Luk N. Van Wassenhove

Quantitative models for reverse logistics: A review

Abstract This article surveys the recently emerged field of reverse logistics. The management of return flows induced by the various forms of reuse of products and materials in industrial production processes has received growing attention throughout this decade. Many authors have proposed quantitative models taking those changes in the logistics environment into account. However, no general framework has been suggested yet. Therefore the time seems right for a systematic overview of the issues arising in the context of reverse logistics. In this paper we subdivide the field into three main areas, namely distribution planning, inventory control, and production planning. For each of these we discuss the implications of the emerging reuse efforts, review the mathematical models proposed in the literature, and point out the areas in need of further research. Special attention is paid to differences and/or similarities with classical ‘forward’ logistics methods.

Strategic Issues in Product Recovery Management

textabstractThis article examines strategic production and operations management issues in product recovery management (PRM). PRM encompasses the management of all used and discarded products, components, and materials for which a manufacturing company is legally, contractually, or otherwise responsible. The objective of PRM is to recover as much of the economic (and ecological) value of used and discarded products, components, and materials as reasonably possible, thereby reducing the ultimate quantities of waste to a minimum. This article also discusses the relevance of PRM to durable products manufacturers. It contains a categorization of PRM decisions. A case study based on the PRM system of a multinational copier manufacturer is presented to illustrate a set of specific production and operations management issues. The experiences of two other pro-active manufacturers (BMW and IBM) are also discussed

Closed-Loop Supply Chain Models with Product Remanufacturing

The importance of remanufacturing used products into new ones has been widely recognized in the literature and in practice. In this paper, we address the problem of choosing the appropriate reverse channel structure for the collection of used products from customers. Specifically, we consider a manufacturer who has three options for collecting such products: (1) she can collect them herself directly from the customers, (2) she can provide suitable incentives to an existing retailer (who already has a distribution channel) to induce the collection, or (3) she can subcontract the collection activity to a third party. Based on our observations in the industry, we model the three options described above as decentralized decision-making systems with the manufacturer being the Stackelberg leader. When considering decentralized channels, we find that ceteris paribus, the agent, who is closer to the customer (i.e., the retailer), is the most effective undertaker of product collection activity for the manufacturer. In addition, we show that simple coordination mechanisms can be designed such that the collection effort of the retailer and the supply chain profits are attained at the same level as in a centrally coordinated system.

OR FORUM---The Evolution of Closed-Loop Supply Chain Research

The purpose of this paper is to introduce the reader to the field of closed-loop supply chains with a strong business perspective, i.e., we focus on profitable value recovery from returned products. It recounts the evolution of research in this growing area over the past 15 years, during which it developed from a narrow, technically focused niche area to a fully recognized subfield of supply chain management. We use five phases to paint an encompassing view of this evolutionary process for the reader to understand past achievements and potential future operations research opportunities.

The impact of ERP on supply chain management: Exploratory findings from a European Delphi study

Abstract This article presents results from a Delphi study on the future impact of enterprise resource planning (ERP) systems on supply chain management (SCM). The Delphi study was conducted with 23 Dutch supply chain executives of European multi-nationals. Findings from this exploratory study were threefold. First, our executives have identified the following key SCM issues for the coming years: (1) further integration of activities between suppliers and customers across the entire supply chain; (2) on-going changes in supply chain needs and required flexibility from IT; (3) more mass customization of products and services leading to increasing assortments while decreasing cycle times and inventories; (4) the locus of the driver’s seat of the entire supply chain and (5) supply chains consisting of several independent enterprises. The second main finding is that the panel experts saw only a modest role for ERP in improving future supply chain effectiveness and a clear risk of ERP actually limiting progress in SCM. ERP was seen as offering a positive contribution to only four of the top 12 future supply chain issues: (1) more customization of products and services; (2) more standardized processes and information; (3) the need for worldwide IT systems; and (4) greater transparency of the marketplace. Implications for subsequent research and management practice are discussed. The following key limitations of current ERP systems in providing effective SCM support emerge as the third finding from this exploratory study: (1) their insufficient extended enterprise functionality in crossing organizational boundaries; (2) their inflexibility to ever-changing supply chain needs, (3) their lack of functionality beyond managing transactions, and (4) their closed and non-modular system architecture. These limitations stem from the fact that the first generation of ERP products has been designed to integrate the various operations of an individual firm. In modern SCM, however, the unit of analysis has become a network of organizations, rendering these ERP products inadequate in the new economy.

