A hybrid manufacturing/remanufacturing system with random remanufacturing yield and market-driven product acquisition

Remanufacturing has created considerable benefits to both industry and community. This paper generates insights into the acquisition management and production planning of a hybrid manufacturing/remanufacturing system. The acquisition quantity of the used products is stochastic and sensitive to the acquisition price, and the uncertain quality of the acquired used products leads to a random yield in the remanufacturing process. With such a market-driven acquisition channel and a random remanufacturing yield, it is shown how the acquisition pricing, remanufacturing, and manufacturing decisions can be coordinated in order to maximize the total expected profit. Sequential and parallel remanufacturing/manufacturing processes are considered in different cases. In each case, we use a stochastic dynamic programming to formulate and analyze the model, showing that the optimal policy is characterized by several critical values and functions. We derive conditions under which the firm should open/close the acquisition channel and utilize/discard the remanufacturing option. By comparing the two cases, we show that expediting the remanufacturing process will help the firm to better utilize the acquisition channel and the remanufacturing option, as the optimal acquisition price and remanufacturing quantity are both higher in the case of sequential processes.