Two-stage capacity design problem in a single-collector-single-remanufacturer system

Abstract

In this paper, we study a capacity planning problem in a two-stage reverse supply chain, which consists of one collector and one remanufacturer when the used products are stochastically returned. We consider collector's two alternative modes to cope with a stochastic return rate of used products. For each mode, we develop the analytical solution procedure to determine the optimal level of collection and remanufacturing capacity according to the bargaining power of these two actors based on newsvendor model. And then, we conduct a numerical study to examine how these two modes behave and compare the relative effectiveness. Based on numerical analyses, it was observed that the variance of return rate of used product is a very important factor in managing the capacity policy. Additionally, according to collector's capacity mode, the issue who leads a decision-making has also significant effect on deciding two actors' individual profit and system profit.