient solution of network design models under uncertainty for reverse logistics.