Computers & Industrial Engineering 75 (2014) 87–95

Contents lists available at ScienceDirect

Computers & Industrial Engineering

journal homepage: www.elsevier.com/locate/caie

Process planning for closed-loop aerospace manufacturing supply chain

and environmental impact reduction q
Vesra Hashemi a,⇑, Mingyuan Chen a,1, Liping Fang b,2
a
Concordia University, Montreal, Quebec, Canada
b
Ryerson University, Toronto, ON, Canada

a r t i c l e i n f o a b s t r a c t

Article history: A considerable amount of work has recently been applied to the development of processes to reduce neg-
Received 15 September 2013 ative environmental impacts of disposal products. Different waste reduction options such as direct reuse,
Received in revised form 5 June 2014 repair, refurbishing, cannibalization, and remanufacturing were introduced to overcome these shortages.
Accepted 7 June 2014
This paper studies an integrated system of manufacturing and remanufacturing using a capacitated
Available online 27 June 2014
facility in the aerospace industry, where products are returned after certain flight hours or cycles for
overhaul. A mixed integer linear programming model is developed to maximize profit considering man-
Keywords:
ufacturing, remanufacturing set-up, refurbishing, and inventory carrying costs. The model was tested
Remanufacturing
Closed-loop supply chain
through a set of experimental data. Further sensitivity analysis was conducted aiming at revealing the
Aerospace overhaul effects of certain factors on inventory carrying cost, profit, amount of scrap, and inventory turnover ratio.
Component transforming Ó 2014 Elsevier Ltd. All rights reserved.

1. Introduction
In recent years, increasing environmental concerns, the price of
raw materials, and government legislations, aiming at conservation
of energy and natural resources, landfill reduction, pollution reduc-
tion, and creating new jobs and skills (Gray & Charter, 2006;
Mcconocha & Speh, 1991), have resulted in companies to reduce
their material wastes. The earlier approach, which was introduced
in the 1970’s, was the recovery/recycling of materials such as
waste paper, glass and metals. Wastewater treatment and
waste-to-energy (WTE) are reestablishing themselves as attractive
technology options to promote low carbon growth among other
renewable energy technologies (Amoo & Fagbenle, 2013; Kusiak
& Wei, 2011). However, recycled products lose their added values;
most of the time closed-loop recycling is not possible because of
the purity of the recovered materials. Also, many energy taking
activities would be required to transform a recycled product into
raw materials. To overcome these deficiencies, different waste
reduction options such as direct reuse, repair, refurbishing, canni-
balization, and remanufacturing were studied (Thierry, Salomon,
q
This manuscript was processed by Area Editor Qiuhong Zhao.
⇑ Corresponding author. Address: 411-485 Rosewell Ave, Toronto, ON M4R 2J2,
Canada. Tel.: +1 6479650406.
E-mail addresses: vehash@yahoo.com (V. Hashemi), mychen@encs.concordia.ca
(M. Chen), lfang@ryerson.ca (L. Fang).
1
Address: 1455 de Maisonneuve Blvd. West, Montreal, Quebec H3G 1M8, Canada.
2
Address: 350 Victoria Street, Toronto, ON M5B 2K3, Canada.
Van Nunen, & Van Wassenhove, 1995). Remanufacturing is ‘‘a pro-
cess of recapturing the value added to the material when a product
was first manufactured’’ (Gray & Charter, 2006). In order to have a
successful remanufacture, the following parameters are required:
market demand for remanufactured products, technology to
remanufacture, stable product technology, standard interchange-
able parts, and a lower remanufacture cost than the price of a
new product (Lund, 1998). Dowlatshahi (2005) identifies strategic
factors in the remanufacturing system and Guide (2000) lists the
characteristics that make remanufacturing complex. Ijomah
(2009) introduces a paradigm shift from product sales to service
business model where a company’s needs are much more closely
tied to customers’ needs. The new model looks at the following
factors differently: product price, quantity of spares, reliability,
customer expectation, source of profit, and incentive to overhaul.
It also lists the difference between the new and old business model
for aircraft engine life cycle costs.
Companies create different strategies to encourage customers
to buy remanufactured products. For example, up to 40% of part
price is reimbursed by Caterpillar to the dealers that return parts
and engines depending on their conditions (http://www.product-
life.org/en/archive/case-studies/caterpillar-remanufactured-prod-
ucts-group). In aerospace industry, where safety and performance
are the main concern and repairs are highly regulated, the general
opinion is that remanufacturing has the least appeal. However,
considering high price of raw materials and the low tolerance for
manufactured components in aerospace which causes high

http://dx.doi.org/10.1016/j.cie.2014.06.005
0360-8352/Ó 2014 Elsevier Ltd. All rights reserved.
88 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95

