Authors:
Fethullah Gocer
1
;
S. Sebnem Ahiska
1
and
Russell E. King
2
Affiliations:
1
Galatasaray University, Turkey
;
2
North Carolina State University, United States
Keyword(s):
Product Substitution, Remanufacturing, Manufacturing, Inventory Control, Markov Decision Process.
Related
Ontology
Subjects/Areas/Topics:
Artificial Intelligence
;
Decision Support Systems
;
e-Business
;
Enterprise Information Systems
;
Industrial Engineering
;
Knowledge Discovery and Information Retrieval
;
Knowledge-Based Systems
;
Logistics
;
Methodologies and Technologies
;
Operational Research
;
Optimization
;
Stochastic Processes
;
Symbolic Systems
Abstract:
We consider the inventory control problem for an infinite-horizon stochastic hybrid manufacturing / remanufacturing system with product substitution under stochastic demand and returns. Remanufactured and manufactured products are considered as two different products, having different costs and selling prices as well as separate demand streams. Remanufactured products have a higher stock out risk because the remanufacturing capacity is mainly dependent on the amount of returns available for remanufacture. One way to cope with the stock-out issue for remanufactured products is to use a downward substitution strategy, which allows a manufactured product (i.e. higher value item) to be substituted for a remanufactured product (i.e. lower value item) in case the latter runs out of stock. We formulate this problem as Markov Decision Process in order to determine the optimal manufacturing and remanufacturing decisions under product substitution, and through numerical experimentation, we inv
estigate the effects of stochastic demand/return distributions on the profitability of the substitution strategy.
(More)