Planning of capacity, production and inventory decisions in a generic reverse supply chain under uncertain demand and returns

Abstract

There is a growing interest for the design and operation of reverse supply chain systems due to the cost and the legislation issues. In this paper, we address the disassembly, refurbishing and production operations in a reverse supply chain setting for modular products such as computers and mobile phones considering the uncertainties in this system, which are the return amounts of the used products and demand for final products. We develop a large-scale mixed integer programming model in order to capture all characteristics of this system, and use two-stage stochastic optimisation and robust optimisation approaches to analyse the system behaviour. In the first stage, we focus on the strategic decisions about the capacities at disassembly and refurbishing sites considering different scenarios regarding the uncertainties in the system. In the second stage, we analyse the operational decisions such as production, inventory and disposal rates. We observe through our extensive numerical analysis that the randomness of demand and return values effect the performance of the system substantially and the uncertainty of the return amounts of used products is much more important than the uncertainty of demand in this system.