Omega 44 (2014) 21–31

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Omega
journal homepage: www.elsevier.com/locate/omega

A flexibly structured lot sizing heuristic for a static

remanufacturing system
Tobias Schulz, Guido Voigt n
Faculty of Economics and Management, Otto-von-Guericke University Magdeburg, Germany

art ic l e i nf o a b s t r a c t

Article history: An effective planning of lot sizes is a key strategy to efficiently manage a combined manufacturing/
Received 23 November 2012 remanufacturing system in the presence of substantial setup costs. Due to its complex interdependen-
Accepted 24 September 2013 cies, optimal policies and solutions have not been identified so far, but several heuristic approaches have
Available online 3 October 2013
been analyzed in recent contributions. The main heuristic shortcuts are forcing equally sized lot sizes
Keywords: over the planning horizon as well as imposing a specific cycle structure, i.e., a sequence of manufacturing
Inventory management batches is followed by a sequence of remanufacturing batches. We are instead proposing a flexibly
Remanufacturing structured heuristic that allows for differently sized remanufacturing batches. We show in a compre-
Lot sizing hensive numerical study that our approach outperforms other existing approaches in more than half of
EOQ
all instances by up to 17%.
& 2013 Elsevier Ltd. All rights reserved.

1. Introduction components (mainly engines and transmissions) and generated

In recent years, the idea of incorporating backward flows into
traditionally forward-oriented supply chains has received increasing
attention in theory and industry. When managed efficiently, this
extension promises new opportunities to create profits from the
recovery of products, components, and materials. Interestingly, firms
cannot only create value from properly functioning product returns
but also when a broken product is returned.
Thierry et al. [22] name five options to handle the recovery of
broken product returns ranging from simple repair to recycling.
Among these options, remanufacturing product returns is espe-
cially interesting as it attempts to bring product returns to an as-
good-as-new quality standard. By doing so, remanufacturing firms
provide their customers a cheap alternative to expensive new
products while being environmentally friendly at the same time.
Remanufacturing a product commences in general with the
disassembly of the product which is followed by a thorough
inspection of all components obtained. All recoverable compo-
nents are then mechanically remanufactured. Combined with new
components, these remanufactured parts are assembled into the
final remanufactured product. Remanufacturing activities can be
found in a large variety of industries (see, e.g., [2], for an over-
view). To give an example, remanufacturing car related compo-
nents is a practical source of revenues for automotive companies.
In 2008, Volkswagen remanufactured, for instance, 3.83 million
n
Corresponding author. Tel.: þ 49 391 6718830.
E-mail address: guido.voigt@ovgu.de (G. Voigt).
with these activities a revenue of around 600 million € (see [23]).
In his seminal work, Guide [8] describes the complicating
characteristics of remanufacturing in industry and elaborates a
number of possible research questions that require further atten-
tion. Due to the complexity of an industrial remanufacturing
system, all research questions can only be formulated to focus
on a small part of the entire system. One important stream of
research focuses on strategic network design perspectives (see, e.
g., [7,3,18]). Another important line of research analyses how
remanufacturing and manufacturing operations have to be prop-
erly balanced to satisfy customer demand.
In this context, one of the important research questions is the
optimal timing and sizing of remanufacturing operations. A lot
sizing problem results when substantial setup costs prevail to
initiate a (re)manufacturing process. Depending on the character-
istics of the demand and return flows, several classes of lot sizing
problems (static vs. dynamic and/or deterministic vs. stochastic) can
be identified. For the dynamic problem, refer to Teunter et al. [21],
Schulz [17], Zhou et al. [24], and Li et al. [10] for more details.
An analysis of static and stochastic return flows is provided by
Mitra [14].
The first author to analyze the static and deterministic problem
setting is Schrady [15]. He proposes to split the infinite planning
horizon into identical cycles that are repeated continuously. Each
cycle contains a single manufacturing batch that is followed by R
equal remanufacturing batches. Henceforth, we will refer to this
cyclical structure as the (R,1)-policy. By minimizing the total cost
(including a setup and a holding cost term), the (R,1)-policy allows to
find a first solution to this problem. Teunter [19] presents a different
policy structure to define a cycle, the so-called (1, M)-policy. In

