Heavy Traffic Analysis of a Simple Closed-Loop Supply Chain

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2010-11-01
Authors
Ryan, Sarah
Wang, Lizhi
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Industrial and Manufacturing Systems Engineering
Abstract

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.

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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.

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Fri Jan 01 00:00:00 UTC 2010
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