Lot-size policies for production in a manufacturing and remanufacturing system

This paper is to determine the optimal manufacturing and remanufacturing lot-sizes in a system where manufacturing and remanufacturing operations co-exist. Considering the effect of needing certain time to complement shortage, we minimize the total cost which includes the setup cost for remanufacturing, the setup cost for manufacturing, the cost for holding remanufacturable items, manufactured items and remanufactured items, and the cost for shortages. We derive simple formulae that determine the optimal lot-sizes for manufacturing of new items and remanufacturing of remanufactured items. Due to considering the effect of manufacturing rate, remanufacturing rate and shortage, these formulae are more general than those in the literature. In addition, through making sensitivity analysis, we derive some managerial insights into inventory related to effects of remanufactured fraction.