A hybrid two-stock inventory control model for a reverse supply chain

• The paper models a two-stock inventory system with backordering option for a reverse supply chain.
• The research considers the dependency of product return and market demand in presence of product life cycle.
• A simulation-based hybrid variable neighborhood search is designed to solve the model.
• We found near optimum solution in considerably short time in comparison with OptQuest in Arena environment.
• We develop 108 test experiments using realistic data from a company in Australia.

This paper develops an inventory control model for a reverse supply chain with separate serviceable and remanufacturable inventory stock points. Return rate is expressed stochastically as a function of product demand. Variation in demand distribution during product life-cycle is modeled using a new order-up-to replenishment policy incorporating five maximum inventory levels corresponding to five product life cycle stages. A near optimum solution to this problem is sought using a hybrid solution method integrating a discrete event simulation with a meta-heuristic search method. Real data from an Australian case company is utilized to design test experiments for model validation and evaluation.