0305-0483/$ - see front matter & 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.omega.2013.09.003
22 T. Schulz, G. Voigt / Omega 44 (2014) 21–31
contrast to Schrady's idea, only a single remanufacturing batch is
issued per cycle that is succeeded by M equal manufacturing batches
before the next identical cycle commences. Konstantaras and Skouri
[9] derive sufficient conditions to determine which class of policy,
ðR; 1Þ or ð1; MÞ, is optimal for a specific problem instance.
Next to formulating the (1, M)-policy, Teunter names two
options to further improve the solution. At first, he proposes that
a more general (R,M)-policy could reduce the total cost per time
unit. This idea has been elaborated by Choi et al. [4] who define
such a policy structure. They prove that there is only one cost
minimizing sequence of equally sized batches in a cycle for any
given (R,M) combination. Moreover, they present an algorithmic
procedure to determine the minimum total cost for this policy
structure. In comparison to the underlying approach of this
contribution, however, they do not allow for variable remanufac-
turing lot sizes over time. We show that the performance can be
considerably increased if this restriction is lifted. Choi et al. [4]
procedure has been facilitated later by Liu et al. [11] using a
slightly different experimental design as testing environment,
however, both contributions derive similar results. The best solu-
tion of the ðR; 1Þ and ð1; MÞ policies is only seldom improved by
using the (R,M)-policy (in about 0.2% of all instances examined).
Moreover, the actual improvement is also small (always less
than 0.5%).
The second possible improvement option mentioned by Teunter
[19] is to allow for scheduling differently sized (re)manufacturing
batches in a cycle. This idea has been analyzed at first by Minner
and Lindner [12] who show with a Lagrange-multiplier approach
that initiating equal remanufacturing batches in a cycle does not
have to be optimal. Yet, these authors do not evaluate the actual
benefit of scheduling differently sized remanufacturing batches.
Feng and Viswanathan [5] contribute to the discussion by
considering an (R,M) type policy with differently sized remanu-
facturing batches. As in our approach, a sequence of manufactur-
ing batches is followed by one remanufacturing batch in each
subcycle. However, for facilitating the solution finding process,
they allow for only two classes of subcycles. In contrast, our
approach is more flexible by not limiting the number of classes
to two. Thus, we are pushing the idea of the subcycle approach
even further and allow for a flexible sequence of manufacturing/
remanufacturing batches while the size of the remanufacturing
batch may vary for every single setup. While Feng and Viswa-
nathan [5] conclude that the total costs can only be slightly
decreased with two subcycle classes, we find that introducing an
even more flexible structure of manufacturing/remanufacturing
sequences can decrease costs substantially by up to 17.5% when
allowing for differently sized remanufacturing batches compared
to the best (R,M)-policy with equally sized (re)manufacturing
batches.
The main objective of this contribution is to comprehensively
analyze the benefits of scheduling differently sized (re)manufac-
turing batches within a flexible cycle structure. We will show that
different batch sizes can reduce the total cost substantially for a
large number of problem instances. The remainder of this work is
Fig. 1. Simplified inventory model for a remanufacturing system.
organized as follows. Section 2 introduces the basic modeling
assumptions and outlines the solution finding process of the
above-mentioned policy structures. In Section 3, we introduce
our flexibly structured ðR; MÞflex heuristic which we extensively test
in a numerical study with the experimental design of Choi et al.
[4]. The results of this study can be found in Section 4. Finally,
Section 5 presents a short summary and an outlook on future
research opportunities.
2. Basic modeling assumptions and current solution
approaches
2.1. Basic modeling assumptions
Since a remanufacturing system contains a large number of
different planning tasks, we restrict our attention to a simplified
model setting that focuses on analyzing a smaller subset of
problems in greater detail. In general, one possibility to model a
remanufacturing system is to describe its relevant processes and
stocking points. Due to their importance, there are many options
to illustrate the existing interdependencies of the corresponding
inventory levels and processes. After conducting a thorough
literature review, Akçalı and Çetinkaya [2] elaborate 14 different
settings to model these interdependencies that can be found in the
literature. Among these settings, one (named 2SP-c) seems to be of
special interest as it has been applied in a large number of
scientific contributions. In our work, the basic modeling approach
coincides with their 2SP-c setting. Its relevant stocking points and
processes are presented in Fig. 1.
In this simplified model, a remanufacturing firm faces a
constant and continuous demand (denoted by λ) for a single
product. To obtain remanufacturable products, the remanufacturer
takes back products from his customers when they have no further
use for it. We assume that only a fraction (denoted by α) of the
entire customer demand returns to the remanufacturer who keeps
all returns in a corresponding used product inventory (at a given
holding cost hR per item and time unit).
After collecting some returns, the remanufacturer issues a
remanufacturing batch to recover these returns which brings
them to an as-good-as-new condition. In this work, we omit
different quality levels of remanufactured products and refer
interested readers to Mitra [13] for a more detailed analysis on
this subject. Each remanufacturing run necessitates a specific
setup (that incurs a cost of KR), for instance to adjust the required
tools. All successfully remanufactured products are stored in a final
product inventory (at a given holding cost hF per item and time
unit) from which the customers receive their orders.
When interpreting the holding cost hR and hF as cost of capital
tied up in inventory, the latter is always larger since more effort
has been put into a final product than into a remanufactured
one. A detailed discussion on the topic on how to set the holding
cost parameters in a remanufacturing environment can be
found in Teunter et al. [20]. Since α is typically smaller than 1,
 T. Schulz, G. Voigt / Omega 44 (2014) 21–31
remanufacturing returns will not be sufficient to satisfy customer
demand and, thus, the additional option of manufacturing new
products is required.
Likewise, each manufacturing run requires a specific setup
which incurs a corresponding setup cost KM. Newly fabricated
products are delivered to the final product stock, too. Since
remanufacturing a used product is assumed to be less expensive
than manufacturing a new product, the remanufacturer recovers
all product returns, i.e., none are disposed of. Further, we assume
that customers are indifferent between new and remanufactured
items as, e.g., in Schrady [15] and Teunter [19].
The objective of the subsequent analysis is to align the required
decisions for two levels of inventory (used and final product level)
and two processes (remanufacturing and manufacturing). In this
model context, the final product inventory faces a continuous
outflow of λ products per time unit. Since substantial setup costs
prevail for (re)manufacturing and neither lead nor processing
times are explicitly modeled, the inflow to the final product
inventory is discrete. Regarding the second level of inventory
(the used product level), the opposite can be noted, i.e., a
continuous inflow of returns can be observed next to a discrete
outflow.
As all parameters remain constant over an infinite planning
horizon, an EOQ-type model (EOQ ¼Economic Order Quantity) has
to be analyzed. Following the recommendations of the EOQ-model
in the standard single inventory case leads the decision maker to
replenish his stock in a cyclical pattern. This means whenever the
inventory is depleted, an order of fixed size (known as the EOQ) is
issued, a pattern that is repeated over the entire planning horizon.
As mentioned above, the basic idea to solve the more sophisticated
two stage remanufacturing model is similar, viz., the infinite
planning horizon is separated into identical cycles. Yet, such a
cycle can be very complex.
Since we have an infinite planning horizon, we can neglect the
starting stock levels of used product inventory and finished goods
inventory. That is because the starting stock levels will be depleted
at some point in time and afterwards we will see an infinitive
repetition of the cycle. Since there is at least one remanufacturing
batch in each cycle, we can assume without loss of generality that
each cycle starts with a remanufacturing batch.
Altogether, six types of decisions have to be obtained to
describe a cycle unambiguously: the length of a cycle (T) as well
as the number of batches scheduled therein containing the number
of remanufacturing (R) and manufacturing batches (M). Moreover,
further information is required on the sequence of batch schedul-
ing and on the lot sizes/quantities of individual batches (denoted by
QR for remanufacturing and QM for manufacturing batches).
2.2. Model formulation
This subsection presents the model formulation for the rema-
nufacturing system presented in Fig. 1. The notation is summar-
ized in Table 1.
The main objective is to minimize the total cost per time unit
due to the infinite planning horizon. The main cost components
are the setup cost SC and the holding cost HC. By dividing the sum
of the cycle's total setup and holding cost SC and HC by the cycle
length T, we obtain the total cost per time unit TC
SC þHC
TC ¼ : ð1Þ
T not be met with the fixed predetermined number and sequence of
The setup cost SC can be easily assessed for any (R, M)-policy, since
SC is only influenced by the number of remanufacturing and
manufacturing batches R and M and does not depend on the cycle
length T. However, the holding cost terms are much more difficult
to obtain, since the inventories in the used product inventory and
23
Table 1
Notation.
λ demand (constant/continuous)
α return fraction of demand
hR holding costs for used product inventory
hF holding cost for finished product inventory
KR setup cost for a remanufacturing batch
KM setup cost for a manufacturing batch
R number of remanufacturing batches in a cycle
M number of manufacturing batches in a cycle
ðR; MÞeq (R,M)-policy with equally sized (re)manufacturing batches according
to Choi et al. [4]
ðR; MÞflex (R, M)-policy with differently sized remanufacturing batches and
flexible sequence
T cycle length
TC total cost (per time unit)
SC setup cost per cycle
HC holding cost per cycle
HC 1 holding cost for a cycle length of T ¼ 1
s index for subcycle, s ¼ 1; …; R
Q R;s size of the remanufacturing batch in subcycle s
Q M;s size of a manufacturing batch in subcycle s
ΘM;s total number of manufactured units in subcycle s
νM;s number of manufacturing batches in subcycle s
γi auxiliary variable, i ¼ 1; …; R þ M
Fig. 2. Solution of a ð3; 2Þflex -policy structure.
in the finished goods inventory depend on the number, size, and
sequence of the (re)manufacturing batches. We give a graphical
representation how inventories may develop over time in Section 3,
Fig. 2, where we introduce our flexibly structured heuristic. The
main challenge when comparing different policy types is to
compute the holding costs per time unit. In the remaining part of
this section, we show how the holding costs can be efficiently
determined for the (1, M) and (M, 1)-policy structures, and for the
(R, M)-policy structure as proposed by Choi et al. [4] (in the
following denoted by ðR; MÞeq , indicating that this policy assumes
equally sized batches).
Lemma 1. The size of the holding cost HC depends quadratically on
the length of the corresponding cycle for a given sequence of
manufacturing and remanufacturing batches.
If we keep the relative scheduling of remanufacturing and
manufacturing batches in a cycle constant for a changing cycle
length (e.g., remanufacture 40% of the cycle's returns after 20% of
the cycle has passed), then doubling the cycle length results in a
doubling of all relevant batch sizes. Otherwise, the demand could
batches. Since all other parameters are kept constant, the time
intervals for collecting the returns required for remanufacturing
(or satisfying customer demand) are doubled as well. Conse-
quently, the holding cost will be four times its initial value if a
cycle is twice as long as before while the relative scheduling of
24 T. Schulz, G. Voigt / Omega 44 (2014) 21–31

Table 2 Table 3
Setup and holding cost terms for the (R, 1), (1, M), and (R, M) policies. Example parameters.

