Robust optimisation approach to the design of service networks for reverse logistics

In this paper we discuss a typical service network of a company providing repair and refurbishment services for its products. To optimise the network we propose a mixed-integer linear programming (MILP) model that minimises the total cost subject to flow balance and logical constraints. The solution of the model determines which facilities are to be used in the network and the associated flows. The model is validated against data obtained from a computer manufacturer and real-life sources. The optimal network configuration depends on several factors such as the number of products returned, percent of faulty products and warranty fraction of modules, which are uncertain in nature. We also address the issue of identifying these uncertain parameters, and their levels to be considered. A min-max robust optimisation model is then developed and solved to address these uncertainties.