Product Remanufacturing and Replacement Decisions Under Operations and Maintenance Cost Uncertainties

Wenbo Shi and K. Jo Min

The Engineering Economist, 2014, vol. 59, issue 2, 154-174

Abstract: In recent years, there has been substantial interest in remanufacturing because it conserves new natural resources and reduces wastes. In this article, we aim to contribute to a deeper understanding of this remanufacturing in the context of maintenance and replacement policies. Specifically, we assume that a product consists of durable and nondurable parts with uncertain, yet different, operations and maintenance (O&M) costs, and we aim to determine the optimal remanufacturing and replacement policies for the nondurable parts and the product. The evolution of the O&M costs is assumed to follow a geometric Brownian motion process, and the corresponding modeling and analysis use a real options approach. Managerial insights and economic implications are obtained via mathematical and numerical analyses.

Date: 2014
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DOI: 10.1080/0013791X.2014.884662

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