Remanufacturing of commercial returns in a market with a variable quality tolerance

The flow of returned products is becoming a significant concern for many manufacturers. The total value of commercial returns, which is defined as products returned by customers for any reasons within a specified warranty period, is estimated at about $100 billion a year in the United States. Therefore, these returns need to be remanufactured, recycled, and reused in order to utilize their value and reduce the environmental impact and disposal costs. In this research, various aspects influencing the efficiency of the remanufacturing activities have been studied with the main objective of maximizing the net profit for the manufacturer. Two key decision policies affecting the performance of such systems are the target quality for components used in the primary product and duration of the time returned products are accumulated before they are remanufactured. The major contribution of this research is the incorporation of a customer quality tolerance function to estimate product return rate. Since with a given level of product deficiency some customers may decide to return a product while others would be happy to keep it, inclusion this function reflects a more realistic approach for estimation of the return rate. The application of the proposed model has been demonstrated by several numerical examples.