The applications of Cobb-Douglas Production Function in remanufacturing industry

Abstract

The study was conducted in a heavy equipment remanufacturing industry. The problem faced by the industry is in order to make the right decisions about the number of products that must be produced and the labor and parts needed to carry out the remanufacturing process. All decisions regarding this matter consider the cost of the new and reprocessed parts and the workforce used, since it depends on the condition of the product returned. In this regard, it will be useful to provide recommendations for developing the production process framework for remanufacturing. The main purpose of this paper is to measure the appropriate production quantity with an existing remanufacturing alternative, during the 3 months observations. This study based on the Cobb-Douglas production function with labor and parts as the input. The remanufacturing process itself consists of three stages; disassembly, reconditioning and reassembly. There were two cases that occurred in reassembly process during 3 months of observation. The input for reassembly process uses new parts and reconditioned parts. In Case I all parts from disassembly process are forwarded to reconditioning process without any constraints. In Case II the parts are binding by the constraints of the return parts. As a result, the existing production quantity from reassembly process is below the maximum output, except for month 2. This indicates that production framework needs to pay attention to the proportion of input parameters. It means that the maximum quantity of the new products could get from a given combination of labor and parts at the reassembly process.