Policy SC HC 1 λ α KR KM hR hF

    2  
(R, 1) RK R þ K M 1 1 α 1000 50% 200 900 1 2
λ 1þ α 1 αhR þ þ ð1  αÞ2 hF
2 R R
" ! #
(1, M) K R þ MK M 1 ð1 αÞ2
λ αhR þ α þ2
hF
2 M
"  ! #
ðR; MÞeq RK R þ MK M 1 ð1 αÞðR  1Þ 1 α2 ð1  αÞ2 remanufacturing batch is not sufficient to satisfy the subcycle's
λ þ αhR þ þ hF
2 RM R R M demand, a certain amount of components (denoted by ΘM;s ) have
to be manufactured in a number of νM;s equally sized manufactur-
ing batches. Each manufacturing batch in a subcycle should be of
batches persists (i.e., both sides adjacent to the right angle in the equal size since deviating from this would increase the holding
well-known holding cost triangles are doubled resulting in four cost incurred (see Appendix C). The individual lot size of a
times larger inventories). manufacturing batch Q M;s is therefore determined by ΘM;s =νM;s .
Lemma 1 allows establishing a total cost function that is However, it is possible that no new component is fabricated in a
independent of the respective cycle length T for a given sequence subcycle, i.e., ΘM;s ¼ 0. To summarize, each subcycle contains
of batches. By defining HC 1 as the total holding cost for a cycle exactly one remanufacturing batch and zero, one, or more man-
length of one time unit (T ¼ 1), the holding cost HC can be ufacturing batches.
reformulated as HC ¼ HC 1  T 2 . Inserting this general condition As in the other heuristic approaches discussed in the literature
into (1), optimizing it with respect to T and inserting the optimal so far, the number of remanufacturing and manufacturing batches
cycle length T n into TC yield the optimal total cost per time unit R and M has to be fixed in advance to obtain the solution of the
TC n as ðR; MÞflex -policy. The best policy is then chosen by enumerating
over R and M. Thus, after fixing R and M, the following three steps
SC þ HC 1  T 2
TC ¼ ð2Þ have to be taken to compute the total cost per time unit. We
T
illustrate each step for a ð3; 2Þflex -policy with respect to the
sffiffiffiffiffiffiffiffiffi parameters summarized in Table 3. The development of the
SC
Tn ¼ ð3Þ inventory positions for this example is presented in Fig. 2.
HC 1
pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
TC n ¼ 2  SC  HC 1 : ð4Þ 3.1. Step 1: determine the batch sequence
This general dependency can be used to eliminate the cycle
length as a variable from the total cost function.1 Table 2 sum- When both the number of remanufacturing and manufactur-
marizes the relevant setup and holding cost terms for the ing batches in a cycle are larger than one at the same time, a
respective policy type. We refer to Appendix A for a derivation number of different batch sequences can be observed. This
of the cost terms along with numerical examples. In the (M, 1)- problem prevails for the ðR; MÞflex -policy as well. Choi et al. [4]
policy or (1, M)-policy, there is only one variable remaining that have shown that there is only one optimal batch sequence for the
can be easily obtained by differential calculus. For a predetermined case of equal remanufacturing and equal manufacturing batches.
sequence of batches in a (R, M)-policy as the ðR; MÞeq -policy, we can To determine this sequence, Choi et al. introduce the so-called
also establish a total cost function that is independent of the cycle SAIL algorithm. In the following, we apply their SAIL algorithm to
length. This considerably simplifies finding optimal policies by determine the batch sequence for the ðR; MÞflex -policy. In order to
enumerating over only R and M. present our ðR; MÞflex -policy as a whole, we recap the approach.
The SAIL algorithm assumes both equally sized remanufacturing
and manufacturing batches. As the cycle length is set to one time
3. The ðR; MÞflex -policy unit to determine HC 1 (i.e., λα products return to the remanu-
facturer), exactly λα=R items are remanufactured in each batch.
Common to all heuristic policy structures introduced so far is The basic idea of the algorithm is to schedule a remanufacturing
that they fix a number of decisions in advance to facilitate the batch if at least λα=R returns are available in the used product
solution finding process. For instance, the decisions regarding the inventory (denoted by yR ) whenever the final product inventory
batch sequence and lot sizes are always predefined when the is depleted. The result of the algorithm is the sequence of batches
decision maker chooses one of these policies. In the following, we in a cycle that is represented by the set of γ i variables (with
present an alternative approach that determines the optimal cycle i ¼ 1; …; R þ M), where γ i ¼ 1 when a remanufacturing batch is
structure when only the number of (re)manufacturing batches is initiated and γ i ¼ 2 when a manufacturing batch is initiated. To
fixed in advance but the exact structure is flexible. determine all γ i the following pseudocode of the SAIL algorithm
In our flexibly structured heuristic (denoted with the super- can be applied (see [4]):
script flex), the concept of subcycle-oriented optimization is
employed. In this concept, the whole cycle is separated into R start γ 1 ¼ 1, yR ¼ λα2 =R
subcycles (denoted by s ¼ 1; …; R) in which the following pre- for i ¼ 2 to R þ M
sumptions are required to hold. At the beginning of each subcycle, if yR Zλα=R then γ i ¼ 1, yR ¼ yR λα=R þ λα2 =R
the sole remanufacturing batch is initiated. It contains exactly Q R;s else γ i ¼ 2, yR ¼ yR þ λð1  αÞ=M  α
items that are remanufactured at once. If the lot size of the end if
end for
1
We thank an anonymous referee who pointed out that this approach is not
necessarily viable for the optimal (R, M)-policy. Since we do not know the optimal
(R, M)-policy structure, we cannot formally proof that the sequence and relative The first batch of a cycle is fixed to be a remanufacturing batch
scheduling of batches do not change with different cycle lengths. comprising λα=R items. After α=R time units, customer demand
 T. Schulz, G. Voigt / Omega 44 (2014) 21–31 25

