Economic Order Quantities for Stochastic Discounted Cost Inventory Systems with Remanufacturing

We study a discounted cost inventory system with stochastic demand and return. Both manufactured and remanufactured products are used to satisfy demands. The lead-times for manufacturing and remanufacturing are negligible. We consider policies that place a new order when the stock drops below zero. A remanufacturing order of fixed quantity is placed if enough returned products are available, and a manufacturing order of fixed quantity is placed otherwise. We propose a pair of simple economic order quantity formulae for calculating the manufacturing order quantity and the remanufacturing order quantity. Using simulation, we show that these formulae lead to near-optimal order quantities for all the examples that we consider.