Supply Planning for a Closed Loop Supply Chain with Uncertain Demand and Price-Dependent Stochastic Return

Abstract

This paper considers a single product closed loop supply chain, in which the manufacturer faces an uncertain market demand and price-dependent stochastic returns. There are two options for supplying the products: either producing products by new materials and components, or remanufacturing the recycle products and bringing them back to ‘as new’ conditions. The problem is to determine the quantities of bran-new and remanufactured products, and the acquisition price for used products so that the manufacturer’s total expected profit is maximized. We develop a Nonlinear Programming (NLP) model and present some properties of this problem. With the properties an optimal solution approach is developed. Two numerical examples are used to analyze the problem and test the solution approach.