Nomenclature

i, k index for component i, k e I, I = {1, 2, 3} RCtStur2i set-up cost of repair of disassembled component i
j index for product j e J, J = {1, 2} RCtrmi remanufacturing cost of disassembled component i
l index for parts l e L, L = {1, 2, 3, 4, 5} RCtrm1i remanufacturing cost of non-repairable disassembled
t index for time period t e T, T = {1, 2, 3, 4, 5} component i (Ry1)
a percentage of demand for new spare components RCtr2i repair cost of disassembled component i
c upper bound of disposal rate for component i RDefit number of defective component i disassembled at period t
BOMij bill of material for product j RDefrati defect rate of disassembled component i
BOM2li bill of material for component i RProjt returned product j at period t
Cti manufacturing cost of component i Rmit 1 if component i is remanufactured at period t, other-
CTj aggregated cost of assembly, material handling, and wise 0
packaging of product j RR2it 1 if disassembled component i is repaired at period t,
Ctcanli cannibalization cost of disassembled component i otherwise 0
Ctr1i repair (type I) cost of component i RRmit 1 if disassembled component i is remanufactured at
Ctr2i repair (type II) cost of component i period t, otherwise 0
Ctrmi remanufacturing cost of component i RRm1it 1 if non-repairable disassembled component i is reman-
CtShortpj shortage cost of product j ufactured at period t, otherwise 0
CtStucanli set-up cost of cannibalization of disassembled compo- RRz2it 1 if component i is produced of cannibalized part l at
nent i period t, otherwise 0
Ctstumi set-up cost of manufacturing of component i RSit 1 if component i is cannibalized at period t, otherwise 0
Ctstur1i set-up cost of repair (type I) of component i Rw1it returned component i sent for salvage at period t
Ctstur2i set-up cost of repair (type II) of component i Rw2it returned component i sent for cannibalization at
Ctsturmi set-up cost of remanufacturing of component i period t
CtstuRZ2i set-up cost of assembly of parts l to produce component i RW1rati lower bound for disposal of component i after
Ctstutrmik set-up cost of transforming of component i to compo- disassembly
nent k RW2rati lower bound for cannibalization of component i after
Cttrmik transforming cost of component i to component k disassembly
Defit number of defective components i produced at period t Ryit remanufactured component i of repairable disassem-
Defrati defect rate of manufacturing of component i bled components at period t
Dempjt demand for product j at period t Ry1it remanufactured component i of non-repairable disas-
Dems1it demand for new spare component i at period t sembled components at period t
Dems2it demand for used spare component i at period t Rzit repaired component i of disassembled components at
Hi holding cost for one unit of component i period t
H2l holding cost for one unit of part l Rz2it used component i produced of cannibalized parts l at
Hrmi remanufacturing hours of component i period t
Hrm1i remanufacturing hours of non-repairable disassembled R2Ctr2i cost of assembling component i of parts l
component i Salratl defect rate of part l during cannibalization
Hrpi manufacturing hours of component i Short2it shortage of used component i at period t
Hrr1i repairing (type I) hours of component i ShortPjt shortage of product j at period t
Hrr2i repairing (type II) hours of component i Subprlt part l produced as a result of cannibalization at period t
HRS summation of labor hours available for certain pro- t1 lead-time of manufacturing
cesses t2 lead-time of remanufacturing
Hrtrmik transforming hours of component i to component k t3 lead-time of repair (type I)
Invnit inventory of new component i at period t before assem- t4 lead-time of repair (type II)
bling the product j t5 lead-time of transforming
Invnfit inventory of new component i at period t after assem- t6 lead-time of repair of disassembled component
bling the product j t7 lead-time of remanufacturing of disassembled compo-
InvSubprlt inventory of part l at period t nent i
Invuit inventory of used component i at period t t8 lead-time of cannibalization of disassembled compo-
Pi disposal cost of component i nent i
Prit number of component i produced at period t t9 lead-time of assembly of cannibalized part
Prc1i price of new spare component i t10 lead-time of remanufacturing of non-repairable disas-
Prc2i price of used spare component i sembled component i
PRCPj price of product j t11 turn-around time of overhaul of product
Prcz1i price of customer’s repaired component i (Rz) ts and te start and end period of labor hours restriction
Prcz2i price of customer’s remanufactured component i (Ry) Tikt 1 if component i is transformed to component k at per-
PRPit number of product j assembled at period t iod t, otherwise 0
Qit 1 if component i is manufactured at period t, otherwise 0 Vikt component i transformed to component k at period t
R1it 1 if component i is repaired (type I) at period t, otherwise 0 wit component i scraped at period t
R2it 1 if component i is repaired (type II) at period t, otherwise 0 Wrati lower bound of disposal for component i
RCtSturmi set-up cost of remanufacturing of disassembled Xrati maximum percentage of repair (type I) for component i
component i xit number of component i repaired (type I) at period t
RCtSturm1i set-up cost of remanufacturing of non-repairable yit number of component i remanufactured at period t
disassembled component i zit number of component i repaired (type II) at period t
 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95
percentage of defects, remanufacturing and component saving
through ‘‘transforming’’ could be applied in imperfect production
systems to reduce the amount of material scraps and inventory
carrying cost. In some cases such as landing gear tires, remanufac-
tured components may even have longer life cycles due to thicker
retread rubber. By definition, an aviation product overhaul involves
cleaning, carefully inspecting, and repairing or replacing compo-
nents to meet service limits. It is usually a good idea to request that
components used in the overhauled product meet new limits. But
it is entirely legal to place a used component that meets only
service limits into an overhauled product as a replacement. To
ensure safety, when used components are consumed more fre-
quent inspection is required. Aftermarket services encourage major
aerospace manufacturers to look at maintenance costs from differ-
ent views and practices such as extending life of defective compo-
nents through remanufacturing, which might not be profitable in
the old business model, becomes a desirable alternative in the
new business model. In this paper a general model is proposed,
and the effects of some factors on profit, inventory carrying cost,
