Optimal policy for a closed-loop supply chain inventory system with remanufacturing

Previous researchers have developed ways of managing forward-oriented supply chains, and gave insight to solve single-stage inventory systems. In this study, we analyze an inventory system with traditional forward-oriented material flow as well as a reverse material flow supply chain. In the reverse material flow, the used products are returned, remanufactured and shipped to the retailer for resale. A multi-echelon inventory system with remanufacturing capability is proposed. We then develop a closed-loop supply chain inventory model and maximize the joint profits of the supplier, the manufacturer, the third-party recycle dealer and the retailer under contractual design. The analytical results of this study show a significant increase in the joint profit when the integrated policy is adopted. (C) 2007 Elsevier Ltd. All rights reserved.