We study the production planning problem for a multi-product closed loop system, in which the manufacturer has two channels for supplying products: producing brand-new products and remanufacturing returns into as-new ones. In the remanufacturing process, used products are bought back and remanufactured into as-new products which are sold together with the brand-new ones. The demands for all the products are uncertain, and their returns are uncertain and price-sensitive. The problem is to maximize the manufacturer's expected profit by jointly determining the production quantities of brand-new products, the quantities of remanufactured products and the acquisition prices of the used products, subject to a capacity constraint. A mathematical model is presented to formulate the problem and a Lagrangian relaxation based approach is developed to solve the problem. Numerical examples are presented to illustrate the model and test the solution approach. Computational results show that the proposed approach is highly promising for solving the problems. The sensitivity analysis is also conducted to generate managerial insights.

Introducing closed-loop supply chain (CLSC) concept.Investigating the recovery options and CLSC network of tires in Toronto, Canada.Considering effects of uncertainty in CLSC network using decision tree.Considering cash flow in the analysis of the multi-period model.Utilizing real locations with real distances between the facilities using maps. In a closed-loop supply chain (CLSC) network, there are both forward and reverse supply chains. In this research, a tire remanufacturing CLSC network is designed and optimized based on tire recovery options. The objective of the optimization model is to maximize the total profit. The optimization model includes multiple products, suppliers, plants, retailers, demand markets, and drop-off depots. The application of the model is discussed based on a realistic network in Toronto, Canada using map. In addition, a new decision tree-based methodology is provided to calculate the net present value of the problem in multiple periods under different sources of uncertainty such as demand and returns. Furthermore, the discount cash flow is considered in the methodology as a novel innovative approach. This methodology can be applied in comparing the profitability of different design options for CLSCs.