and number of scrap components are studied. The model
determines the number of components to be manufactured,
repaired, remanufactured, transformed, or scrapped at each time
period to satisfy demand for spare components and final products
while maximizing profit.
The remainder of this paper is organized as follows. Section 2
categorizes and summarizes some of the relevant literature. Sec-
tion 3 defines the problem, where the closed-loop supply chain
network is introduced and a mixed integer mathematical model
is developed for a multi-product multi-period scenario. Section 4
provides the results of sensitivity analysis and Section 5 concludes
the study with a summary, extensions, and directions for future
research.
2. Literature review
In the last 30 years many studies have been carried out to
understand the elements and success factors of the reverse supply
chain. Major factors considered in the literature affecting profit and
cost of remanufacturing are: facility capacity; lead-times; fixed,
variable, back-ordering, and disposal costs; single period versus
multiple period horizons; deterministic or stochastic returns;
deterministic or stochastic yields; independent or integrated for-
ward and reverse supply chain. In this section, the related
literature is classified into four categories: product related,
reverse-logistics design, pricing strategy and marketing, produc-
tion planning and inventory management.
Seven characteristics that make remanufacturing difficult are
provided by Guide (2000). Based on this study scheduling and
inventory control are the most affected stages in the closed-loop
supply chain. Brass and Hammond (1996) studied design for disas-
sembly and remanufacturing characteristics. Gungor and Gupta
(1998) developed an algorithm for the disassembly of defective
components. Inderfurth and Langella (2006) considered a system
with stochastic yield and designed an experiment to study the
effects of four factors: disassembly profit, subassembly procure-
ment symmetry, subassembly demand symmetry, and yield
distribution. Dowlatshahi (2005) provided strategic factors and
sub-factors that should be considered in designing remanufacture
operations.
Kroon (1995) studied reverse logistics for collapsible plastic
containers in The Netherlands. Fleischmann and Dekker (2001)
suggested a quantitative model for a single product network,
which included manufacturing plants, distribution centers, collec-
tion centers and remanufacturing facilities. Salema, Barbosa-Povoa,
and Novais (2007) extended the model by Fleischmann and Dekker
89
(2001) for a capacitated, multi-product system. Balancing flow
between capacitated sites in a reverse logistics system for the car-
pet recycling industry is presented in Realff, Ammons, and Newton
(2000). Lu, Christina, Stuart, and Rich (2000) provided an algorithm
for designing a reverse supply chain. Schultmann, Zumkeller, and
Rentz (2006) used Tabu search to find the location of the most
profitable dismantling facilities in reverse logistics. Srivastava
(2008) developed two mixed integer linear programming (MILP)
models to find the most cost efficient collection centers and rework
facilities. According to Savaskan, Bhattacharya, and Van
Wassenhove (2004), the retailer, which is the closest to customer,
is the most effective agent for collecting used products compared
to a manufacturer or third party logistics provider.
Glover (1986) showed that dismantling and recycling parts of a
house was 20% cheaper than conventional demolition and disposal.
Krikke, Van Harten, and Schuur (1998) presented a set of
definitions and a description of how to calculate the net profits
of recoverable assemblies. Teunter (2001) proposed a method to
calculate the value of assemblies and their net profits in a reverse
logistics system. Kocabasoglu, Prahinski, and Klassen (2007)
studied the reverse supply chain with respect to investment, risk
propensity, and reconditioning. Michaud and Llerena (2006) exam-
ined the relationship between stakeholders of closed-loop supply
chains.
Gupta and Taleb (1994) developed a material requirements
planning (MRP) algorithm for disassembly of products. Effect of
lead-time variation on the cost of inventory with stochastic
demand and return is shown in Inderfurth (1997), Van der Laan,
Salomon, and Dekker (1999), and Inderfurth and Van der Laan
(2001). The mixed integer programming model in Stuart,
Ammons, and Turbini (1999) calculated economic production
quantity (EPQ) and recycling capacity for an electronic assembly
company. According to Fleischmann, Kuik, and Dekker (2002)
and Fleischmann and Kuik (2003), (s, S) order policy can give the
optimal average cost of inventory where returns are stochastic.
Murayama, Yoda, Eguchi, and Oba (2006) used a reliability model
to calculate stochastic return products and their usable and failed
components at one time interval. Toktay, Wein, and Zenios (2000)
modeled Kodak’s single-use camera supply chain as a closed queu-
ing network to study effects of length of product life, procurement
delay, demand rate, and information structure. Li, Chen, and Cai
(2007) considered a capacitated batched manufacturing/remanu-
facturing system where the time horizon was finite, demand was
deterministic, and emergency subcontracting and substitution
were allowed. Tang, Grubbstrom, and Zanoni (2007) considered
disassembly and purchase order release time at an engine manu-
facturing company when yield is deterministic and lead-times
are stochastic. Kim, Song, Kim, and Jeong (2006) developed a max-
imization mixed integer linear mathematical model for an inte-
grated system of manufacturing and remanufacturing with
capacitated facilities. The paper by Li, Chen, and Cai (2006) studied
an un-capacitated multi-product, multi-period stochastic remanu-
facturing system with part substitution where no backlog/shortage
or disposal was allowed. One-way substitution is further studied in
Bayindir, Erkip, and Gullu (2007) and Jin, Hu, Ni, and Xiao (2013).
Jin et al. (2013) studied reassembling of products made of modular
components where high quality modules are substituted for low
quality modules. This paper expands on the study by Kim et al.
(2006) and considers the substitution concept introduced in Li,
Chen, and Cai (2007) to maximize profit over multiple time
periods, introducing transforming, and considering remanufactur-
ing on customer owned components in an integrated forward
and reverse supply chain. In our model, shortage is allowed for
components during the assembly of final products but not on
assembly of overhauled products. To the best of our knowledge,
it is the first time that such a model has been presented.
90 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95

