This paper deals with the production-dependent failure rates for a hybrid manufacturing/remanufacturing system subject to random failures and repairs. The failure rate of the manufacturing machine depends on its production rate, while the failure rate of the remanufacturing machine is constant. In the proposed model, the manufacturing machine is characterized by a higher production rate. The machines produce one type of final product and unmet demand is backlogged. At the expected end of their usage, products are collected from the market and kept in recoverable inventory for future remanufacturing, or disposed of. The objective of the system is to find the production rates of the manufacturing and the remanufacturing machines that would minimize a discounted overall cost consisting of serviceable inventory cost, backlog cost and holding cost for returns. A computational algorithm, based on numerical methods, is used for solving the optimality conditions obtained from the application of the stochastic dynamic programming approach. Finally, a numerical example and sensitivity analyses are presented to illustrate the usefulness of the proposed approach. Our results clearly show that the optimal control policy of the system is obtained when the failure rates of the machine depend on its production rate.
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