Inventory Control in Closed Loop Supply Chain using System Dynamics

Inventory control is a fundamental activity in closed loop supply chains, particularly for remanufacturing processes. Several models have been developed in the literature where the aim is mostly to optimize cost or profit and to find the optimal order quantity for an integrated production and remanufacturing system. In this study, we explore a System Dynamics approach in order to model an inventory control system for a remanufacturing process in the context of a Closed Loop Supply Chain. Specifically, the return process is modelled using several factors which influence relationships within the process. The factors considered are residence time of the product with customer, service agreement with customer and customer behaviour in returning used products. The findings suggest that a reduction of residence time and an increase in the level of service agreement with customers, which in turn increases customer behaviour in returning used product, can lead to efficiency in inventory management for companies involved in the remanufacturing process. In addition, we provide two simple case studies to support these findings.