A joint inventory model for an open-loop reverse supply chain

This research focuses on an open-loop reverse supply chain, which includes a single centralized returns center (CRC) and multiple local collection points (LCPs). Each LCP receives a stream of returned products from consumers and once its inventory reaches its economic inventory level, these products are immediately delivered to the CRC. The CRC begins to handle those returned products when its inventory reaches its economic batch size. Special attention is placed on the joint inventory control and product return handling policies. The purpose of this study is to find the optimal economic delivery batch size for the LCPs as well as the optimal handling batch size for the CRC in order to minimize the long-run average cost for the open-loop reverse supply chain. An algorithm to find an optimal policy of delivery batch size for LCPs and handling batch size for CRC is developed. We present detailed discussions on how the optimal policy of delivery as well as the handling batch sizes changes with respect to changes in system parameters. We show that the formulas for optimal policies of delivery and handling batch sizes are modifications of the EOQ model. Simulation results illustrate that our model development is suitable for more general situations.