Closed Loop Supply Chain Under Consignment Stock Partnership

Abstract

The emerging field of reverse logistics or closed loop supply chain management seeks to efficiently handle all the activities pertaining to the retrieval of products from end customers along with the proper reuse or disposal of those products. This thesis addresses a closed loop supply chain comprised of a single vendor and a single buyer operating under a consignment stock (CS) strategy. Following this sort of partnership, the buyer agrees to store the products at its premises where, in return, the payment for those products is made only after being sold to the end customer. We develop a mixed integer non-linear program that seeks to minimize the closed loop chain-wide total cost by jointly optimizing the length of the production cycle, the number and the sequence of the newly manufactured and the remanufactured batches, as well as the inventory levels of the finished and recovered products at the beginning of the cycle. Extensive numerical experiments are also conducted in order to assess the impact of key problem parameters on the behavior of the model. The results indicate that, for low values of the setup cost associated with newly manufactured batches, the vendor might be better off adopting intermittent schedules in which he would alternate between the production of new and remanufactured batches more than once. The economic merits of the generalized model are also assessed through calculating the cost percentage increase when adopting special production sequences such as consecutive remanufacturing batches followed by consecutive newly manufacturing batches, and other sequences with single manufactured or remanufactured batch.