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This paper designs an optimal closed-loop supply chain network with an integrated forward and reverse logistics to examine the possibility of remanufacturing end-of-life (EoL) ships.

Explanatory variables are used to estimate the number of EoL ships available in a closed-loop supply chain network. The estimated number of EoL ships is used as an input in the model and then it is solved by a mixed-integer linear programming (MILP) model of the closed-loop supply chain network to minimise the total logistic costs. A discounted payback period formula is developed to calculate the length of time to recoup an investment based on the investment's discounted cash flows. Existing ship wrecking industry clusters in the Western region of India are used as the case study to apply the proposed model.

The MILP model has optimised the total logistics costs of the closed-loop supply network and ascertained the optimal number and location of remanufacturing for building EoL ships. The capital and variable costs required for establishing and operating remanufacturing centres are computed. To remanufacture 30 ships a year, the discounted payback period of this project is estimated to be less than two years.

Ship manufacturing businesses are yet to re-manufacture EoL ships, given high upfront capital expenditure and operational challenges. This study provides management insights into the costs and benefits of EoL ship remanufacturing; thus, informing the decision-makers to make strategic operational decisions.

The design of an optimal close loop supply chain network coupled with a Bayesian network approach and discounted payback period formula for the collection and remanufacturing of EoL ships provides a new integrated perspective to ship manufacturing.