A stochastic dynamic programming based model for uncertain production planning of re-manufacturing system

Re-manufacturing is recycling by manufacturing as-good-as-new products from used products, often involving disassembly, cleaning, testing, part replacement/repair, and re-assembly operations. Production planning and inventory control is one of the most important research issues for re-manufacturing system, which are faced with a greater degree of uncertainty and complexity. This leads to a critical need for planning and control systems designed to deal with the added uncertainty and complexity. We formulate a stochastic dynamic programming based model to study the production planning, i.e. dynamic lot sizing problem, of re-manufacturing systems. In the model the demand and return amounts are stochastic over the finite planning horizon. The objective is to determine the quantities that have to be re-manufactured at each period in order to minimise the total cost, including re-manufacturing cost, holding cost for returns and re-manufactured products and backlog cost. The optimal production plan of the re-manufacturing system over a finite planning horizon can be obtained with the policy iteration method. In the end, a numerical example is performed to illustrate how the model is applied and to prove its feasibility.