3. Supply chain network design
3.1. Problem definition
An aerospace manufacturing company with different product
families is studied in this paper. Each product is made by
assembling different components which are made of different parts.
Usually there are common components among products within a
family. The network studied in this paper is a closed-loop supply
chain, where reverse flow contains products that are brought to ser-
vice centers for overhaul or repair. The general flow in a forward sup-
ply chain is that components are manufactured and inspected and
depending on the severity of defects, they could be sent for repair
type I, repair type II or disposal. The repairs are defined as follows.

Fig. 1. Current closed-loop supply chain network.

Fig. 2. Recommended closed-loop supply chain network.

 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95 91

 Repair type I: applicable to minor defects like scratches or

unclear name plates. These defective components are repaired
and returned to ‘‘as good as new’’ condition.
 Repair type II: applicable to some major defects. These defective
components are repaired and used only on products that come
for repair and overhaul because of their reduced life cycle.
Fig. 3. Products and their subassemblies.
New components are pulled out of inventory pool either to
assemble new products, which eventually go through intensive
Table 1 test and certification by regulatory authorities before being deliv-
Relationships between input data. ered to customers, or to reassemble used products. At each over-
haul or repair, the product is disassembled, components are
Description Formula
cleaned and inspected. Components in good condition are put back
Manufacturing cost of Labor rate  Hrp + Raw material cost
to products and defective components are classified as: repairable,
component
Repair (type I) cost of Labor rate  Hrr1 + .1  Raw material cost scrap, or suitable to be cannibalized. Dismantled parts are stored in
component service centers and when there is demand for used components
Repair type II cost of Labor rate  Hrr2 + .2  Raw material cost during overhaul, these parts will be assembled to produce used
component components with a limited life cycle. Spare parts account for the
Remanufacturing cost of Labor rate  Hrrm + .3  Raw material cost
component
great majority of profits in aerospace industry, especially in engine
Transforming cost of Labor rate  Hrtrm + .15  Raw material cost manufacturing companies. Companies sell their products with low
component profit margin to create a larger user base for highly profitable, cap-
Holding cost for one unit of .09  Manufacturing cost tive spare parts business. Fig. 1 shows current forward and reverse
component
flows in a closed-loop supply chain network. Lead-times, inventory
Disposal cost of component .2  Ct
Price of new spare 1.7  (Ct + Ctstum) carrying costs, and profit margins are the major factors determin-
component ing where defective components should be sent. The general prac-
Price of used spare .7  Prc1 tice in the companies, where the first author worked, is that
component defective components eligible for repair type II only get repaired
Price of product 1.3  (BOM cost + Set-up cost)
Price of customer’s repaired 1.25  (Ctr1 + Ctstur1)
when there is demand for them in the next few months, otherwise
component they are scrapped. This is to increase inventory turnover ratio.
Price of customer’s .8  Prc1 In this paper, a modified network is proposed as shown in Fig. 2.
remanufactured New processes have been added to reduce the number of scraps and
components
to increase profit over the product life cycle. Remanufacturing and
Repair cost of disassembled Labor rate  Repair hour (Rz) + .35  Raw
component material cost transforming processes are considered for new defective compo-
Remanufacturing cost of Labor rate  Remanufacturing hour + .7  Raw nents. Through transforming a defective component is transformed
disassembled material cost to another ‘‘as good as new’’ component. Also, remanufacturing is
component considered for repairable disassembled components as well as
Remanufacturing cost of Labor rate  Remanufacturing hour
those that are not remanufacturable during the turn-around time
disassembled (Ry1) + .8  Raw material cost
component (Ry1) (TAT) and become the company’s property.
Shortage cost of product .1  Price of product

3.2. Mathematical model

Table 2 In this section, we develop a mathematical model for the rec-

Lead-time of different processes.
ommended closed-loop supply chain network as shown in Fig. 2.
t1 t2 t3 t4 t5 t6 t7 t8 t9 t10 The objective is to maximize total profit, which is revenue that
M 2 1 0 1 NA* 1 2 NA** 0 2 has been generated from the sale of final products, new spare com-
N 1 0 0 0 1 1 1 NA** 0 2 ponents, used spare components, and revenue from repair and
P 2 1 0 0 1 1 1 NA** 0 2 remanufacturing of customer owned components, minus the cost
*
No component can be transformed to M. of manufacturing, repairs, remanufacturing, transforming, canni-
**
t is applicable to parts and is considered less than one time period. balization and the corresponding set-up costs as well as inventory
carrying costs and scrap costs. Major constraints are for set-up cost
of each process; linking products, components, and parts; inven-
Table 3 tory level of components and parts; linking defects and processes;
Demand and returned products at each period. as well as production capacity. Inspection cost is considered as part
T=1 T=2 T=3 T=4 of the processing cost. Assembly cost, material handling cost, and
new product packaging cost are included in the aggregated cost.
Demand for Product A1 600 1200 900 200
Demand for Product A2 1200 900 810 200
The model gives priority to spare component demand, that is, at
Returned Product A1 300 320 480 0 each period demand for new and used spare components are satis-
Returned Product A2 320 210 510 0 fied first. If there are not enough used components, new compo-
nents are used instead. It is only then that production of final
products starts from assembling the remaining new components.

Table 4
Results of running the model.

