Inventory decision in a closed-loop supply chain with

inspection, sorting, and waste disposal

A R Dwicahyani1, W A Jauhari1, and N A Kurdi2

1
Department of Industrial Engineering, Faculty of Engineering
2
Department of Mathematics, Faculty of Mathematics and Science
Sebelas Maret University, Surakarta, Indonesia

E-mail: anindyard94@gmail.com

Abstract. The study of returned item inventory management in a closed-loop supply chain
system has become an important issue in recent years. So far, investigations about inventory
decision making in a closed-loop supply chain system have been confined to traditional
forward and reverse oriented material flow supply chain. In this study, we propose an
integrated inventory model consisting a supplier, a manufacturer, and a retailer where the
manufacturer inspects all of the returned items collected from the customers and classifies
them as recoverable or waste. Returned items that recovered through the remanufacturing
process and the newly manufactured products, are then used to meet the demand of the retailer.
However, some recovered items which aren’t comparable to the ones in quality, classified as
refurbished items, are sold to a secondary market at a reduced price. This study also suggests
that the flow of returned items is controlled by a decision variable, namely an acceptance
quality level of recoverable item in the system. We apply multiple remanufacturing cycle and
multiple production cycle policy to the proposed model and give the corresponding iterative
procedure to determine the optimal solutions. Further, numerical examples are presented for
illustrative purpose.