Manufacturing-remanufacturing policies for a centralized two stage supply chain under consignment stock partnership

This paper addresses a centralized 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 product at its premises where, in return, the payment of 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 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. The special case of the production sequence (R,M), in which R consecutive remanufacturing batches are produced first followed by M manufacturing batches, along with the production sequences (M,R), (R,1), and (1,M) are also derived from the general model. Extensive numerical experiments are also conducted in order to assess the impact of key problem parameters on the behavior of the developed models. The results confirm that, under the consignment stock agreement, the (R,M) and (M,R) production sequences are the dominant ones as they yield the optimal solution in roughly 87% and 10% of the reported problem instances, respectively. It is also found that intermittent schedules, in which the vendor alternates between the production of newly and remanufactured batches more than once, would only result in marginal savings under extreme values of the setup costs. In contrast to the reported results in the literature, the simplified cases of (R,1) and (1,M) did not perform well under several settings of the problem parameters with an average increase in the total cost as high as 19% and 25%, respectively.