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|Title: ||Refuse or reuse: managing the quality of returns in product recovery systems|
|Authors: ||Marshall, Sarah Elizabeth|
|Supervisor(s): ||Archibald, Tom|
|Issue Date: ||26-Jun-2012|
|Publisher: ||The University of Edinburgh|
|Abstract: ||Increasing legislative and societal pressures are forcing manufacturers to become
environmentally-conscious and take responsibility for the fate of their goods after they
have been used by consumers. As a result, some manufacturers operate hybrid systems
which produce new goods and recover used goods. Product recovery describes
the process by which used products are returned to their manufacturers or sent to a
specialised facility for recovery, before being sold on the original or a secondary market.
The quality of the returned goods is a significant issue in product recovery systems as
it can affect both the type of recovery and costs associated with it. Quality in product
recovery systems has not been adequately studied, with many authors either ignoring
the possibility of receiving lower quality returns, or assuming they are disposed of
rather than recovered. However, such assumptions ignore the possibility that the firm
might be able to salvage value from lower quality returns by using them for parts or
This thesis presents four models that investigate the importance of considering the
quality of returns in the management of inventory in a product recovery system, by
examining the cost-effectiveness of recovering both high quality and low quality returns.
The first model is a deterministic lot-sizing model of a product recovery system. It
was found that performing both high and low quality recovery reduced the sensitivity
of the optimal cost to operational restrictions on the choice of decision variables.
The second model is a discrete-time, periodic-review model formulated as a Markov
decision process (MDP) and introduces uncertainty in demand, returns, and the quality
of the returns. It was found that performing both types of recovery can lead to cost
savings and better customer service for firms through an increased fill rate.
The third model addresses those industries where produced and recovered goods
cannot be sold on the same market due to customers’ perceptions and environmental
legalisation. Using an MDP formulation, the model examines a product recovery system
in which produced and recovered goods are sold on separate markets. The profitability
of offering two-way substitution between these markets was investigated. It was found
that offering substitution can allow firms to increase both their profits and fill rates.
The fourth model examines the issue of separate markets and substitution in the
continuous time domain using a semi-Markov decision process. The continuous nature
of the model allows more detailed examination of the substitution decision. It was
found that offering substitution can allow firms to increase their profit and in some
cases also increase their fill rate. In some cases, production is performed less frequently
when downward substitution can be offered, and recovery is performed less often when
upward substitution can be offered.
The findings of this thesis could be used to help a firm that is currently recovering
high quality returns assess the cost-effectiveness of also recovering lower quality
returns. Recovering low-quality items, rather than disposing of them, may allow a firm
to increase the amount it recycles. The findings highlight the importance of considering
the quality of returns when managing a product recovery system as they show that
economic gains can be achieved by reusing rather than refusing low quality returns.|
|Keywords: ||product recovery|
Markov decision process
|Appears in Collections:||Business and Management thesis and dissertation collection|
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