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.