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2017 | OriginalPaper | Buchkapitel

17. Closed-Loop Supply Chains: A Strategic Overview

verfasst von : James D. Abbey, V. Daniel R. Guide Jr.

Erschienen in: Sustainable Supply Chains

Verlag: Springer International Publishing

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Abstract

Managers who consider a closed-loop supply chain just another environmental initiative need to update their thinking. Modern firms that use closed-loop supply chains as a competitive strategy receive many benefits—particularly higher profitability and control over a product’s entire lifecycle. In fact, the market for multiple lifecycle products continues to grow, with current estimates holding that remanufactured product sales exceed $100 billion per year. As a result of analyzing the ever-growing remanufacturing sector through years of working with managers in numerous industries, various levers and themes surrounding effective closed-loop supply chain strategies became apparent. This chapter presents these findings and shows how firms in multiple industries experienced both successes and failures of their closed-loop supply chain strategies.

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Vorheriges Kapitel Moving from a Product-Based Economy to a Service-Based Economy for a More Sustainable Future

Nächstes Kapitel Sustainable Food Supply Chain Design

Current estimates of the remanufactured products market in the US come from the United States International Trade Commission (USITC) report on remanufactured goods. See USITC. 2012. Remanufactured goods: an overview of the US and global industries, markets, and trade. Public report, U.S. International Trade Commission accessible at http://www.usitc.gov/publications/332/pub4356.pdf.

Corporate social responsibility continues to generate much debate about the role of a corporation as a good citizen. For an excellent discussion of such issues, see Carroll, A. B. 1999. Corporate social responsibility evolution of a definitional construct. Business & Society 38(3): 268–295.

Additionally, for firms less interested in internally promoting environmental initiatives, legislative mandates regarding environmental performance and impact are particularly prevalent in the European Union with the waste electrical and electronic equipment (WEEE : http://ec.europa.eu/environment/waste/weee/legis_en.htm) and reduction of hazardous substances (RoHS: http://ec.europa.eu/environment/waste/rohs_eee/index_en.htm). Both laws seek to control environmental impact. Though the E.U. was among the first to enact such laws, Japan (http://www.env.go.jp/en/policy/) and Australia (http://www.environment.gov.au/about-us/legislation) have followed with similar legislation aimed at curbing environmental impact.

Though much of the strict recycling mandates legislation has not occurred within the US, multinational firms already maintain product portfolios that meet the ambitious requirements. Should the legislative programs continue to expand throughout the world, firms holding such product portfolios may hold a competitive advantage over competitors who currently do not meet the requirements of such legislation. Various recent works address the issue of environmental legislation and product take-back. For two such works, see Atasu, A. and L.N. Van Wassenhove. 2010. “Environmental Legislation Regarding Product Take-Back and Recovery” in ‘Closed‐Loop Supply Chains,’ Eds. M. Ferguson, G. Souza. Taylor and Francis. and a work tailored to the extended producer responsibility for electronics waste Atasu, A., R. Subramanian. 2012. Extended Producer Responsibility for E‐Waste: Individual or Collective Responsibility? Production and Operations Management 21(6): 1042–1059.

If the concept of a closed-loop supply chain is unfamiliar, multiple resources can provide guidance and insights. For example, see Guide, V.D.R. Jr., and Van Wassenhove, L.N. 2003. “Business Aspects of Closed-Loop Supply Chains” in Guide, V.D.R. Jr., and Van Wassenhove, L.N. (eds.), Business Aspects of Closed-Loop Supply Chains Exploring the Issues. Pittsburgh: Carnegie Mellon University Press. Also, see Ferguson, M.E. and Souza, G.C. 2010. “Closed-Loop Supply Chains New Developments to Improve the Sustainability of Business Practices. Boca Raton: CRC Press.”

For a recent discussion of the continuing challenges in closed-loop supply chains, see Guide, V. D. R. and L.N. Van Wassenhove. 2009. The evolution of closed-loop supply chain research. Operations Research 57(1): 10–18.