Reverse Channel Design: The Case of Competing Retailers

The economical and environmental benefits of product remanufacturing have been widely recognized in the literature and in practice. In this paper, we focus on the interaction between a manufacturers reverse channel choice to collect postconsumer goods and the strategic product pricing decisions in the forward channel when retailing is competitive. To this end, we model a direct product collection system, in which the manufacturer collects used products directly from the consumers (e.g., print and copy cartridges) and an indirect product collection system, in which the retailers act as product return points (e.g., single-use cameras, cellular phones). We first examine how the allocation of product collection to retailers impacts their strategic behavior in the product market, and we discuss the economic trade-offs the manufacturer faces while choosing an optimal reverse channel structure. When a direct collection system is used, channel profits are driven by the impact of scale of returns on collection effort, whereas in the indirect reverse channel, supply chain profits are driven by the competitive interaction between the retailers. Subsequently, we show that the buy-back payments transfered to the retailers for postconsumer goods provide a wholesale pricing flexibility that can be used to price discriminate between retailers of different profitability.

Market Segmentation and Product Technology Selection for Remanufacturable Products

Remanufacturing is a production strategy whose goal is to recover the residual value of used products. Used products can be remanufactured at a lower cost than the initial production cost, but consumers value remanufactured products less than new products. The choice of production technology influences the value that can be recovered from a used product. In this paper, we solve the joint pricing and production technology selection problem faced by a manufacturer that considers introducing a remanufacturable product in a market that consists of heterogeneous consumers. Our analysis discusses the market and technology drivers of product remanufacturability and identifies some phenomena of managerial importance that are typical of a remanufacturing environment.

Remanufacturing as a Marketing Strategy

The profitability of remanufacturing systems for different cost, technology, and logistics structures has been extensively investigated in the literature. We provide an alternative and somewhat complementary approach that considers demand-related issues, such as the existence of green segments, original equipment manufacturer competition, and product life-cycle effects. The profitability of a remanufacturing system strongly depends on these issues as well as on their interactions. For a monopolist, we show that there exist thresholds on the remanufacturing cost savings, the green segment size, market growth rate, and consumer valuations for the remanufactured products, above which remanufacturing is profitable. More important, we show that under competition remanufacturing can become an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.

Reverse Supply Chains for Commercial Returns

The flow of product returns is becoming a significant concern for manufacturers. Typically, these returns have been viewed as a nuisance, resulting in reverse supply chains that are designed to minimize costs. These minimum cost reverse supply chains often do not consider product return speed. The longer it takes to retrieve a returned product, the lower the chances that there are financially attractive reuse options. Unlike forward supply chains, design strategies for reverse supply chains are unexplored and largely undocumented. The most influential product characteristic for reverse supply chain design is the marginal value of time. Responsive reverse supply chains are the appropriate choice when the marginal value of time for products is high, and efficient reverse supply chains are the proper choice when the marginal value of time for products is low. Product returns and their reverse supply chains represent a potential value stream and deserve as much attention as forward supply chains.

Matching Demand and Supply to Maximize Profits from Remanufacturing

The profitability of remanufacturing depends on the quantity and quality of product returns and on the demand for remanufactured products. The quantity and quality of product returns can be influenced by varying quality-dependent acquisition prices, i.e., by using product acquisition management. Demand can be influenced by varying the selling price. We develop a simple framework for determining the optimal prices and the corresponding profitability. We motivate and illustrate our framework using an application from the cellular telephone industry.