INVENTORY MANAGEMENT IN A MANUFACTURING-REMANUFACTURING SYSTEM WITH CANNIBALIZATION AND STOCHASTIC RETURNS

Background: The design of a remanufacturing system that recovers sold products for reprocessing is needed to meet Japan’s environmental objectives. However, to establish closed-loop supply chains for sustainability, it is necessary to consider not only environmental factors but also economic efficiency. Selling remanufactured products at prices lower than new products, may expand market sizes and allow a firm to accrue higher profits. However, a cannibalization effect will occur in which consumers who would have purchased new products, instead purchase remanufactured products at lower prices. The purpose of this study is to design a manufacturing-remanufacturing system in consideration of the cannibalization effect. Furthermore, we evaluate the system including cycle of a product by using the use period of products.

Methods: Based on a previous study, we develop a demand model with cannibalization effect using the Bass model. We deal with the demand affected by the different prices of products by introducing a demand function that increases as the price of products decreases. Moreover, by giving the use period of each product, we consider the case that the recovery period of each product is different.

Results: In numerical examples, a manufacturing-remanufacturing system using the proposed model is evaluated. The numerical results clarify the influence of the price of remanufactured products, cannibalization rate, and introduction timing of remanufactured products on total profit and remanufacturing rate of our system.

Conclusions: This manufacturing-remanufacturing system revealed the influence of cannibalization effect on total profit and the importance of price and the timing of introduction of remanufactured products. In addition, by using the use period of each product, fluctuation in the quantity of reusable products can also be taken into consideration. It is shown that it is necessary to sell remanufactured products according to product recovery.

A part of this study was presented as oral presentation at the "24th International Conference on Production Research (ICPR 2017)" in Poznan, Poland from July 30 to August 3, 20017.