The rate of false failure returns can vary widely by the nature of the product and industry. As a prime example in the consumer electronics industry, Hewlett-Packard experienced false failure returns rates as high as 80 % of all inkjet printer returns. On the other hand, Bosch false failure return rates at a vastly lower 2 % of all power drill returns. For more information, see Ferguson, M., V.D.R. Guide, Jr., G.C. Souza. 2006. Supply chain coordination for false failure returns. Manufacturing & Service Operations Management 8(4): 376–393.

The National Retail Federation offers free, detailed reports on returns. For recent reports, such as the 2013 report noted, see http://www.theretailequation.com/retailers/IndustryReports.

The Remanufacturing Institute’s (http://www.reman.org) gives an in-depth look at remanufacturing from various industry perspectives. In particular, the website provides details about remanufacturing processes and the resulting environmental benefits.

For an examination of issues in production planning and control in the engine portion of remanufacturing, see Guide, V.D.R., Jr. 2000. Production planning and control for remanufacturing: industry practice and research needs. Journal of Operations Management 18(4): 467–483. For detailed information about the issues related to grading the quality of cores acquired through the front-end processes of product acquisition management, see Ferguson, M., V.D.R. Guide, Jr., E. Koca, and G.S. Souza. 2009. The value of quality grading in remanufacturing. Production and Operations Management 18(3): 300–314.

For an overview of the current state of market based literature for remanufactured products and pricing structures, and market segments, see, Abbey, J.D., M.G. Meloy, V.D.R. Guide, Jr., and J.D. Blackburn. 2015. Barriers and Strategies for Product Reuse in Consumer Markets. Under review at California Management Review.

This figure is adapted from, Abbey, J.D., V.D.R. Guide Jr. 2012. “Closed-Loop Supply Chains” in T. Bansal, A. Hoffman, (eds.), Oxford Handbook on Business and the Natural Environment. New York: Oxford University Press, 290–309.

For further information on the reduce, reuse, and recycle (3R) hierarchy, see the Environmental Protection Agency’s website at http://www2.epa.gov/recycle.

See Atasu, A., V.D.R. Guide, Jr., L.N. Van Wassenhove. 2009. So what if remanufacturing cannibalizes new product sales? California Management Review 52: 56‐76.

For additional insights into how to operate in a competitive core acquisition market, see Guide, V. D. R., R.H. Teunter, and L.N. Van Wassenhove. 2003. Matching demand and supply to maximize profits from remanufacturing. Manufacturing & Service Operations Management 5: 303–316.

For a detailed look at the nature of such challenges related to marginal value of time in fast moving industries such as consumer electronics, see Guide, V. D. R., G.C. Souza, L.N. Van Wassenhove, and J.D. Blackburn. 2006. Time value of commercial product returns. Management Science 52: 1200–1214. For potential solutions to maximize profits based on the nature of the industry’s marginal value of time, see Blackburn, J.D., V.D.R. Guide, G.C. Souza, and L.N. Van Wassenhove. 2004. Reverse Supply Chains for Commercial Returns. California Management Review 46: 6–22.

The Xerox Corporation has been a world leader in remanufacturing systems at their Webster, New York manufacturing/remanufacturing hybrid facilities. In both popular press and academic research, Xerox stands out as an exemplar of environmentally friendly closed-loop supply chain systems. Xerox works diligently from the design phase forward to recycle and remanufacture their equipment with great success in energy, materials, and waste reduction. For instance, in 2011, Xerox’s remanufacturing operations diverted over 13 million pounds of waste from landfills. See a recent corporate sustainability report at http://www.xerox.com/corporate-citizenship/2012/sustainability/product-design/enus.html.

Reverse supply chain design for consumer products remains a persistent issue for many firms. For a detailed discussion of viable solutions in consumer product industries, see the California Management Review article, Blackburn, J.D., V.D.R. Guide, G.C. Souza, and L.N. Van Wassenhove. 2004. Reverse Supply Chains for Commercial Returns. California Management Review 46: 6–22.

