Dynamic Acquisition pricing of Uncertain Product Return for a Third Party Remanufacturer

Acquisition price is a key factor in remanufacturing activities which totally affects profitability of take-back and reusing systems. In some industries, third party sectors involve in collecting, reusing, and remanufacturing activities efficiently. When a remanufacturer contributes in returning and remanufacturing activities as a third party sector, she confronts uncertainty of selling price of market as well as uncertainty of return side. In this paper, we consider a third party remanufacturer who, after remanufacturing uncertain returned products, would have to sell them to main producer or retailers on an uncertain market price. We develop a dynamic acquisition pricing problem in which optimal acquisition price and selling price are the most important variables to be determined. The remanufacturer is able to stock remanufactured products to sell in future periods with higher market prices so much as she can handle inventory costs. Robust optimization approach is used to reformulate nominal maximization problem to uncertain case. Final robust optimization model is obtained as a quadratic programming model over discrete periods which can be solved by optimization packages of QP. Sensitivity analysis on critical parameters is performed over a numerical example.

Keywords:

acquisition pricing , robust optimization , remanufacturing , dynamic pricing , product return