Variable Pr Def x y z v w P Sh1 Rz Ry Ry1

Value 38520 3354 1677 1337 230 8 102 1955 713 0 4418 1785
92 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95

The model allows backlog in assembly of new products. Inventory yitþt2 6 100000  Rmit 8i 2 I;t1 < t 2 T ð15Þ
of new and used components is measured at the end of each zitþt4  100000  R2it 8i 2 I;t1 < t 2 T ð16Þ
period.
The capacity of system, which in this model is presented by
v iktþt5  100000  T ikt 8i; k 2 Iandk  i ¼ 1; t1 < t 2 T ð17Þ
labor hour, is considered finite i.e. no over time or turnover is Ryitþt7  100000  RRmit 8i 2 I; t 2 T ð18Þ
allowed. Since during the overhaul peak season more manpower Rzitþt6  100000  RR2it 8i 2 I;t 2 T ð19Þ
is allocated to service of returned products, production of majority Rw2it 6 100000  RSit 8i 2 I; t 2 T ð20Þ
of new components should occur prior to these periods. Upper
Rz2itþt9 6 100000  RRz2it 8l 2 L;t 2 T ð21Þ
bound and lower bound are considered for certain variables to pre-
vent the model of sending defects only through the processes with Ry1itþt10  100000  RRm1it 8i 2 I; t 2 T ð22Þ
X
the highest profit margin i.e. repair type I. RDefit < RDefrati BOMij  RProjt 8i 2 I; j 2 J; t 2 T ð23Þ
Manufacturing process is associated with a certain defect rate. j

However, repair, transforming, and remanufacturing are consid- Rw1it  RW1rat i  RDefit 8i 2 I; t 2 T ð24Þ
ered with no defect because defective components are rigorously Rw2it  RW2rat i  RDefit 8i 2 I; t 2 T ð25Þ
inspected prior to these processes. Also, deterministic set-up costs
Ryitþt7 þ Rzitþt6 þ Rw1it þ Rw2it ¼ RDefit 8i 2 I; t 2 T ð26Þ
are considered for each process. There is no constraint on lead-time
meaning lead-time of processes can be less or more than one time Ry1itþt10 6 c  Rw1it 8i 2 I; t 2 T ð27Þ
X
period. The mixed integer linear programming model is formulated Subprltþt8 ¼ ð1  Salrat l Þ  BOM2li  Rw2it 8i 2 I; l 2 L; t 2 T ð28Þ
as follows. i
XX X
Max Z ¼ ðPRP jt  ðPRCP j  CT j Þ  ShortP jt  CtShortpj Þ Inv Subprlt ¼ Inv Subpr lt1 þ Subprlt  BOM2li  Rz2itþt9
j t i
XX
þ ððDems1it þ Short2it Þ  Prc1i þ ðDens2it  Short2it Þ 8l 2 L;t8 < t 2 T ð29Þ
X
i t
XX BOM2li  Rz2itþt9  Inv subprlt 8i 2 I; l 2 L; t 8 < t 2 T ð30Þ
 Prc2i Þ þ ðPrcz1i  Rzitþt6 þ Prcz2i  Ryitþt7 Þ i
t
i
Rw1it þ Rw2it ¼ Dems1itþt11 þ Dems2itþt11 8i 2 I; t 2 T ð31Þ
XX
 ðPr it  Cti þ Ctr1I  xitþt3 þ Ctrmi  yitþt2 þ Ctr2i Dems1itþt11 ¼ a  ðRw1it þ Rw2it Þ 8i 2 I; t 2 T ð32Þ
i t>t1 X X
 zitþt4 þ Ctstumi  Q ott1 þ Ctsturmi  Rmit þ Ctstur1i  R1it ðHrpi  Pr it þ Hrmi  yit þ Hrm1i  Ry1it þ zit  Hrr2i
XXX i ts <t<t e
þ Ctstur2i  R2it þ ðT ikt  Ctstutrmol þ Cttrmik !
i k t>t1
XX X
þxit  Hrr1i Þ þ v ikt  Hrtrmik < HRS 8i; k 2 I; t 2 T ð33Þ
X X i<k k ts <t<t e
 v iktþt5 þ ðHi  ðInv uit þ Inv nfit þ P i  ðwit þ Rw1it
i t>t1
 X
Ry1itþt10 Þ þ ðRCtr2i  Rzitþt6 þ RCtSturmi  RRmit Eqs. (2)–(5) define defects in the forward flow and put limitations
t on the number of components sent for repair (type I) and scrap in
þRCtSturm1i  RRm1it þ RCtrmi  Ryitþt7 þ RCtrm1i the forward flow. Eqs. (6)–(8) show the relationship between differ-
X
Ry1itþt10 þ RCtStur2i  RR2it Þ þ ðRz2itþt9  R2Ctr2i ent types of components and inventories. At each period, the
t demand for used and new spare components is satisfied first. Short-
XX
þCtstuRZ2i  RRz2i ÞÞ þ F2l  InvSubprIt age of used components is satisfied with new spares, and then
l t assembly of final products starts with the remaining components,
XXX
þ ðCtStucanli  RSit þ Ctcanli  Rw2it ÞÞ ð1Þ as per Eqs. (9)–(12). At each period if a process is taking place there
t i l will be set-up costs; Eqs. (13)–(22) explain these cost allocations.
Constraints: After returned products are disassembled, defective components
are sent for repair, remanufacturing, scrap or cannibalization, as
Defit < Defrati  Prit 8i 2 I;t 2 T ð2Þ shown in Eqs. (23)–(26). Eq. (27) puts limit on number of company
xitþt3 6 Xrat i  Defit 8i 2 I;t 2 T ð3Þ owned and remanufacturable components (Ry1). Cannibalized parts
wit  Wrat i  Defit 8i 2 I;t 2 T ð4Þ inventory and their assembly to produce used components are
X demonstrated in Eqs. (28)–(30). Demand for new and used spare
yitþt2 þ zitþt4 þ wit þ xitþt3 þ v iktþt 5
¼ Defit 8i 2 I; t 2 T ð5Þ components is calculated in Eqs. (31) and (32). Finally, Eq. (33) puts
k
limits on the labor hours available for certain processes at specific
Inv uit  Short2it ¼ Inv uit1 þ zit þ Rz2it  Dems2it 8i 2 I; t 2 T ð6Þ time periods. The purpose of adding this constraint is to allocate
Inv nit ¼ Inv nfit1  Short2it þ ð1  Defrati Þ  Pr it þ xit þ yit more labor hours in those periods to overhaul processes.
X
þ Ry1it þ v kit  Dems1it 8i 2 I;t 2 T ð7Þ
k
X
Inv nfit ¼ Inv nit  BOM ij  PRP jt 8i 2 I; t 2 T ð8Þ 4. Numerical example
j
X
BOMij  PRP jt 6 Inv nit 8i 2 I; j 2 J; t 2 T ð9Þ In this section, a numerical example is presented to show how
j the proposed model works. Two final products (A1 and A2), three
PRPjt 6 Dempjt 8j 2 J; t 2 T ð10Þ components (M, N, and P) with the quantity of three of each per
product, and five parts (K, G, O, S, F) with the quantity of one per
ShortPjt ¼ ShortPjt1 þ Dempjt  PRP jt 8j 2 J;t 2 T ð11Þ
component are considered, as shown in Fig. 3. Table 1 presents
ShortPjt ¼ 0 8j 2 J; t ¼ lastperiod 2 T ð12Þ some of the assumptions used to generate input data. Lead-times
Prit 6 100000  Q itt1 8i 2 I;t1 < t 2 T ð13Þ of different processes as well as new product demands and
xitþt3 6 100000  R1it 8i 2 I;t1 < t 2 T ð14Þ returned products at different time periods are shown in Tables 2
and 3, respectively. The labor rate is $25 per hour. The costs of
Table 5
Results of sensitivity analysis.