cannot be satisfied from this batch anymore and a new batch has subsequent pseudocode describes a procedure to determine all
to be scheduled. While the first remanufacturing batch satisfied νM;s values:
demand, λα products return per time unit which means that the
inventory contains λα2 =R returns at this point in time. This amount start i ¼ 1, s ¼ 0
is not sufficient to schedule a remanufacturing batch as α o1 and, while i r R þM
thus, the second batch in a cycle is always a manufacturing batch if γ i ¼ 1 then s ¼ s þ1, νM;s ¼ 0
containing λð1  αÞ=M items. Thereafter, the algorithm checks if at else νM;s ¼ νM;s þ 1
least λα=R returns are available as soon as the second batch cannot end if
satisfy demand any more. In this case, a remanufacturing batch is i ¼ i þ1
initiated. Otherwise, a manufacturing batch is set up. The algorithm end while
stops after all batches have been scheduled. After determining the
batch sequence, the second step computes the corresponding batch
sizes. The heuristic commences with the first remanufacturing batch
of a cycle and counts the number of adjacent manufacturing
Example. We present in the following the SAIL algorithm intro- batches before the next remanufacturing batch is initiated.
duced by Choi et al. [4] for the numerical example. The develop- After computing all νM;s values, the amount of manufactured
ment of the inventory positions is depicted for this policy products in subcycle s (denoted by ΘM;s ) can be computed by
in Appendix A.3, Fig. A3. The first batch is by definition a (ΘM;s ¼ νM;s  λ  ð1 αÞ=M).
remanufacturing batch comprising (1000 x 5)/3 = 166.67 items, By definition, all returns collected in subcycle s are remanu-
i.e., γ 1 ¼ 1. Since only 166.67  0.5 ¼ 83:33 units return during factured at the beginning of the following subcycle. Two factors
the first remanufacturing phase, and this amount is not sufficient determine the size of each subcycle's remanufacturing batch Q R;s :
to schedule another remanufacturing batch comprising 166:67 the number of used products remanufactured at the beginning of
units, a manufacturing batch has to follow (γ 2 ¼ 2). This manufac- the preceding subcycle s  1 as well as the number of manufac-
turing batch contains (1000 x 5)/2 = 250 units. During this tured items in s  1. In general, Q R;s can be computed by
manufacturing phase 250  0:5 ¼ 125 units are returning to Q R;s ¼ ðQ R;s  1 þΘM;s  1 Þ  α 8 s ¼ 2…R: ð5Þ
the used product inventory. Thus, the inventory position in the
used product inventory amounts to 83:33 þ 125 ¼ 208:33. Since Due to the cyclical structure, the first subcycle is preceded by the last
208:33 Z 166:67, the next remanufacturing batch can be sched- subcycle of the previous identical cycle. Thus, Q R;1 is obtained by
uled (γ 3 ¼ 1). When the remanufacturing batch is initiated, the Q R;1 ¼ ðQ R;R þ ΘM;R Þ  α: ð6Þ
used product inventory drops to 41:67, and 166:67  0:5 ¼ 83:33
units are returning to the used product inventory during the Hence, a system of R linear equations (see Appendix A.4) results that
remanufacturing phase. Thus, after that remanufacturing phase contains altogether R variables Q R;1 to Q R;R . Solving this system of
there are 41:67 þ 83:33 ¼ 125 units in the used product inventory. equations leads to a closed-form expression for each subcycle's
Again, this amount is not sufficient to schedule a remanufacturing remanufacturing batch size as in Appendix A.4. We get
lot (166:67 Z 125), and a manufacturing batch has to follow ∑Ri ¼ 01 ΘM;R  i  αi þ 1
(γ 4 ¼ 2). After the manufacturing phase, there are 125 þ 250  Q R;1 ¼ and
1  αR
0:5 ¼ 250 units in the used product inventory, and another ∑R  1 ΘM;R  i  αi þ s s  1
remanufacturing batch will be scheduled (γ 5 ¼ 1). Q R;s ¼ i ¼ 0 þ ∑ ΘM;i  αs  i 8 s ¼ 2…R: ð7Þ
1  αR i¼1
The used product inventory drops to 250–166.67 ¼83.33, and
another 83:33 units return during this remanufacturing phase. After determining all (re)manufacturing batch sizes of the considered
Finally, there are exactly 166:67 units in the used product cycle, the total holding cost can be determined to compute the
inventory and the next cycle can start with a remanufacturing optimal total cost for the ðR; MÞflex -policy.
batch (γ 1 ¼ 1).
Example. Fig. 2 presents the development of inventory positions
for the ð3; 2Þflex -policy. The heuristic starts with γ 1 ¼ 1, and the first
3.2. Step 2: determine the batch sizes subcycle is initiated. Since γ 2 ¼ 2, a manufacturing batch will be
initiated. From γ 3 ¼ 1 follows that the next subcycle s ¼ 2 starts.
While the previous section recaps the SAIL algorithm as From γ 4 ¼ 2 follows that a manufacturing batch is initiated in the
proposed by Choi et al. [4], we show next how to adapt the second subcycle, i.e., νM;2 ¼ 1. From γ 5 ¼ 1 follows directly that the
approach to unequal remanufacturing batch sizes. We assume for third subcycle s ¼ 3 contains no manufacturing batch. According to
simplifying reasons that all manufacturing lot sizes in a cycle are (7), the remanufacturing lot sizes are Q R;1 ¼ 107:14, Q R;2 ¼ 214:29,
identical.2 As λð1  αÞ products need to be manufactured in a and Q R;3 ¼ 178:57.
cycle with T ¼ 1, each manufacturing batch contains, therefore,
λð1 αÞ=M items. In order to compute the size of all remanufactur- 3.3. Step 3: compute HC 1 and the total cost per time unit TC RMflex
ing batches, the sequence of scheduling plays an important role. In
our approach, each subcycle s begins with a remanufacturing The holding cost for a cycle length of one time unit HC 1 can be
batch that is followed by νM;s identical manufacturing batches. computed by multiplying the region bounded by the inventory
Each cycle contains, thus, exactly R subcycles (i.e., s ¼ 1; …; R) levels with the corresponding inventory holding cost. Using (7) to
while νM;s can take on any non-negative integer value. The determine the remanufacturing lot sizes Q R;s as well as the number
of new products manufactured in each subcycle ΘM;s , we can insert
2 these values into the following equation (see [16], p. 21):
This approach is not necessarily optimal but facilitates the solution finding
" #
process for determining the remanufacturing batches thereafter substantially. Note
1 R ðQ R;s Þ2 ðQ Þ2 ðΘM;s Þ2
that we can prove that all manufacturing lot sizes within a subcycle must be HC 1 ¼ ∑  hR þ R;s  hF þ  hF : ð8Þ
identical, see Appendix C. That said, since the total amount of manufactured goods 2s¼1 λα λ λ  νM;s
within a subcycle may vary, the performance may be improved by considering
different manufacturing lot sizes in different subcycles. However, the merits of such The computed holding cost can be inserted afterwards into (4) to
an approach are left for future research. determine the optimal total cost TC RMflex for the ðR; MÞflex policy
26 T. Schulz, G. Voigt / Omega 44 (2014) 21–31

when both R and M are given. In the following, we present an
extensive numerical study in order to gain deeper insights in which
situations the flexibly structured heuristic outperforms preexisting
approaches. Note, we are benchmarking our results in the following
against the ðR; MÞeq -policy introduced by Choi et al. [4] which, in
turn, nests the ð1; RÞ-policy and the ðM; 1Þ-policy.
Example. As in the previous approaches, the holding cost HC 1 can
be calculated by summing up the triangles in Fig. 2. Applying (8)
gives HC 1 ¼ 303:36.
percentage improvement Δ is computed for each instance by
TC nRM  TC nRMflex
Δ¼ ð9Þ
TC nRMflex
The results of the full factorial study are presented in Table 5. For
each factor, two results are presented therein: the mean percen-
tage improvement over all instances Δ and the percentage of
instances (denoted by P) that yield a lower total cost when
initiating the ðR; MÞflex -policy instead of a policy structure with
equal remanufacturing batches.

