Optimal production policy for a closed-loop hybrid system with uncertain demand and return under supply disruption

The paper considers a closed-loop supply chain inventory system involving a single-manufacturer and a single-retailer with stochastic market demand and random return of used item. The manufacturer produces the finished product by manufacturing from raw materials as well as remanufacturing from used product obtained from a collector. Used product's yield rate is assumed to be random. The raw materials may be sourced from two suppliers. The primary supplier is cheaper but unreliable in the sense that supply from this source may disrupt, whereas the secondary supplier is perfectly reliable but more expensive. The objective of this study is to determine the optimal quantity of finished product which is to be manufactured from raw materials so as to maximize the total profit of the integrated system. Results of numerical experiments are presented and sensitivity analysis is carried out to investigate the influence of model-parameters on the optimal solution. (C) 2015 Elsevier Ltd. All rights reserved.