Lot-streaming policy for forward-reverse logistics with recovery capacity investment

Abstract

In this paper, we consider the problem where after usage the finished goods are collected at a constant rate and returned to the manufacturer who uses them to produce new products. In order to optimize this kind of closed-loop supply chain, it is necessary to synchronize the forward flow and the reverse flow in establishing the operational policies for both the lot size and the delivery frequency between products consumption and parts recovery. Additionally, the decision regarding recovery policy with lot-streaming policy should be considered deliberately to minimize overall supply chain cost. We develop the optimization model for controlling the lot-streaming policy in the closed-loop logistics scheme and propose the solution procedure for determining the lot-streaming policy and recovery policy. From the sensitivity analyses, we observe that optimal lot-streaming policy and recovery policy could be characterized by either pure strategy or mixed strategy according to the changes in the relevant cost factors. So, an integrated management of both lot-streaming policy and recovery decision could be a critical managerial issue in a closed-loop supply chain.