Inventory management in a manufacturing/remanufacturing hybrid system with condition monitoring

Traditional supply chains consist of manufacturers, who process, assemble and sell products to customers. Once the product has been sold, the ownership of the product is transferred on to the customer. Typically after a possible warranty period, the repair, maintenance and eventual disposal of the product is then the responsibility of the customer. The reverse processing activities of inspection, parts remanufacturing, and materials recycling can substantially reduce the material and energy consumed by producing goods. Although these activities have a beneficial environmental impact, customers fail to participate in the remanufacturing efforts by producers or third parties because they often lack incentives. To overcome this drawback, several environmental and economic thinkers have proposed a concept called servicizing . In this paradigm, producers become service providers who provide the use and maintenance of products while retaining ownership; customers become clients who pay fees to receive the benefits the products provide. Instead of extensive buying and disposing of products, servicizing includes the obligation to dispose of used products responsibly, while reusing them and their constituent parts and materials as much as possible. However, because the provider retains responsibility for the product while it is in use by different client firms, the service paradigm also creates the need for better information and communication technology to increase the provider\u27s knowledge of the product condition. Monitoring the condition of the equipment enhances the ability of the service provider to make better replacement decisions (when to replace the product in the fleet to avoid failures) and better inventory management decisions (how much remanufactured stock to maintain so the customer is ensured a working product at all times). This thesis aims at optimizing the replacement and inventory decisions of the service provider in order to minimize the long-run overall cost per unit time