An inventory model with remanufacturing for a product with a circular economy indicator

• Main Author: Yeo, Ivan
• Format: Conference Proceeding
• Language: English
• Subjects: Circular economy; Circularity; Consumers; Cost analysis; Demand analysis; Economic conditions; Economic models; Manufacturers; Manufacturing; Mathematical models; Plant layout; Raw materials; Remanufacturing; Sustainability
• ISSN: 0094-243X; 1551-7616
• DOI: 10.1063/5.0228426

Recently, the agenda of sustainability is gaining increasing interest among both consumers and manufacturers. One way to increase sustainability is by adopting a circular economy, where manufacturers keep materials circulating as much as possible to reduce waste and consumers support these manufacturers with their patronage. Hence, there is merit in demonstrating the viability of adopting a circular economy by formulating relevant mathematical models. In this paper, an Economic Production Quantity inventory model for a finished product in a circular economy is presented. It is assumed that the finished product can be manufactured from raw materials and remanufactured from used items with a variable level of circularity that is indicated by an index. It has been argued in the literature that the circularity level affects the demand rate of a finished product and the cost of producing the product. Hence, both the production quantity and circularity level are taken as decision variables. The situation where demand increases with circularity but unit profits decrease with circularity is considered. A solution procedure to find the optimal policy is presented and is illustrated with numerical examples. Our analysis showed that applying a remanufacturing policy can be more economical than applying a pure manufacturing policy, even when the unit profit is higher for manufacturing than for remanufacturing.