Inventory optimization in a one product recoverable manufacturing system

Environmental regulations or the necessity for a ‘green image’ due to growing environmental concerns, as well as the potential economical benefits of product recovery, have pushed manufacturers to integrate product recovery management with their manufacturing process. Consequently, production planning and inventory control of recoverable manufacturing systems has gained significant interest among researchers who aim to contribute to industrial practice. This paper considers inventory optimization of a single product recoverable manufacturing system where customer demands are satisfied through either regular production (manufacturing) of new items or remanufacturing of returned items. We present robust, implementable characterizations of the optimal manufacturing/remanufacturing inventory policies found using Markov decision processes. We extend the results in the literature by considering setup costs and different lead time cases for manufacturing and remanufacturing.