Optimization of Closed-Loop Supply Chains under Uncertain Quality of Returns

The efficient design and operation of supply chains with return flows represent a major optimization challenge, given the high number of factors involved and their intricate interactions. In particular, the quality level of the return products has strong economic and societal implications and depends greatly on the type of product (glass, paper, electronic, oil, etc) and on the degree of consumers' readiness, frequently promoted by various kinds of awareness raising campaigns. A multi-product multi-period model was previously developed by the authors [1] for the closed-loop supply chain (CLSC) design and planning, where strategic and tactical decisions were comprehensively considered. This model is now being extended to handle the uncertainty related to the quality of the returned products, which at this stage is modeled by a two-stage scenario-based stochastic approach. General strategies to solve optimization problems involving uncertainty tend to exhibit poor computational performance, due to the problem NP-hard complexity, which tends to worsen with the problem size. Therefore and, in addition, a model performance solution enhancement is also being explored. To increase the efficiency of the solution approach, an alternative representation to some of the integer variables employed in the mathematical formulation was developed, which is tested by means of computational experiments being performed on illustrative real sized examples.