Production control of hybrid manufacturing–remanufacturing systems under demand and return variations

Hybrid manufacturing systems that use both raw materials and returned products as a supply for their production process are considered. Specifically, the system under study contains two machines: one uses raw materials for manufacturing, while another utilises end-of-life products returned from the market for remanufacturing. Machines are failure-prone, demand and return rates fluctuate in time reflecting market behaviour due to economical, seasonal and environmental changes. The system performance is characterised by a long-term discounted cost that integrates several partial costs (those of manufacturing, remanufacturing, disposal, holding costs in serviceable and return inventories). Optimisation of the hybrid system behaviour requires to determine the combined manufacturing, remanufactruring and disposal policy, withstanding machine failures under dynamic market conditions. Optimality conditions in the form of Hamilton–Jacoby–Bellman equations are obtained and a novel numerical approach, based on the estimation of value function timederivative, is proposed in order to deal with demand and return variations. Extensive simulations are performed to address the numerous scenarios corresponding to evolving relationship between manufacturing capacities and varying demand and return levels. Simulation results show that the optimal policies have an important property of anticipating the future changes in the demand and return, and making the timely decisions relevant to these changes.