The redesign of a warranty distribution network with recovery processes

• We give a nonlinear MIP model for the design of the warranty distribution network.
• The model makes decisions on the forward flow of new and refurbished products.
• The model also considers different recovery processes of returned products.
• To solve the model we piecewise linearize the objective function and constraints.
• The new network results in cost savings of 3.4% of the total distribution costs.

A warranty distribution network provides aftersales warranty services to customers and resembles a closed-loop supply chain network with specific challenges for reverse flows management like recovery, repair, and reflow of refurbished products. We present here a nonlinear and nonconvex mixed integer programming model for the design of the warranty distribution network of a semiconductor company which is operated by an outsourced third party logistics service provider. The application of the model to the real-life case provides an improved distribution network flow and rearranged warehouse and recovery locations, and resulted in weekly cost savings of 3.4% for the considered item.