Inventory Management in Reverse Logistics in FAW Co., Ltd

Recycling and remanufacturing returned goods are economically beneficial for companies since the cost of obtaining used parts is lower in many cases and selling price is close to that of a new product. This leads to decreased costs and thereby increased profits for the company. In addition, there are also great environmental benefits by keeping the structural integrity of a part; the energy used for disassembly and refurbishing is much lower than the energy required for raw material extraction and machining. Encompassing the returned goods makes the supply chain to closed loop supply chain, which is different from the traditional supply chain due to reverse logistics. A reverse flow of material is however usually more complex than a forward flow of parts and components from suppliers. This means that inventory management becomes critical and needs to be viewed from a new perspective. The purpose of the report is to study FAW Co., Ltd’s inventory situation in reverse logistics. The report analysed the inventory management in the company, specifically focusing on one product as the instance Motor Engine LFTS-2000since it is in the maturity stage of product life cycle. Two scenarios were designed to consider how different parameters affect inventory levels in reverse logistics. The report analysed how different parameters affect the inventory levels and minimum cost. With the increasing returned goods are processed, inventory levels and minimum cost will decrease correspondingly.