4.2. Interpretation of results

4. Numerical study
In order to test the importance of scheduling differently sized
remanufacturing batches, the experimental design of Choi et al. [4]
full factorial study is employed. Since their experimental design
has already been applied for testing the improvements of
the (R, M)-policy w.r.t. the (M, 1) and (1, M) policies, we presume
it to be an appropriate test environment to evaluate the
ðR; MÞflex -policy. Yet, in contrast to their design, their parameter p
(production rate of the recovery process) is not included in our
experimental design (as we presume an infinite rate of recovery).
Moreover, the sensitivity analysis of Schulz [16] has shown
that the solution quality does not depend on the demand rate λ
which can, therefore, be omitted as well. Table 4 lists all relevant
parameters including their lower and upper bounds as well as the
difference between two consecutive parameter values.
4.1. Results
Altogether, 81,000 problem instances have been tested. For
each instance in this study, the cost minimizing total cost values
(denoted by TC n including the policy specific subindices) have
been determined. In order to evaluate the improvement of
scheduling differently sized remanufacturing batches in a cycle,
the set of policies suggesting equally sized batches is compared to
the ðR; MÞflex -policy. The best ðR; MÞflex -policy has been computed
for each instance by enumerating over R; M A fxj1 rx r30 4 x A Ng
in order to limit computational effort. As evaluation criterion, the
Table 4
Parameters of the experimental design.
Parameters α (%) hR hF KR
Lower bound 10 0:1hF 10 100
Upper bound 90 0:9hF 100 1000
Amount of increment 10 0:1hF 10 100
When analyzing these results, several interesting conclusions
can be drawn. We observe performance improvements in 44,067
of all tested instances (around 54.4%) with a mean average of
around 3.8% when including the ðR; MÞflex -policy into the set of
possible solution approaches. Yet, the mean improvement over all
instances is a little smaller amounting to around 2.1%.
Scheduling differently sized remanufacturing batches can also
be worse than scheduling equal remanufacturing batches. In 1410
of all tested instances (1.74%), the best ðR; MÞflex -policy determines
a higher total cost compared to the policies with equally sized
batches. However, as can be seen in Table 5, these negative
deviations average out, i.e., the Δ is never negative. The counter-
intuitive result that a higher flexibility in scheduling remanufac-
turing batches may result in an inferior performance can be
explained as follows. When employing our ðR; MÞflex -policy, we
obtain higher average final product inventories, because the used
product inventory is emptied in every subcycle. This shift of
inventories may lead to an inferior performance, because the
ðR; MÞflex -policy does not rely on holding cost data.
We observe that the return rate α mainly impacts the range of
performance improvements/losses. For α ¼ 0:1, we observe that
the range lies between 0% and 0.16% and for α ¼ 0:9, we observe a
range of  3.59% to 17.55%. Thus, for large return rates, the
importance of the decisions for the used product level becomes
more important. In these instances, we have high potential gains/
losses from applying our ðR; MÞflex -policy. However, for small
return rates, inventories in the used product inventory build-up
slowly and the used product inventory has only a minor impact on
the overall performance. In these cases, we observe only minor
potential benefits/losses when applying the ðR; MÞflex -policy.
The same effect can be observed for the setup cost for (re)
manufacturing batches. For K R =K M ¼ 10 (i.e., manufacturing setup
KM cost is relatively much higher than the remanufacturing setup cost)
we observe performance improvements ranging from 0–2.14%. In
100
1000 turn, for K R =K M ¼ 0:1 we observe a wider span ranging from  4.11%
100 to 17.55%. The reason is that a smaller setup cost for remanufactur-
ing results in the tendency to set up more remanufacturing batches

Table 5
Results of the numerical study.

α (%) 10 20 30 40 50 60 70 80 90
Δ (%) 0 0 0.1 0.4 1.1 2.4 3.8 5.0 5.7
P (%) 7.8 14.9 25.2 33.6 50.1 74.4 88.4 97.0 98.2

hR =hF 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Δ (%) 0.2 0.7 1.3 1.8 2.2 2.6 2.9 3.2 3.5
P (%) 40.4 54.9 56.9 55.9 56.6 56.0 55.8 56.3 56.9

KR 100 200 300 400 500 600 700 800 900 1000
Δ (%) 3.6 3.0 2.5 2.2 1.9 1.7 1.6 1.4 1.3 1.2
P (%) 65.2 60.4 59.3 55.7 53.5 53.2 50.6 49.6 49.4 47.3

KM 100 200 300 400 500 600 700 800 900 1000
Δ (%) 0.7 1.2 1.6 1.9 2.1 2.3 2.5 2.6 2.8 2.9
P (%) 39.1 47.2 50.9 53.7 55.6 57.5 58.8 59.8 60.7 60.9
 T. Schulz, G. Voigt / Omega 44 (2014) 21–31 27

Fig. 3. Comparison of the best ðR; MÞeq and ðR; MÞflex policies for hR =hF ¼ 0:9. (a) ð16; 1Þflex -policy, (b) ð13; 1Þeq -policy.

Fig. 4. Comparison of the best ðR; MÞeq and ðR; MÞflex policies for hR =hF ¼ 0:1. (a) ð15; 1Þflex -policy, (b) ð22; 1Þeq -policy.

