Optimal and predefined policies for the static lot sizing problem in a two stage recovery system

Abstract

Analyzing static lot sizing problems has always attracted a considerable interest in scientific literature. A commonly applied methodology to solve the trade-off between setup and holding costs is to order the Economic Order Quantity (EOQ) whenever the corresponding inventory is depleted. Yet, this simple proceeding can only be applied as long as there is only a single source of supply. Recovery systems, however, obtain in general two sources of supply, remanufacturing product returns and fabricating new products. Therefore, a more sophisticated approach needs to be taken into account for this kind of problem setting. This contribution focusses on extending the current knowledge in this field of research by showing that non-equal remanufacturing batches propose a significant cost reduction for some parameter classes. Furthermore, a more general optimization approach is introduced that allows to evaluate the solution quality of the preset policy structures.