Leadtime effects and policy improvement for stochastic inventory control with remanufacturing

When returns of goods and remanufacturing options have to be taken into con sideration in inventory control situations, two additional sources of compl exity appear in the traditional approaches of optimizing stochastic invento ry control. Firstly, due to uncertainty of returns, an additional stochasti c impact has to be regarded. Secondly, with remanufacturing a second mode o f supply of serviceable goods is given, so that coordination with the regul ar mode of procurement becomes necessary. It can be shown that under these conditions we face extremely complicated optimal control rules if the leadt imes for remanufacturing and regular procurement differ. This holds for bot h the structure of the control policy and the inventory information necessa ry for optimal stock adjustment. In this context, the meaning of the invent ory position, which is well-defined in traditional inventory control, is no longer evident. In practice, in these situations usually simple (suboptima l) decision rules are applied that only use a few control parameters and ad ditionally do not take into consideration the complexity of defining the in ventory position appropriately. For such a simple (4-parameter) control rul e it is shown that by determining the inventory position in a proper way th e performance of the policy can be improved considerably. This effect is eq uivalent to using the remanufacturing leadtime as a decision variable which has to be fixed in an optimal way. (C) 2001 Elsevier Science B.V. All righ ts reserved.