The study of returned item inventory management in a closed-loop supply chain system has become an important issue in recent years. So far, investigations about inventory decision making in a closed-loop supply chain system have been confined to traditional forward and reverse oriented material flow supply chain. In this study, we propose an integrated inventory model consisting a supplier, a manufacturer, and a retailer where the manufacturer inspects all of the returned items collected from

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... e customers and classifies them as recoverable or waste. Returned items that recovered through the remanufacturing process and the newly manufactured products are then used to meet the demand of the retailer. However, some recovered items which are not comparable to the ones in quality, classified as refurbished items, are sold to a secondary market at a reduced price. This study also suggests that the flow of returned items is controlled by a decision variable, namely an acceptance quality level of recoverable item in the system. We apply multiple remanufacturing cycle and multiple production cycle policy to the proposed model and give the corresponding iterative procedure to determine the optimal solutions. Further, numerical examples are presented for illustrative purpose.