Abstract
This paper presents a dynamic stochastic optimization model to jointly determine marketing and operations decisions in a remanufacturing system. In the system, two remanufactured products share a common recycled core component. One remanufactured product is for the high end market and the other is for the low end market. The company has to decide how many common core components to recycle, how many high end and low end products to remanufacture, and how many high end and low end products to sell in each period given the market conditions. The main source of the uncertainty is the number of the common recycled core component available in each period. The inter-dependence among decision variables and the uncertainty make this problem extremely complicated. Without proper control policies, the company will result in significantly lower profits.Sequential decision processes are used to formulate the problem. The objective is to maximize the sum of total profits over the planning horizon. Efficient value iteration algorithm is developed to solve the problem. The stationary solutions provide relationships between values of decision variables and inventory levels. The impact of the uncertainty is also discussed.