Lead-time Scrap cost Remanufacturing Transforming Inventory cost Original Inventory cost Transforming Remanufacturing Scrap cost Lead-time
remanufacturing (10%) cost (10%) cost (10%) (10%) run (+10%) cost (+10%) cost (+10%) (+10%) remanufacturing

V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95

(Ry1) (50%) (Ry1) (+50%)
Pr 38,980 38,520 38,520 38,520 38,520 38,520 38,520 38,520 38,520 38,520 39,330
Def 3398 3354 3354 3376 3354 3354 3354 3354 3376 3356 3433
x 1699 1677 1677 1688 1677 1677 1677 1677 1688 1678 1715
y 1307 1337 1342 938 1337 1337 1337 1342 938 1329 1480
z 235 230 232 220 230 230 230 233 220 233 0
w 103 102 102 103 102 102 102 102 103 102 104
Rz 0 0 0 0 0 0 0 0 0 0 0
Ry 4418 4418 4418 4418 4418 4418 4418 4418 4418 4418 4418
RW1 3632 3638 3638 3638 3638 3638 3638 3638 3638 3638 3642
RW2 938 932 932 932 932 932 932 932 932 932 928
Rz2 431 428 428 428 428 428 428 428 428 428 467
Ry1 1322 1785 1785 1785 1785 1785 1785 1785 1785 1784 1132
v 54 8 0 427 8 8 8 0 427 14 134
Value Total inventory cost 723,116 707,913 707,900 710,427 627,567 707,913 764,644 707,910 710,427 708,026 731,319
Total scraps 2413 1955 1955 1956 1955 1955 1495 1955 1956 1956 2614
Total profit 1,480,559 1,528,353 1,589,816 1,521,783 1,603,301 1,522,955 1,466,224 1,522,995 1,453,702 1,517,531 1,509,700
Total sales 8,449,418 8,450,074 8,449,910 8,450,894 8,450,074 8,450,074 8,450,074 8,449,828 8,450,894 8,449,828 8,528,367
ITO ratio (profit) 2.05 2.16 2.25 2.14 2.55 2.15 1.92 2.15 2.05 2.14 2.06
ITO ratio (sales) 11.68 11.94 11.94 11.90 13.46 11.94 11.05 11.94 11.90 11.93 11.66
% Changed Total inventory cost 2% 0% 0% 0% 11% 8% 0% 0% 0% 3%
Total scraps 23% 0% 0% 0% 0% 24% 0% 0% 0% 34%
Total profit 3% 0% 4% 0% 5% 4% 0% 5% 0% 1%
ITO ratio (profit) 5% 0% 4% 0% 19% 11% 0% 5% 0% 4%
ITO ratio (sales) 2% 0% 0% 0% 13% 7% 0% 0% 0% 2%

