Heavy Traffic Analysis of a Simple Closed-Loop Supply Chain
Is Version Of
We consider a closed-loop supply chain where new products are produced to order and returned products are refurbished for reselling. The solution to aprice-setting problem enforces the heavy traffic condition, under which we address the production rate control problem for two types of cost functions. Wesolve a drift-control problem for an approximate system driven by a correlated two-dimensional Brownian motion. The solutions to this system are then used to obtain asymptotically optimal control policies. We also conduct a numerical study to explore the effects of different parameters on the optimal production rates and the resulting costs.
The Version of Record of this manuscript has been published and is available in Stochastic Models 2010, http://www.tandfonline.com/10.1080/15326349.2010.519665. Posted with permission.