V. Daniel R. Guide

Production planning and control for remanufacturing: industry practice and research needs

Abstract Remanufacturing represents a higher form of reuse by focusing on value-added recovery, rather than materials recovery (i.e., recycling). Remanufacturing systems are widespread in the United States and are profitable. However, the management of production planning and control activities can differ greatly from management activities in traditional manufacturing. We report on managerial remanufacturing practices via a survey of production planning and control activities at remanufacturing firms in the United States. Production planning and control activities are more complex for remanufacturing firms due to uncertainties from stochastic product returns, imbalances in return and demand rates, and the unknown condition of returned products. We identify and discuss seven complicating characteristics that require significant changes in production planning and control activities. We also describe the research opportunities that exist for each of the complicating characteristics.

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.

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.

Supply-Chain Management for Recoverable Manufacturing Systems

Recoverable manufacturing systems minimize the environmental impact of industry by reusing materials, reducing energy use, and reducing the need to landfill industrial products. These systems are widespread in the United States and are profitable, in addition to contributing to sustainable development. However, the management of supply-chain activities can differ greatly from management activities in traditional manufacturing supply chains. Seven complicating characteristics increase uncertainty. Managers must take actions to reduce uncertainty in the timing and quantity of returns, balance return rates with demand rates, and make material recovery more predictable. Managers must also plan for the collection of products from end-users. The use of information systems with new production-planning and control techniques makes management of these activities more predictable.

The Challenge of Closed-Loop Supply Chains

Closed-loop supply chains differ significantly from forward supply chains in many aspects. These differences are not well understood in many contexts, and the situation is complicated by many types of product returns. Progress is slow since closed-loop supply chains are rarely considered as value-creating systems, and much of the focus is on the operational aspects, rather than the larger strategic issues. Interest is growing in the US because of the potential profitability and in the European Union because of legislation. New business models need to be developed by joint cooperation between industry and academia that take a life-cycle approach to products.

Time Value of Commercial Product Returns

Manufacturers and their distributors must cope with an increased flow of returned products from their customers. The value of commercial product returns, which we define as products returned for any reason within 90 days of sale, now exceeds

The Potential for Cannibalization of New Products Sales by Remanufactured Products

100 billion annually in the United States. Although the reverse supply chain of returned products represents a sizeable flow of potentially recoverable assets, only a relatively small fraction of the value is currently extracted by manufacturers; a large proportion of the product value erodes away because of long processing delays. Thus, there are significant opportunities to build competitive advantage from making the appropriate reverse supply chain design choices. In this paper, we present a network flow with delay models that includes the marginal value of time to identify the drivers of reverse supply chain design. We illustrate our approach with specific examples from two companies in different industries and then examine how industry clockspeed generally affects the choice between an efficient and a responsive returns network.

Supply Chain Coordination for False Failure Returns

The potential for cannibalization of new product sales by remanufactured versions of the same product is a central issue in the continuing development of closed-loop supply chains. Practitioners have no fact-based information to guide practice at firms and academics have no studies available to use as the basis for assumptions in models. We address the cannibalization issue by using auctions to determine consumers’ willingness to pay (WTP) for both new and remanufactured products. The auctions also allow us to better understand the potential impact of offering new and remanufactured products at the same time, which provides us insights into the potential for new product cannibalization. Our results indicate that, for the consumer and commercial products auctioned, there is a clear difference in WTP) for new and remanufactured goods. For the consumer product, there is scant overlap in bidders between the new and remanufactured products, leading us to conclude that the risk of cannibalization in this case is minimal. For the commercial product, there is evidence of overlap in bidding behavior, exposing the potential for cannibalization.

Scheduling policies for remanufacturing

False failure returns are products that are returned by consumers to retailers with no functional or cosmetic defect. The cost of a false failure return includes the processing actions of testing, refurbishing (if necessary), repackaging, the loss in value during the time the product spends in the reverse supply chain (a time that can exceed several months for many firms), and the loss in revenue because the product is sold at a discounted price. This cost is significant and is incurred primarily by the manufacturer. Reducing false failure returns, however, requires effort primarily from the retailer, for example informing consumers about the exact product that best fits their needs. We address the problem of reducing false failure returns via supply chain coordination methods. Specifically, we propose a target rebate contract that pays the retailer a specific dollar amount per each unit of false failure returns below a target. This target rebate provides an incentive to the retailer to increase her effort, thus decreasing the number of false failures and (potentially) increasing net sales. We show that this contract is Pareto improving in the majority of cases. Our results also indicate that the profit improvement to both parties, and the supply chain, is substantial.

So What If Remanufacturing Cannibalizes My New Product Sales

Abstract Recoverable product environments are part of strategies to increase product life and prevention of waste through repair, remanufacturing and recycling of products. A key part of this type of environment is the recoverable manufacturing system designed to extend product life through repair and remanufacturing. Remanufacturing systems are faced with a greater degree of uncertainty and complexity than traditional new manufacturing systems, leading to the need for planning and control systems designed to deal with the added uncertainty and complexity. In this study of a remanufacturing facility, two key activities in planning and controlling, disassembly release mechanisms (DRMs) and priority dispatching rules (PDRs) are examined via a simulation model. The results indicate that simple due-date-based priority dispatching procedures generally perform well for a variety of performance measures. Disassembly release mechanisms, as examined in this study, had very little impact and as a result practicing managers should favor the simplest to implement and manage mechanisms.