Production Decisions of Manufacturing and Remanufacturing Hybrid System Considering Downward Substitution: A Comprehensive Model Integrating Financial Operations

Abstract

Traditional approaches for production decisions of the manufacturing/remanufacturing hybrid system usually focus on physical operations and ignore the corresponding financial aspects. This paper proposes a mixed integer stochastic programming model integrating physical and financial operations based on scenario analysis, which considers the downward substitution between new and remanufactured products and selects financial performance indicator, i.e. economic value added, as the optimal objective function. The prime superiorities of the integrated approach are emphasized through a numerical example, and sensitivity analyses on some critical parameters are conducted. The findings indicate that the integrated approach can not only ensure the stability of hybrid production system, but also significantly improve financial operation efficient and reduce total financial operation cost, and thus eventually brings the manufacturer higher objective value. Furthermore, the advantage of integrated approach in objective optimization is more prominent when manufacturers intend to provide higher service level to customers. Finally, the results proposed in this paper provide applicable suggestions to manufacturers and financial institutions. INDEX TERMS Production decisions, manufacturing /remanufacturing hybrid system, downward substitution, financial operations, economic value added YONGJIAN WANG was born in Henan, China, in 1989. He received the B.S. degree in financial management from Henan Polytechnic University in 2011, the M.S. degree in business management from Nanjing University of Finance & Economics in 2013, and the PhD degree in management science and engineering from Southeast University in 2017. Since 2017, he has been a lecturer in the Business School at Jiangsu Normal University. His research interests are in production and operations management, supply chain management, financial management, and systems simulation modeling and optimization.

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