Lot-sizing for inventory systems with product recovery

Abstract

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