한국생산성학회

Remanufactured product has the same or similar quality as a new product and used products are recovered and sold as new products. Manufactured and remanufactured products can be substitutes for each other. Customer-driven substitution is initiated by the customers and firm-driven substitution is initiated by the firm. In this study, we consider a single-period stochastic optimization model considering firm-driven substitution for the optimal decisions of price and production quantity. The most common type of substitution is inventory-based substitution where consumers substitute for a product that is unavailable or protected from sale to that customer at that time. Customers may switch to a cheaper product regardless of the availability of their original preference and this type of demand substitution is price-based substitution. This model is a profit maximization model for deciding optimal pricing and production quantity where the unsold high-priced products are substituted to the low-priced product demand customers. The customer demands are stochastic and independent. We develop a one-period model for optimal production quantity for a given price and for optimal prices for a given production quantity. We consider inventory-based substitution and price-based substitution in the pricing decisions. The main objective of this study is to develop analytical models to obtain the optimal solutions to support decision-makers in these environments. We develop standard numerical procedures for finding optimal solutions (numerical examples). The numerical study shows that the optimal production quantity of newly manufactured product is greater than that of the equivalent newsvendor problem (with zero holding and shortage costs and no substituted demand), and the optimal production level of remanufactured product is less than that of the equivalent newsvendor problem. The optimal prices are less than those of the equivalent deterministic model. The limitations of this work suggest that the need for future research that enables firms to cope with the general case where there are multiple markets and capacity resource constraint.