Managing Condition Variability in Remanufacturing

Abstract

The condition of the used items acquired for remanufacture is often highly variable, and this variability creates numerous management challenges for remanufacturing firms. Management decisions regarding whether or not a given item should be remanufactured and where that remanufacturing should occur can be quite complex in practice. Sorting policies – the rules specifying which used products should be remanufactured and at which facility – have received limited attention in the literature. In this work, I examine the case of a remanufacturer who acquires unsorted used products as needed, e.g. from third party brokers. First, I derive optimal acquisition and sorting policies to meet both known and uncertain demands when the yield for a given sorting policy is deterministic and the firm operates a single remanufacturing facility. I then extend the analysis to the case where yield is uncertain, presenting both a newsvendor-type heuristic as well as an exact algorithm for determining optimal policies in these cases. Finally, I consider an environment in which both domestic and offshore facilities are available for remanufacturing. By analyzing both a two-period model and a multi-period model with ongoing demand, I identify situations in which domestic-only, offshore-only, and a mixed strategy using both facilities are optimal. This work contributes to the remanufacturing literature by presenting a variety of models, applicable to a wide range of remanufacturing environments, for managing used product condition variability through the optimal acquisition and sorting of used items.