93
94 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95

raw materials for M, N, and P are 50, 30, and 40 respectively and
production hours are 5, 3, and 4.
LINGO version 10 was used to run the model. Profit and total
inventory costs are $1,522,955 and $ 707,913, respectively. Some
of outcome variables are presented in Table 4. The numbers in
front of ‘‘Value’’ are summation over all periods. Based on these,
transforming and remanufacturing increase profit and have non-
zero value. Also, the model chose remanufacturing over repair,
which is less time consuming, for customer owned disassembled
components. As expected, inventory cost is high because of the
labor hour limitation imposed by Eq. (33). This cost can be reduced
by increasing labor hours, especially during the periods that
demand for repaired or remanufactured components is high. Dif-
ferent strategies such as adding extra shifts, allowing over-time
hours, part-time or seasonal employment could be considered to
overcome labor hour shortages where costs are justified. For exam-
Fig. 5. Effect of remanufacturing cost change of company owned disassembled
ple, a 10-percent labor hour increase in Eq. (33) will reduce the components.
total scraps by 19 units and profit by $7710 while adds $7500 to
costs, therefore this increase is not justified. On the other hand, if
labor cost is changed from $25 per hour to $20 per hour, a 10-per-
cent capacity increase will cost only $6000 which results in net
profit of $1710.
Sensitivity analysis was performed to compare the effect of
some input changes on profitability, inventory cost, and inventory
turnover ratio, as shown in Table 5. Based on this analysis, inven-
tory carrying costs and remanufacturing costs have the highest
effect on profit. In this example, the defect rate of production is
low and many of the defective components can be corrected by
repair type I. Therefore, there are not many components left to
be transformed. As a result, the effect of transforming cost is less
than other factors. As the defect rate increases or the percentage
of defective components that could be repaired (type I) decreases,
the effect of transforming cost becomes more apparent. The two
columns at the extreme right and left represent changes on reman-
ufacturing lead-time for company owned disassembled compo-
nents. As the results show, increase of this lead-time has less Fig. 6. Effect of inventory carrying cost on profit.
effect on profit than decrease, which is aligned with the findings
of Van der Laan, Salomon, and Dekker (1999).
To further gain insight into this model’s behavior, the effect of with no turning point meaning that after certain point this process
remanufacturing costs change has been studied separately; first, is not profitable anymore and the demand is satisfied by manufac-
remanufacturing cost of customer owned disassembled compo- turing of new components. Fig. 6 presents the effect of inventory
nents, then remanufacturing cost of company owned disassembled carrying cost on profit. It is also a linear function with a steeper
components. Figs. 4 and 5 show the results respectively. As the cost slope compared to that shown in Fig. 5.
of remanufacturing (Ry) increases, the profit margin decreases. At a
certain point (80% cost increase), this margin becomes less than the 5. Conclusion
profit margin of repair of the disassembled components (Rz) and
the model chooses repair over remanufacturing. The relationship A general mathematical model to study the effect of remanufac-
between cost of remanufacturing (Ry1) and profit is negative linear turing and transforming on profit and scrap in the aerospace indus-
try where customers return products for overhaul has been
proposed. The model determines the quantity of components sent
for two types of repair, remanufacturing, transforming, and scrap
in the forward flow and repair, remanufacturing, cannibalization
and scrap in the reverse flow. A numerical example has been pre-
sented to validate and analyze the mathematical model. Based on
the result remanufacturing and transforming increase profit in
spite of inventory carrying cost increase.
This study is based on the assumption of a deterministic defect
rate(s) for manufacturing of new components and disassembled
components, and lead-times. An extension of the model could
make these factors stochastic. Also, the model developed in this
paper can be extended to include shop visits for repair. Finally,
the proposed model has integer variables which make computa-
tional time long and it is very sensitive to input data. Since this
is the first attempt in solving this type of problems, the main objec-
Fig. 4. Effect of remanufacturing cost change of customer owned disassembled tive of this work was to propose a mathematical modelling
components. approach for the considered manufacturing process with repair
 V. Hashemi et al. / Computers & Industrial Engineering 75 (2014) 87–95
and remanufacturing activities. The developed model can be solved
to optimality with acceptable computational time for the consid-
ered example problem which is based on real production cases.
We plan to develop efficient solution methods in future work in
this area so that much larger size problems can be tackled prop-
erly. Such solution methods can be based on heuristic, meta-heu-
ristic, optimization, or the combinations of these approaches.
References
Amoo, O. M., & Fagbenle, R. L. (2013). Renewable municipal solid waste pathways
for energy generation and sustainable development in the Nigerian context.
International Journal of Energy and Environmental Engineering. http://dx.doi.org/
10.1186/2251-6832-4-42.
Bayindir, Z. P., Erkip, N., & Gullu, R. (2007). Assessing the benefits of
remanufacturing option under one-way substitution and capacity constraint.
Computers and Operations Research, 34, 487–514.
Brass, B., & Hammond, R. (1996). Towards Design for Remanufacturing-Metrics for
Assessing Remanufacturability. Proceedings of the 1st International Workshop
on Reuse, September 13, Hoboken, NJ, USA, 5–22.
Dowlatshahi, S. (2005). A strategic framework for the design and implementation of
remanufacturing operations in reverse logistics. International Journal of
Production Research, 16, 3455–3480.
Fleischmann, M., & Dekker, R. (2001). Reverse Logistics: Quantitative Models for
