We consider a reverse supply chain with a production facility and a recovery facility, and address the joint control of production and disposal decisions for sustainable operations. Demands are satisfied from on-hand inventory of serviceable products, replenished via manufacturing or remanufacturing. Sold products may be returned after usage and each returned product is disposed of or accepted for recovery. Accepted returned products are converted into serviceable products after remanufacturing process. Formulating the model as a Markov decision process, we characterized the structure of the optimal production and disposal policy as two monotone switching curves under a special condition. Three types of heuristic policies are presented and their performance is numerically compared.