Studying the impact of merged and divided storage policies on the profitability of a remanufacturing system with deteriorating revenues

Merging capacity for a remanufacturing system is studied in this paper. In the system under study, there are two streams for returns and each stream has its dedicated processing line. However, the storage space is merged between the streams. Two strategies are investigated and compared in this paper. The first strategy is to divide the storage space between the two streams in the way that each type of return has its predetermined space in the storage area (divided capacity). In the second strategy, storage space is not split between the two streams and each unit of return, independent of its type, is admitted if there is vacant space (merged capacity). In both strategies, the value of remanufactured products decreases over time by a known factor called the decay rate. Mathematical models to maximize the total profit in each strategy is presented and also verified by a simulation model. From a practical point of view, selecting the correct strategy is an important decision for the remanufacturers because choosing the wrong policy leads to lost profits. Numerical experiments reveal that neither of the scenarios is always preferred to the other one and the choice of the optimal strategy depends on the parameters' values and product types. For instance, increasing the remanufacturing cost of the superior product, or increasing the sale price of the inferior product make the merged storage strategy more desirable. On the contrary, increasing the remanufacturing cost of the inferior product, or increasing the sale price of the superior product make the divided storage policy more appealing.