Lot-sizing for inventory systems with product recovery

We study inventory systems with product recovery. Recovered itemsare as-good-as-new and satisfy the same demands as new items. Thedemand rate and return fraction are deterministic. The relevantcosts are those for ordering recovery lots, for orderingproduction lots, for holding recoverable items in stock, and forholding new/recovered items in stock. We derive simple formulaethat determine the optimal lot-sizes for theproduction/procurement of new items and for the recovery ofreturned items. These formulae are valid for finite and infiniteproduction rates as well as finite and infinite recovery rates,and therefore more general than those in the literature.Moreover, the method of derivation is easy and insightful.product returns;recovery;lot sizing;EOQ/EPQ

Determining optimal disassembly and recovery strategies

We present a stochastic dynamic programming algorithm fordetermining the optimal disassembly and recovery strategy, giventhe disassembly tree, the process dependent quality distributionsof assemblies, and the quality dependent recovery options andassociated profits for assemblies. This algorithm generalizes theone proposed by Krikke et al. \\cite{Krikke98} in two ways. First,there can be multiple disassembly processes. Second, partialdisassembly is allowed. Both generalizations are important forpractise.

The multiple-job repair kit problem

The repair kit problem is that of finding the optimal set of partsin the kit of a repairman. An important aspect of this problem, inmany real-life situations, is that several job-sites are visitedbefore a kit is restocked. In this paper, we present twoheuristics for solving the multiple-job repair kit problem. Bothheuristics can be used to determine a solution under theservice-objective (minimal holding cost for a required job-fillrate) as well as the cost-objective (minimal expected total cost,including a penalty cost for each `broken' job). The `JobHeuristic (JH)' almost always determines the exact optimalsolution, as is shown in an extensive numerical experiment.However, it can not (easily) be used in cases where several partsof the same type may be needed on a job, or part failures aredependent, or the number of jobs in a tour varies. The `PartHeuristic (PH)' is simpler and easy to use in these cases also. Infact, it can be applied in a spreadsheet software package, as weillustrate. The numerical experiments show that it s leads tonear-optimal solutions (average `cost error' of less than 0.1 percent). Therefore, the PH is an excellent method for solving repairkit problems in practise.logistics;inventory;repair kit problem

Forecasting intermittent demand

Methods for forecasting intermittent demand are compared using a large data-set from the UK Royal Air Force (RAF). Several important results are found. First, we show that the traditional per period forecast error measures are not appropriate for intermittent demand, even though they are consistently used in the literature. Second, by comparing target service levels to achieved service levels when inventory decisions are based on demand forecasts, we show that Croston's method (and a variant) and Bootstrapping clearly outperform Moving Average and Single Exponential Smoothing. Third, we show that the performance of Croston and Bootstrapping can be significantly improved by taking into account that each lead time starts with a demand

The Newsboy Problem with Resalable Returns

We analyze a newsboy problem with resalable returns. A single order isplaced before the selling season starts. Purchased products may bereturned by the customer for a full refund within a certain timeinterval. Returned products are resalable, provided they arrive backbefore the end of the season and are undamaged. Products remaining atthe end of the season are salvaged. All demands not met directly arelost. We derive a simple closed-form equation that determines theoptimal order quantity given the demand distribution, the probabilitythat a sold product is returned, and all relevant revenues and costs.We illustrate its use with real data from a large catalogue/internetmail order retailer.inventory;reverse logistics;product returns;mail order retailer;newsboy problem

Rework and postponement: a comparison of bottling strategies

This paper presents the results of a case study in a batch production facility for biological vaccines. The problem considered is that of finding the best bottling strategy for produced batches. A batch can be bottled directly after production, after positive intermediate test results, or after positive final test results. Strategies that start the bottling process quickly after production, have the advantages of a low capacity requirement for production tanks and of a small throughput time if all test results are positive. However, a production batch can only be reworked as long as it has not been bottled. So fast bottling reduces the possibilities for rework and therefore reduces the production yield. We present performance measures for comparing the different strategies and derive closed-form expressions for them. We illustrate the results obtained for the considered case.case study;process industry;rework;yield uncertainty

Production planning and control of closed-loop supply chains

More and more supply chains emerge that include a return flow of materials. Many original equipment manufacturers are nowadays engaged in the remanufacturing business. In many process industries, production defectives and by-products are reworked. These closed-loop supply chains deserve special attention. Production planning and control in such hybrid systems is a real challenge, especially due to increased uncertainties. Even companies that are engaged in remanufacturing operations only, face more complicated planning situations than traditional manufacturing companies.We point out the main complicating characteristics in closed-loop systems with both remanufacturing and rework, and indicated the need for new or modified/extended production planning and control approaches. An overview of the existing scientific contributions is given. It appears that we only stand at the beginning of this line of research, and that many more contributions are needed and expected in the future.closed-loop supply chains;Production planning and control

The newsboy problem with resalable returns

We analyze a newsboy problem with resalable returns. A singleorder is placed before the selling season starts. Purchasedproducts may be returned by the customer for a full refund withina certain time interval. Returned products are resalable, providedthey arrive back before the end of the season and are undamaged.Products remaining at the end of the season are salvaged. Alldemands not met directly are lost. We derive a simple closed-formequation that determines the optimal order quantity given thedemand distribution, the probability that a sold product isreturned, and all relevant revenues and costs. We illustrate itsuse with real data from a large catalogue/internet mail orderretailer.inventory;reverse logistics;product returns;mail order retailer;newsboy problem

Profitability of price promotions if stockpilling increases consumption

Price promotions induce consumers to purchase higher-than-usual quantities, resulting in higher stocks that lead to increased consumption. We show for a stylized model with a single shop and a single loyal customer that because of this stockpiling effect, promotions can be profitable even if they do not attract extra customers

Valuation of inventories in systems with product recovery

Valuation of inventories has different purposes, in particularaccounting and decision making, and it is not necessary for a firmto use the same valuation method for both purposes. In fact, it isnot uncommon to use accounting books as well as management books.In this chapter, we will only consider inventory values from theperspective of decision making. More specifically, we will analyzethe effect of inventory valuation on inventory control decisions(and not the corresponding financial results) for systems withproduct recovery.