Application of Åström’s method to supply chain inventory problems: A reverse logistics scenario


A simple dynamic model of a hybrid manufacturing / remanufacturing system is investigated. In particular we study an infinite horizon, continuous time, APIOBPCS (Automatic Pipeline Inventory and Order Based Production Control System) model. We specifically highlight the effect of re-manufacturing lead-time and the return rate on the inventory variance and bullwhip produced by the ordering policy. Our results clearly show that a larger return rate leads to less bullwhip and less inventory variance, thus returns can be used to absorb demand fluctuations to some extent. Longer re-manufacturing lead-times have less impact at reducing inventory variance and bullwhip than shorter lead-times. We conclude, within our specified system, that inventory variance and bullwhip is always less in supply chain with returns than without returns.

Workshop of the Gesellschaft für Operation Research e.V., Operations Research and Reverse Logistics, 25th-26th March, Eindhoven, The Netherlands, 19 pages