Lot-sizing for a product recovery system with quality-dependent recovery channels

The importance of sustainable manufacturing has been recognised in recent years and as such, there has been a growing interest in initiatives such as product recovery and remanufacturing. In this paper, we study a product recovery system over an infinite planning horizon, with cycles consisting of multiple fixed-sized production lots followed by multiple fixed-sized recovery lots. Our model provides two channels for recovery - recovery into serviceable items and recovery into components. The inclusion of both recovery channels may allow manufacturers to increase the proportion of returns which they recover, and thus reduce the amount of waste that they generate. We derive expressions for the total cost per time unit for the model and provide formulae for the optimal lot sizes. Bounds are developed to provide upper limits on the optimal numbers of lots per cycle, given a maximum returned inventory capacity. The properties of the model are explored and demonstrated through numerical experiments, in particular we explore the situations in which the use of both recovery channels can lead to cost savings.