Joint Optimization of Asset and Inventory Management in a Product–Service System

Xiang Wu and Sarah M. Ryan

The Engineering Economist, 2014, vol. 59, issue 2, 91-115

Abstract: We propose an integrated model of the asset management decisions for a fleet of identical product units and the inventory management decisions for a closed-loop supply chain in the context of a product–service system, in which the two types of decisions are closely coupled. A joint optimization technique is developed to obtain the parameters of the operational policy for the integrated model that minimize the long run average cost rate. A numerical example is provided to illustrate the computational procedures. In addition, the effect of a simplifying assumption that the replaced products have no quality difference is evaluated and the results suggest that as long as the quality difference between the preventively replaced products and failure replaced products is not too big, the simplification to treat them as one category is reasonable.

Date: 2014
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DOI: 10.1080/0013791X.2013.873844

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