Closed-loop Supply Chains, ISBN3-540-40696-4 (2001) Springer- Verlag Berlin
Heidelberg New York.
Fleischmann, M., & Kuik, R. (2003). On optimal inventory control with independent
stochastic item returns. European Journal of Operational Research, 151, 25–37.
Fleischmann, M., Kuik, R., & Dekker, R. (2002). Controlling inventories with
stochastic item returns: A basic mode. European Journal of Operational
Research, 138, 63–75.
Glover, F. (1986). Future paths for integer programming and links to artificial
intelligence. Computers and Operations Research, 13, 533–549.
Gray, C., & Charter, M. (2006). Remanufacturing and Product Design: Designing for
the 7th Generation, CFSD expert remanufacturing workshop, 1-77. http://
cfsd.org.uk/Remanufacturing%20and%20Product%20Design.pdf.
Gungor, A., & Gupta, S. M. (1998). Disassembly sequence planning for products with
defective parts in product recovery. Computers and Industrial Engineering, 35,
161–164.
Gupta, S. M., & Taleb, K. N. (1994). Scheduling disassembly. International Journal of
Production Research, 32, 1857–1866.
Guide, V. D. R. Jr., (2000). Production planning and control for remanufacturing:
Industry practice and research needs. Journal of Operations Management, 18,
476–483.
Ijomah, W. L. (2009). Addressing decision making for remanufacturing operations
and design-for-remanufacture. International Journal of Sustainable Engineering, 2,
91–102.
Inderfurth, K. (1997). Simple optimal replenishment and disposal policies for a
product recovery system with lead-times. OR Spektrum, 19, 111–122.
Inderfurth, K., & Langella, I. M. (2006). Heuristics for solving disassemble-to-order
problems with stochastic yields. OR Spectrum, 28, 73–99.
Inderfurth, K., & Van der Laan, E. (2001). Lead-time effects and policy improvement
for stochastic inventory control with remanufacturing. International Journal of
Production Economics, 71, 381–390.
Jin, X., Hu, S. J., Ni, J., & Xiao, G. (2013). Assembly strategies for remanufacturing
systems with variable quality returns. IEEE Transactions on Automation Science
and Engineering, 10, 76–85.
Kim, K., Song, I., Kim, J., & Jeong, B. (2006). Supply planning model for
remanufacturing system in reverse logistics environment. Computers and
Industrial Engineering, 51, 279–287.
95
Kocabasoglu, C., Prahinski, C., & Klassen, R. D. (2007). Linking forward and reverse
supply chain investments: The role of business uncertainty. Journal of
Operations Management, 25, 1141–1160.
Krikke, H. R., Van Harten, A., & Schuur, P. C. (1998). On a medium term product
recovery and disposal strategy for durable assembly products. International
Journal of Production Research, 36, 111–139.
Kroon, V. G. L. (1995). Returnable containers: An example of reverse logistics.
International Journal of Physical Distributions and Logistics Management, 25,
56–68.
Kusiak, A., & Wei, X. P. (2011). Prediction of methane production in wastewater
treatment facility: A data-mining approach. Annals of Operation Research, 1007.
10/s10479-11-1037- 6.
Li, Y., Chen, J., & Cai, X. (2006). Uncapacitated production planning with multiple
product types, returned product remanufacturing, and demand substitution. OR
Spectrum, 28, 101–125.
Li, Y., Chen, J., & Cai, X. (2007). Heuristic genetic algorithm for capacitated
production planning problems with batch processing and remanufacturing.
International Journal of Production Economics, 105, 301–317.
Lu, Q., Christina, V., Stuart, J. A., & Rich, T. (2000). A Practical Framework for Reverse
Supply Chain, Proceedings of the 2000 IEEE International Symposium, May 8–
10, San Francisco, CA, USA 266–271.
Lund, R. (1998). Remanufacturing: An American Resource, Proceedings of the 5th
International Congress Environmentally Conscious Design and Manufacturing,
June 16–17, Rochester Institute of Technology, Rochester, NY, USA.
McConocha, D., & Speh, T. (1991). Remarketing: Commercialization of
remanufacturing technology. Journal of Business and Industrial Marketing, 6,
23–37.
Michaud, C., & Llerena, D. (2006). An Economic Perspective on Remanufactured
Products: Industrial and Consumption Challenges for Life Cycle Engineering,
13th CRIP International Conference on Life Cycle Engineering (LCE). http://
www.mech.kuleuven.be/lce2006/.
Murayama, T., Yoda, M., Eguchi, T., & Oba, F. (2006). Production planning and
simulation for reverse supply chain. JSME International Journal, 49, 281–286.
Realff, M. J., Ammons, J. C., & Newton, D. (2000). Strategic design of reverse
production systems. Computers and Chemical Engineering, 24, 991–996.
Salema, M. I. G., Barbosa-Povoa, A. P., & Novais, A. Q. (2007). An optimization model
for the design of a capacitated multi-product reverse logistics network with
uncertainty. European Journal of Operational Research, 179, 1063–1077.
Savaskan, R. C., Bhattacharya, S., & Van Wassenhove, L. N. (2004). Closed-loop
supply chain models with product remanufacturing. Management Science, 50,
239–252.
Schultmann, F., Zumkeller, M., & Rentz, O. (2006). Modeling reverse logistic tasks
within closed-loop supply chains: An example from the automotive industry.
European Journal of Operational Research, 171, 1033–1050.
Srivastava, S. K. (2008). Network design for reverse logistics. International Journal of
Management Science, 36, 535–548.
Stuart, J. A., Ammons, J. C., & Turbini, L. J. (1999). A product and process selection
model with multidisciplinary environmental consideration. Operations Research,
47, 221–234.
Tang, O., Grubbstrom, R. W., & Zanoni, S. (2007). Planned lead-time determination
in a make-to-order remanufacturing system. International Journal of Production
Economics, 108, 426–435.
Teunter, R. H. (2001). A reverse logistics valuation method for inventory control.
International Journal of Production Research, 9, 2023–2035.
Thierry, M., Salomon, M., Van Nunen, J., & Van Wassenhove, L. (1995). Strategic
issues in product recovery management. California Management Review, 37,
114–135.
Toktay, L. B., Wein, L. M., & Zenios, S. A. (2000). Inventory management of
remanufacturable products. Management Science, 46, 1412–1426.
Van der Laan, E., Salomon, M., & Dekker, R. (1999). An investigation of lead-time
effects in manufacturing/remanufacturing systems under simple push and pull
control strategies. European Journal of Operational Research, 115, 195–214.