Benders Decomposition for the Distributionally Robust Optimization of Pricing and Reverse Logistics Network Design in Remanufacturing Systems

Abstract The pricing and reverse logistics network design problem in remanufacturing has attracted considerable attention in recent years due to increasingly serious environmental problems. In this study, we consider a pricing and reverse logistics network design problem with price-dependent return quality uncertainty. To handle the high uncertainty in return quality, we propose a distributionally robust risk-averse model to safeguard the profits of investors in extreme situations. We propose a Benders decomposition approach to solve the proposed model. It is enhanced through valid inequalities, local branching, in-out variant methods and scenario-based aggregated cuts. Computational experiments demonstrate that the distributionally robust model can effectively hedge against high uncertainty and that the enhanced Benders decomposition methods significantly outperform their classical counterparts and the off-the-shelf solver Gurobi. Lastly, managerial insights are explored, and future research directions are outlined.