which leads to an increase in the importance of remanufacturing holding cost) but lower average inventories in the finished product
decisions. On the contrary, a larger setup cost for manufacturing inventory (with relatively high holding cost). Fig. 4 presents the
puts the focus more on manufacturing new products and, thus, on best ðR; MÞeq -policy and the best ðR; MÞflex -policy.
the final product level. Therefore, the ðR; MÞflex -policy has less
potential in these settings. In Table 5 we see, however, that in those
4.3. Do further lot size adjustments of remanufacturing batches
cases with high potential benefits/losses, the ðR; MÞflex -policy out-
increase performance?
performs the ðR; MÞeq . As an example, the mean improvement for
K R ¼ 100 is 3.6% and the mean improvement for K M ¼ 1000 is 2.9%.
One might argue that the performance of the heuristic can be
The above analysis indicates that the instances with relatively
further improved by combining the ideas of equally sized and
high importance of remanufacturing decisions (i.e., high α and low
flexibly sized remanufacturing batches.3 We assessed the merits of
K R =K M -ratio) are those instances with the highest potential gains/
pursuing such an approach exemplarily with a (3, 2)-policy
losses of our ðR; MÞflex -policy. These effects amplify for a high
parameterized as mentioned in Appendix A. In this example, the
hR =hF -ratio, i.e., when the holding cost of the used product
ðR; MÞeq -policy gives holding cost per period of 333.33 (see
inventory is relatively high. The importance of this ratio can be
Appendix A.3), and our ðR; MÞflex -policy 303.6 (see Section 3).
explained by its influence on both inventory levels. For relatively
Given the ðR; MÞflex -policy as a starting point, we evaluated via
large used product inventory holding cost, the decisions regarding
enumeration a large set of policies in which Q R;1 ¼ Q R;3 ¼
the used product level have a larger impact on the overall total
fxj125 r x r 225 4 x A Ng holds. Interestingly, none of those poli-
cost. Hence, an efficient solution for this inventory level is sought
cies outperformed our ðR; MÞflex -policy. Schulz [16] provides
which can be achieved when all returns on hand are remanufac-
further indications that a mix of equally sized and flexibly sized
tured in a batch and none are kept in stock for a later batch. Since
remanufacturing batches is unlikely to further improve the sys-
neither the (M, 1) nor the ðR; MÞeq -policy can provide such a
tem's performance. He also presents non-linear mixed-integer
solution, the ðR; MÞflex -policy performs better for relatively large
program to the lot sizing problem discussed in this paper, which
hR values. Not surprisingly, we can find our largest improvements
was solved for several instances with the GAMS SBB solver (see
in instances with a high hR =hF ratio. As an example, our largest
[1]). The data indicates that all solutions presented by the GAMS
percentage improvement of 17.55% can be found in instances with
SBB solver have either a ðR; MÞeq -structure or a ðR; MÞflex -structure.
α ¼ 90%, hR =hF ¼ 0:9, K R ¼ 100, and K M ¼ 1000. Fig. 3 compares
However, since no NLP solver can guarantee optimality, this is not
both policy structures for these parameters. We present a detailed
a formal proof that one of both presented policies has to be
analysis of this example in B.1. It can be seen that the ðR; MÞflex
optimal. It seems though an interesting avenue for future research
leads to lower inventory levels in the used product inventory,
if such a conjecture can be formally proven.
because the used product inventory is depleted in every subcycle.
Because of the relatively large holding cost rate for the used
product inventory, we see a superior performance of the
5. Conclusion and outlook
ðR; MÞflex -policy.
In contrast, holding all other parameters constant and setting
Efficient planning of remanufacturing is critical in closed-loop
hR =hF ¼ 0:1 we observe a poor performance with performance
supply chains facing substantial setup costs for (re)manufacturing.
losses of  3.59% (see Appendix B.2. In these settings, it is more
beneficial to apply a ðR; MÞeq -policy that leads to higher average
inventories in the used product inventory (with relatively low 3
We thank an anonymous referee for pointing this out.
28 T. Schulz, G. Voigt / Omega 44 (2014) 21–31
The present work, therefore, aims at improving the cost efficiency
of preexisting heuristics. We review the existing approaches and
find that all heuristics are somewhat limited in either the
flexibility regarding the batch sizes as well as the cycle structure.
The only exception is reported by Feng and Viswanathan [5] who
are assuming a sub-cycle structure in which the sequences as well
as sizes of batches might vary between two subcycles. While Feng
and Viswanathan [5] report that “the reduction obtained in the
cost is quite marginal”, we find that substantial cost improvements
can be achieved by not limiting the number of subcycle classes.
Our flexibly structured ðR; MÞflex -policy (see Section 3) builds
upon the SAIL algorithm as proposed by Choi et al. [4] that
provides the optimal batch sequence for the case of equal
remanufacturing and equal manufacturing batches. We extend
the approach by dividing the sequence of manufacturing and
remanufacturing batches into subcycles, and propose a heuristic
to define the size of the remanufacturing batch within the
subcycle. We performed an extensive numerical study based on
Choi et al. [4] factorial design and find that 54.4% of all instances
can be improved by applying the ðR; MÞflex approach with a mean
improvement of around 2% and a maximum improvement of
17.55%. A detailed analysis reveals that our approach performs
particularly well in situations when the holding cost rates for
returned items are high. We conclude that our approach can
substantially improve performance in those industrial settings.
This contribution provides an interesting approach for extend-
ing the considered problem setting in future contributions.
As there are a number of possible extensions (like finite produc-
tion and recovery rates, a disposal option, etc.), the improvements
for introducing differently sized remanufacturing batches in these
settings can be analyzed as well. Another interesting task to follow
in future would be to analyze optimization approaches as pre-
sented in Schulz [16] in order to determine the optimal solution
and policy structures. However, due to limited computational
power this is hardly possible nowadays. Finally, to model a more
realistic remanufacturing system, a multitude of different subpro-
cesses (disassembly, rework, manufacturing, reassembly) should
be considered as well as a large number of components that need
to be (re)manufactured.
Acknowledgments
We are grateful to two anonymous referees and our colleague
Ian M. Langella for the constructive comments that they provided
on previous versions of this manuscript.
Appendix A. Model formulation: details
In the following we will derive the cost terms for the respective
policy types. We will present for each policy type an example that
is based on the parameters summarized in Table 3.
A.1. (R,1)-policy
We define HC ¼ hR  Y R þ hF  Y F as the total inventory holding
cost in a cycle, where Y R (Y F ) denotes the cumulated amount of
inventories of used product (final product) inventory in a cycle and
hR (hF ) the holding cost parameters.
The average inventory in the used product inventory, Y R , results
from yR;max =2 (see [19], p. 488), where yR;max denotes the max-
imum amount of remanufactured goods in the used product
inventory. The maximum inventory level is reached when the
single manufacturing batch of the cycle (that follows necessarily
after the first remanufacturing batch) is depleted. The time for
depletion is ðα  T=RÞ þ ð1  αÞ  T. Multiplied with the return frac-
tion per cycle, α  λ  T, we get Y R ¼ yR;max =2 ¼ ðλ  α  T 2 =2Þ
ððα=RÞ þð1 αÞÞ ¼ ðλ  α  T 2 =2Þð1 þ α  ðð1=RÞ 1ÞÞ.
Y F results from the average cumulated amount of inventory in
each cycle resulting from manufactured (remanufactured) goods
denoted as Y F;M (Y F;R ).
We know that we need to manufacture λ  ð1  αÞ  T units in
each cycle. During the manufacturing phase, we have on an
average ðλ  ð1  αÞ  TÞ=2 units of finished product inventory. Multi-
plied with the depletion time, ð1  αÞ  T, we get Y F;M ¼ λ
ð1  αÞ2  T 2 .
We also know that a total of λ  α  T units need to be remanu-
factured in each cycle. Thus, ðλ  α  TÞ=R units need to be remanu-
factured in each batch and the average inventory during a
remanufacturing phase is ðλ  α  TÞ=2  R. Multiplying with the time
in which the remanufacturing batch is depleted, ðα  TÞ=R, and
multiplying with the number of remanufacturing batches, R,
gives Y F;R ¼ R  λ  α2  T 2 =ð2  R2 ). It follows that Y F ¼ Y F;R þ Y F;M ¼
ðλ  T 2 =2Þðð1  αÞ2 þ α2 =RÞ.
The total inventory holding cost result from multiplying the
cumulated inventory positions, Y F and Y R , with the respective
holding cost, hF and hR , and summing them up, i.e., HC ¼ 12λ  T 2 
½ð1 þ αðð1=RÞ  1ÞÞαhR þ ððα2 =RÞ þð1  αÞ2 ÞhF . HC 1 results directly
from HC with T ¼ 1.
Example. We present the development of inventories for a (3,1)-
policy with T ¼ 1 (Fig. A1).
Used product inventory: The used product inventory reaches the
maximum after 0:5 3 þð1 0:5Þ ¼ 3 time units. The return rate per
2
unit time is α  λ ¼ 500, and the used product inventory after 23 time
units is therefore Y R;Max ¼ 23  500 ¼ 333:33. The average used pro-
duct inventory is Y R;Max =2 ¼ 166:66.
Finished product inventory: We need to manufacture 1000 
ð1  0:5Þ ¼ 500 units in each cycle, i.e., the average inventory in
the manufacturing phase is 250. These manufactured items are
depleted over ð1  0:5Þ ¼ 0:5 time units. Thus, the average cumu-
lated amount of finished product inventory during the manufac-
turing phase is Y F;M ¼ 500 2  ð1 0:5Þ ¼ 125 units. We need to
remanufacture 1000  0:5 ¼ 500 units in three batches. Thus, the
average inventory during a remanufacturing phase is 500 23 ¼ 83:33.
One remanufacturing batch is depleted over 0:5 3 ¼ 0:166 time units.
It follows that the three remanufacturing batches are depleted
over 3  0:166 ¼ 0:5 time units. Thus, the amount of finished
product inventory cumulating in the remanufacturing phases is
Y F;R ¼ 3  10000:5
2
¼ 41:66. Thus, the sum of average inventories
232
during the manufacturing phase and during the (re)manufacturing
phases amounts to 125 þ 41:66 ¼ 166:66.
The total holding costs per unit time are HC 1 ¼ hR  166:66 þ hF 
166:66 ¼ 500:
Fig. A1. Development of inventory positions for a (3,1)-policy.
 T. Schulz, G. Voigt / Omega 44 (2014) 21–31 29

