Capacitated Lot-Sizing Problem with One-way Substitution: A Robust Optimization Approach

This paper focuses on a closed-loop production planning and inventory control problem commonly encountered in the real manufacturing practice. We firstly present a deterministic model for this particular problem with several features such as remanufacturing and one-way substitution. Then we take into consideration the uncertainty of the new item demand, the remanufactured item demand and the returned item flow simultaneously, which have rarely been integrated in a single model in the existing literature. A robust optimization approach based on the uncertain budget is adopted to leverage the robustness. Numerical experiments are conducted to generate some managerial insights into this closed-loop logistics system, and the results show that the proposed model is a flexible tool which enables us to better balance the optimal solutions and the robustness.