Optimizing Production and Remanufacturing Decisions for Make-to-Stock Hybrid Manufacturing Systems Using Real-Time Information on Products in Use

Abstract

This study presents an analytical framework for make-to-stock hybrid manufacturing systems that use both virgin and returned materials to produce a single product. The system is modelled as a Markov Decision Process, and a linear programming approach is used to determine optimal decisions on when to produce, which material to use, and whether to remanufacture or dispose of returned items. A key feature of the model is the inclusion of real-time tracking information on products in use within such a circular system, which supports informed and timely decision-making. We conduct a comparative numerical analysis between the optimal policy and a simplified one that omits orbit information. Our results show that excluding orbit information leads to an average profit loss of 2.21%, with losses reaching up to 11.18% in some settings, quantifying the economic impact of tracking capabilities in closed-loop systems. We also examine the effect of regulatory minimums that require a portion of production to use returned materials. While such policies support sustainability goals, they may reduce profitability when return rates are low or holding costs are high. We believe these findings offer practical guidance for firms seeking to balance profitability, regulatory compliance, and operational simplicity in circular manufacturing environments.