Coordination and priority decisions in hybrid manufacturing/remanufacturing systems

Companies are increasingly realizing the need to coordinate their manufacturing and remanufacturing operations. This can be a challenge due to the inherent variability in the condition and amount of returns, which has a direct impact on remanufacturing costs and leadtimes. In this paper, we develop a modeling framework to compare two alternative strategies that use either manufacturing or remanufacturing as the primary means of satisfying customer demand. Of course, in the event that the demand cannot be met by the prioritized process, the secondary process is used as a contingency. In our basic model, the priority decisions are made at the component level in replenishing the serviceable inventory, while the disposal and new component ordering decisions are made independently. The second model represents the coordination of remanufacturable and new component inventory control decisions. Using simulation-based optimization on a large number of experiments, we observe that when prioritization is in the upstream echelon and there is no coordination in managing component stocks, there exists a critical return ratio, below which it is beneficial to give priority to manufacturing and above which it is beneficial to give priority to remanufacturing. We also see that coordinated control of the component inventories considerably reduces the importance of prioritization. These observations remain valid when congestion in the shop floor is also taken into account. We also study the benefits of state-dependent dispatching policies in a realistic case.