As recycling and remanufacturing become more common, companies may simultaneously operate twoproduction processes for producing new and remanufactured products, and these are called hybrid pro-duction systems. However, such systems bring greater managerial complexity, and thus the determina-tion of an appropriate operation strategy to set the recycling ratio of the old product and allocate thecapacities of production to the new and remanufactured products is an important issue. This studymainly focuses on a hybrid production system in which the determination of the optimal operation strat-egy is based on the consideration of the related costs, the uncertainty about recycling, the demand sub-stitution, the capacity limitation, and the component durability. Moreover, the competition between newand remanufactured products is also considered to construct the proposed model, with the aim of max-imizing the profit of the manufacturer. The mathematical model are designed from several possible sce-narios to estimate the expected revenue and related costs of the hybrid production system. A Hessianmatrix and multivariate optimization methods are used to examine and obtain the optimal solution ofthe mathematical model. The impacts of related parameters are investigated by utilizing sensitivity anal-ysis, and the results of this can give insights to the related production managers.