A.2. (1,M)-policy

Since we only remanufacture once in a cycle, it follows directly

that yR;max ¼ Q R ¼ λ  α  T. For a cycle length of T we get Y R ¼
Y R;Max =2 ¼ 12λ  α  T 2 .
Since all returned items are remanufactured in one batch, the
cumulated final product inventory in each cycle resulting from
remanufactured items is Y F;R ¼ 12  λ  α2  T 2 , i.e., the maximum
amount of λ  α  T multiplied with the depletion time α  T. We know
that we have to manufacture λ  ð1 αÞ  T units in each cycle. Multi-
plying the amount of manufactured units with the average depletion
time of the batch, ð1 2M  αÞT
, gives Y F;M ¼ ðλ  ð1  αÞ2  T 2 Þ= ð2  MÞ.
Fig. A2. Development of inventory positions for a (1,3)-policy.
All returned items in a cycle are remanufactured in one batch.
Thus there are on an average Q R =2 ¼ 12  α  λ  T items for α  T time
units in the finished goods inventory. The cumulated average the used product inventory, since remanufacturing batches and
amount of finished goods inventory during the remanufacturing manufacturing batches cannot be balanced perfectly.
phase is Y F;R ¼ 12  α2  λ  T 2 . We also know that we have to In this case, we will have subcycles with ⌊M R ⌋ and ⌈ R ⌉ manu-
M

manufacture λ  ð1  αÞ  T units in each cycle. In the average facturing batches. In subcycles with ⌈M R ⌉ the used product inven-
amount of inventory in a manufacturing phase is therefore tory will increase relatively to subcycles with ⌊M R ⌋ manufacturing
ðλ  ð1  αÞ  TÞ=2  M. The depletion time for one manufacturing batches.
batch is ðð1  αÞ  TÞ=M. Multiplying the average amount of used When applying the SAIL algorithm, we observe that the last
product inventory during a manufacturing phase with the deple- subcycle is a cycle with ⌊M R ⌋ manufacturing batches. Thus, in order
tion time for one batch and multiplying with the total number of to ensure that (A.1) holds for the last subcycle, we need to have an
manufacturing batches gives Y F;M ¼ ðλ  ð1  αÞ2  T 2 Þ=ð2  M). used product inventory at the start of the last subcycle of
The cumulated inventory holding cost in each cycle result from ðM=R ⌊M R ⌋Þ  Q M  α.
multiplying the cumulated inventory positions (Y R ; Y F ) with the We know that there are M  ⌊M R ⌋  R subcycles in which the
respective holding cost (hR ; hF ) and summing them up, i.e., inventory position increases compared to R  ðM  ⌊M R ⌋  RÞ sub-
HC ¼ 12  λ  T 2 ½αhR þ ðα2 þð1 αÞ2 =MÞhF . HC 1 results directly from cycles in which the used product inventory declines. Thus,
HC with T ¼ 1 regardless of the actual scheduling of phases with increasing/
decreasing stock levels, we know that the average inventory build-
Example. We present the development of inventories for a (1,3)- up (denoted as d) in each subcycle must fulfill the condition that at
policy with T ¼ 1 (Fig. A2). the beginning of the last subcycle ðM=R  ⌊M R ⌋Þ  Q M  α units are
Used product inventory: The average amount of used product available.
inventory is Y R ¼ Y R;Max =2 ¼ 12  1000  0:5 ¼ 250. Thus, the following condition must hold:
Finished product inventory: We need to manufacture 1000     
M M M
ð1  0:5Þ ¼ 500 units in each cycle, i.e., the average inventory in M ⌊ ⌋  R  d ¼ ⌊ ⌋  QM  α ðA:2Þ
R R R
each manufacturing phase is 250 3 ¼ 83:33. The depletion time for
one manufacturing batch is ð1 30:5Þ ¼ 0:166. Thus, the cumulated Rearranging the right hand side of (A.2) gives
average amount during all three manufacturing phases is    
M 1 M
Y F;M ¼ 83:33  0:166  3 ¼ 41:66. The average amount of finished M ⌊ ⌋  R  d ¼ M⌊ ⌋  R  QM  α ðA:3Þ
R R R
product inventory in the single remanufacturing phase is
Q R =2 ¼ 12  0:5  1000 ¼ 250. Given a depletion time of α ¼ 0:5, it and it follows directly from (A.3) that
follows Y F;R ¼ 125. Thus, the sum of average inventories during the 1
manufacturing phase and during the (re)manufacturing phases d¼  Q M  α: ðA:4Þ
R
amounts to 125 þ41:66 ¼ 166:66.
The total holding costs per unit time are HC 1 ¼ hR  250 þ The average inventory build-up occurs in (R–k) subcycles,
hF  166:66 ¼ 583:32. where k denotes the number of subcycles in which the used
product inventory is zero (including the last subcycle). In these
A.3. ðR; MÞeq -policy subcycles, there is neither an increase nor a decrease of the
average inventory position relatively to (A.1). Then, the average
At the end of the cycle we have by definition Q R units in the inventory build-up d takes place over ðR kÞ subcycles and we
used product inventory. Moreover, the ratio of products to be have a maximum amount of used product inventory of Q R þ
remanufactured within a cycle to products manufactured within ð1=RÞ  Q M  α  ðR  kÞ. Multiplying the average inventory in the
the cycle must be equal to the ratio of the return rate to the rate of used product inventory with the cycle length T gives TðQ R þ
products not being returned. Thus, within a cycle the condition ð1=RÞ  Q M  α  ðR  kÞÞ. Inserting Q R ¼ ðα  λ  TÞ=R and Q M ¼ ðð1  αÞ 
M  Q M =R  Q R ¼ ð1 αÞ=α must hold. Rearranging the latter term λ  TÞ=M gives Y R;Max ¼ λ  α  T 2  ððð1  αÞðR  kÞ=ðR  MÞÞ þ 1=RÞ and it
gives follows directly that Y R ¼ Y R;Max =2.
Finally, that for any ðR′; M′Þ-policies with k 41, we can deduct a
M structurally identical ðR; MÞ-policy with k ¼ 1 by dividing R′ and M′
 Q M  α ¼ Q R  ð1  αÞ: ðA:1Þ
R by the least common denominator. This structurally identical
For the ðR; MÞeq it is clear that the maximum amount of stock is Q R policy yields identical per period holding costs. We therefore omit
when M=R ¼ z with z A N þ , because then there is an equal number these structurally identically policies with k 4 1 in our further
of manufacturing batches within a remanufacturing cycle, i.e., analysis and consider only policies with k ¼ 1.
M=R-manufacturing batches fill exactly the amount that was not The stock in the finished goods inventory can be derived
returned during the remanufacturing phase of a subcycle. How- according to the method presented for the (1, M)-policy. HC 1
ever, once M=R a z with z A N þ , we will observe stockkeeping in results directly from HC with T ¼ 1.
30 T. Schulz, G. Voigt / Omega 44 (2014) 21–31

