Integrated decision-making in reverse logistics: an optimisation of interacting acquisition, grading and disposition processes

In view of global environmental and social challenges the transition towards a Circular Economy is considered as a crucial factor for sustainable development. Therefore, the replacement of traditional linear business models involving product discard at the end of product life with concepts focusing on re-use of resources is essential. Reverse Logistics and Closed-loop Supply Chains are seen to be key elements of such a transition. Motivated by findings from a case study of an independent reprocessing company, we address integrated decision-making in Reverse Logistics in this paper. We present a non-linear optimisation model with interrelated processes in terms of acquisition of used products, grading for determination of product quality and reprocessing disposition. The decisions to be made concern the effort spent for active acquisition of used products and the number of reprocessed goods; both decisions are influenced by heterogeneous condition of used products. The consideration of deterministic and stochastic demand facilitates the representation of a variety of business cases. For both demand types we provide analytical insights in the form of complete strategies consisting of different scenarios which allow optimal decision-making under variable conditions. Numerical examples complement insights into the model by conducting a sensitivity analysis of relevant model parameters.