Supply planning for a closed‐loop system with uncertain demand and return

This paper considers a supply network consisting of a manufacturer, its external suppliers, and a remanufacturing facility. The manufacturer, facing an uncertain market demand and return, has two options for supplying parts: either ordering the required parts from external suppliers or remanufacturing used products and bringing those back to 'as good as new' conditions. We proposed a general framework for this multi‐product, closed‐loop system and developed a non‐linear programming (NLP) model to maximise the total expected profit by optimally deciding quantity of parts to be remanufactured and quantity of parts to be purchased from external suppliers. We solved the mathematical model using GAMS and CONOPT. With a numerical example, we introduced sensitivity analysis to illustrate the interacting effects among critical parameters in the model.