Remanufacturing of multi-component systems with product substitution

Motivated by the remanufacturing systems at Daimler AG and other automobile, aerospace heavy machinery parts dealers/manufacturers, we develop a hybrid manufacturing/remanufacturing system with controlled two-way substitution between new remanufactured products. We Markov decision processes for management on product-level as well component-level. show that optimal policy has switching-curve structure under assumption lost sales costs products are identical. Based this structural result, an efficient, close-to-optimal heuristic general model component-level model. Our numerical experiments indicate component level significantly reduces total cost. also extend our to strategic cost includes environmental aspects in objective function. For model, find appears be phenomenon primarily beneficial profit-oriented firms. Sustainability-oriented firms require less frequent product substitution.