Multistage reverse logistics of assembly systems in extended MRP Theory consisting of all material flows

In this paper we will address the issue of environmental problems in connection with extended MRP Theory. It is based on Grubbström’s well developed MRP Theory (Grubbström, 2007). A major advantage of this theory is that timing and its impact on net present value can be easily calculated even for extended multilevel, multistage production-inventory systems and also for perturbed production systems consisting of many production cells. Theory has recently been extended by including reverse logistics of final and used products (Grubbström 2007). At each activity cell a certain percentage of scrapes is produced and sent for recycling after quality control. Here we present an input‐output model which includes all possible flows into a recycling sub-process with several stages of recycling. This model is presented in a generalized form of input and output matrices which has not been developed before. The model will be presented in two different ways which differ in the level of detailed information they contain. Contribution of recycling to the net present value of all activities in a supply chain is expressed and can be compared to environmental damage that could occur if reverse processes are not introduced. Using this approach, the losses and gains in both the economy and the environment could be evaluated more accurately considering all individual flows in the system. No other approaches besides input‐output analysis and Laplace transforms have been found so successful in compound supply systems.