Optimal manufacturing policy in a reverse logistic system with dependent stochastic returns and limited capacities

Abstract

The stochastic models of systems with reverse logistics usually assume that the quantity of products returned is independent of sales. This hypothesis is obviously not true and can lead to suboptimal production policies. In this paper a new sales-dependent returns model is described. In this model, the returns depend on the useful life of the products sold and on the probability of an end-of-life product being returned. A Markov decision problem is formulated in order to obtain the optimal manufacturing policy. A numerical example is provided to illustrate the use of the defined model. An approximated Markov decision model is defined where the optimal policy is easily obtained. The optimal policies of the original and the approximated models are compared.