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Manufacturers are increasingly interested in the design of hybrid manufacturing/remanufacturing systems in terms of environmental protection and the desire to enhance profits. Furthermore, they have realised the role of the quality characteristics of end-of-life items on the cost of the remanufacturing process. This paper introduces a production planning optimisation model for a hybrid system, which consists of both manufacturing and remanufacturing processes, under a 2-way substitution strategy and stochastic quality characteristics of returned items. A stochastic model, which allows the customers to switch from new to remanufactured products and vice versa, is conducted based on the size of demand in primary/secondary markets. A numerical example is provided to compare the optimal strategies with and without considering the Waste Electrical and Electronic Equipment Directive. Finally, a global sensitivity analysis is performed to assess the impacts of characteristic parameters on the optimal solution. The findings indicate that the high quality of returns can encourage more customers to purchase remanufactured items even without decreasing the expected profit made by the manufacturer. Furthermore, with a high recycling rate, the manufacturer is enabled to extract more reusable components and hence make more profit.

Production planning of a closed-loop hybrid system on primary/secondary market under WEEE Directive and 2-way substitution