Example. We present the development of inventories for a the first subcycle that only depends on α and the Θ values. We find
ð3; 2Þeq -policy with T ¼ 1.
R1
Used product inventory: We have 2  ⌊23⌋  R ¼ 2 subcycles in Q R;1 ¼ Q R;1  αR þ ∑ ΘM;R  i  αi þ 1
i¼0
which inventories are build up. At the beginning of the last
subcycle, there are 23  250  0:5 ¼ 83:33 units in the used product ∑R  1 ΘM;R  i  αi þ 1
Q R;1 ¼ i ¼ 0 ðA:10Þ
inventory. In order to reach this inventory level, there is an average 1 αR
build-up of d ¼ 13  250  0:5 ¼ 41:66 per subcycle, accumulating
over R  k ¼ R  1 subcycles. Thus, the maximum used product After formulating the size of the first remanufacturing batch Q R;1 ,
inventory is Q R þð3  1Þ  41:66 ¼ 166:66þ 83:33 ¼ 250. The average we can use (A.6) to calculate Q R;2 . Thereafter, a more general
condition for Q R;s (for 2 o s rR) can be derived.
used product inventory is 250 2 ¼ 125.
Finished product inventory: We need to manufacture 1000  !
∑Ri ¼ 01 ΘM;R  i  αi þ 1
ð1  0:5Þ ¼ 500 units in each cycle, i.e., the average inventory in Q R;2 ¼ þ Θ M;1 α
1  αR
each manufacturing phase is 500 22 ¼ 125. The depletion time for one
manufacturing batch is ð1 20:5Þ ¼ 0:25. Thus, the cumulated average
∑Ri ¼ 01 ΘM;R  i  αi þ s s  1
amount during the two manufacturing phases is Y F;M ¼ 125 ⋯Q R;s ¼ þ ∑ ΘM;i  αs  i 8 s ¼ 3; ‥; R
1  αR i¼1
0:25  2 ¼ 62:5. We need to remanufacture 1000  0:5 ¼ 500 units
in three batches. Thus, the average inventory during a remanu-
facturing phase is 500 23 ¼ 83:33. One remanufacturing batch is
depleted over 0:5 3 ¼ 0:166 time units. It follows that the three Appendix B. Numerical examples: sensitivity analysis
remanufacturing batches are depleted over 3  0:166 ¼ 0:5 time
units. Thus, the amount of finished product inventory accumulat-
2 In this section we provide two examples based on the para-
ing in the remanufacturing phases is Y F;R ¼ 3 10000:5 ¼ 41:66. The
232 meters listed in Table B1. We vary the hR =hF -ratio in order to
average finished product inventory is Y F ¼ 62:5 þ 41:66 ¼ 104:16.
highlight instances in which the ðR; MÞflex -policy outperforms the
The total holding costs per unit time are HC 1 ¼ hR  125 þ
ðR; MÞeq -policy and vice versa. As no closed-form expression exists
hF  104:16 ¼ 333:33.
to evaluate Rn and M n for the ðR; MÞflex -policy, the best values for R
and M have been determined by enumeration (R as well as M can
take on any integer value between 1 and 30).
A.4. ðR; MÞflex -policy

The holding cost term for the ðR; MÞflex policy is derived in
detail in Section 3. For each subcycle s, the size of each remanu-
facturing batch Q R;s can be formulated according to (5) and (6).
Q R;1 ¼ ðQ R;R þ ΘM;R Þ  α
Q R;2 ¼ ðQ R;1 þ ΘM;1 Þ  α
⋯Q R;R  1 ¼ ðQ R;R  2 þ ΘM;R  2 Þ  α
Q R;R ¼ ðQ R;R  1 þ ΘM;R  1 Þ  α:
By inserting (A.8) into (A.5) the following expression can be
derived:
Q R;1 ¼ ððQ R;R  1 þ ΘM;R  1 Þ  α þ ΘM;R Þ  α
¼ Q R;R  1  α2 þΘM;R  1  α2 þ ΘM;R  α
B.1. High hR/hF-ratio.
In this example we set hR ¼ 63 and hF ¼ 70, i.e., hR =hF ¼ 0:9. The
ðR; MÞflex -policy with the lowest total cost has been a ð16; 1Þflex -pol-
ðA:5Þ icy. The best ðR; MÞeq -policy is a ð13; 1Þeq -policy. We present the
total unit costs and cycle lengthes for both policies in Table B2.
Note, the lowest achievable cost with a classical (R, M)-policy in
ðA:6Þ
which M manufacturing setups are followed by R remanufacturing
setups would at best yield total cost of 8211.08 per unit time (see
ðA:7Þ calculations in [6] with infinite production and manufacturing
rates). One can see that scheduling differently sized remanufactur-
ing batches in a cycle by using the (16,1)flex -policy is able to reduce
ðA:8Þ the total cost incurred by around 17.55% when compared to the
best ðR; MÞeq -policy. Fig. 3 in Section 4.2 compares both policy
structures. It can be seen that the ðR; MÞflex leads to lower inventory
levels in the used product inventory, because the used product
inventory is depleted in every subcycle. Because of the relatively
large holding cost rate for the used product inventory, we see a
ðA:9Þ superior performance of the ðR; MÞflex -policy.

Proceeding in the same manner, i.e., inserting (A.7) to (A.6) into

(A.9), yields an expression for the remanufacturing batch size of Table B1
Numerical example.

λ α KR KM

1000 90% 100 1000

Table B2
Performance comparison with hR =hF ¼ 0:9.

Best ðR; MÞflex policy: Best (R, M)-policy:

ð16; 1Þflex policy ð13; 1Þeq policy

TC 6985.26 8211.08
T 0.74 0.56
eq
Fig. A3. Development of inventory positions for a ð3; 2Þ policy.
 T. Schulz, G. Voigt / Omega 44 (2014) 21–31 31

Table B3 Solving (C.5) for ΘM;s and inserting into (C.3) gives Q M;s;1 ¼
Performance comparison with hR =hF ¼ 0:1. Q M;s;i 8 i ¼ 2; …; n. Thus, it is optimal to schedule equally sized
manufacturing batches in a subcycle. &
Best ðR; MÞflex policy: Best (R, M)-policy:
ð15; 1Þflex policy ð22; 1Þeq policy

TC 5354.99 5162.94
T 0.93 1.24
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