Uncapacitated production planning with multiple product types, returned product remanufacturing, and demand substitution

This paper investigates an uncapacitated multi-product production planning problem with returned product remanufacturing and demand substitution, where no backlog and no disposal are allowed. Both the production of new products and the remanufacturing of returned products are considered to meet time-varying demands in a finite time horizon. Setup costs are taken into account when a new product is manufactured or a returned product is remanufactured. The problem is to determine when and how many returned products are remanufactured and new products are manufactured so as to minimize the total cost, including manufacturing, remanufacturing, holding and substitution costs. We first develop an optimization model to formulate the problem. We then propose a dynamic programming approach to derive the optimal solution in the case with large quantities of returned products. We further propose an approximate approach for the general problem to compute a near-optimal solution. The proposed approaches are evaluated by computational experiments and the effectiveness of the approximate approach is verified. Some managerial insights regarding the effects of remanufacturing/substitution are also obtained from the computational studies.