A closed-loop recycling system with minimum allowed quality level on returned products

Abstract

This paper deals with a closed-loop recycling system in which a stationary demand is satisfied by remanufactured products as well as newly manufactured products. In this system only those products that satisfy a minimum allowed quality level are bought back from customers for recycling purpose. Thus the collection rate of used products is expressed as a function of the quality level and unit bought-back price. Also, it is assumed that products are either manufactured or remanufactured in an EPQ setting. Treating the quality of recycled products as a random variable, we develop a mathematical model for a single remanufacturing and a single manufacturing run in a cycle with the objective of minimizing the production and inventory costs. Decision variables are the length of cycle, the minimum allowed quality level and the unit bought-back price of used products. To illustrate the validity of the model, example problems are solved.