Much recent research focuses on the need for better understanding of design for remanufacturing and reuse. Many resources exist for those interested in the engineering side of design such as the Rochester Institute of Technology’s Center for Remanufacturing (http://www.rit.edu/gis/remanufacturing/). For an excellent summary of recent research on the topic of product design in a CLSC, see Bras, B. 2010. “Product Design Issues” in Ferguson, M.E. and Souza, G.C. (eds.), Closed-Loop Supply Chains New Developments to Improve the Sustainability of Business Practices. Boca Raton: CRC Press. Finally, for general resources on remanufacturing, see The Remanufacturing Institute website at http://www.reman.org/ and the Remanufacturing Industries Council website at http://remancouncil.org/.

The major impetus for this chapter and framework for understanding strategies for reuse through remanufacturing comes from ongoing research found in the manuscript, Abbey, J.D. and V.D.R. Guide. 2016. A typology of remanufacturing in a closed-loop supply chain. Working Paper, Texas A&M University and The Pennsylvania State University. Relatedly, see Abbey, J.D. and V.D.R. Guide. 2016. Remanufacturing Strategies in a Circular Economy. Working Paper, Texas A&M University and The Pennsylvania State University.

Reclaiming rare earth and other precious metals from electronics products has been an issue for decades. For a review of issues related to such reclamation, see Cui, J., and E. Forssberg. 2003. Mechanical recycling of waste electric and electronic equipment: a review. Journal of Hazardous Materials 99: 243–263.

Delta Airlines and Lufthansa continue to generate significant cost savings and profits through repair and refurbishment of both their own equipment and equipment for other airlines. For details on Delta Airlines’ continued strategy of extending lifecycles of aircraft, see Carry, Susan. 2012. “Delta Flies New Route to Profits: Older Jets,” The Wall Street Journal November 16, 2012. Lufthansa Technik AG actively markets their commercial airline refurbishment services for all levels of maintenance, overhaul, engines, components, aircraft systems, and more. For details, see Lufthansa website at http://www.lufthansagroup.com/en/company/business-segments/maintenance-repair-overhaul.html.

As noted before, the E.U., Japan, and Australia have all moved toward increasing legislative mandates for recycling and waste stream reduction. This increasing legislative pressure has also come to the US in the form of California’s recycling laws aimed to curbing electronics and other waste (http://www.calrecycle.ca.gov/recycle/).

Two recent studies shed light on the nature of consumer perceptions of multiple lifecycle products. The first study delves into the various factors that influence how consumers perceive multiple lifecycle (e.g., remanufactured) products (see Abbey, J. D., et al. 2015. Remanufactured Products in Closed-Loop Supply Chains for Consumer Goods. Production and Operations Management 24(3): 488–503.). An even more recent work examines how various consumer segments emerge with a sizeable portion—upwards of 35 %—of consumers refusing to consider a remanufactured product of any kind (see Abbey, J.D., J.D. Blackburn, V.D.R. Guide Jr. 2015. “Optimal Pricing for New and Remanufactured Products.” Journal of Operations Management 36: 130–146.). For a managerially-oriented discussion of these and expanded topics, see Abbey, J.D., M.G. Meloy, J.D. Blackburn, and V.D.R. Guide. 2015. Consumer Markets for Remanufactured and Refurbished Products. California Management Review 57(4): 26–4.

Fear of new product sales cannibalization when offering a remanufactured product has been a long-standing source of opposition for remanufacturing at many firms. For a nice discussion of such opposition and strategies to handle common issues with potential cannibalization, see Atasu, A., V.D.R. Guide, Jr., L.N. Van Wassenhove. 2009. So what if remanufacturing cannibalizes new product sales? California Management Review 52: 56–76.

Pinar Martin has recently released a book on the various levels of remanufacturing strategy as well as a scholarly paper on the topic. For those interested in the more managerially oriented materials, see Martin, P. 2010. Remanufacturing as a Supply Chain Strategy: Business Models and Case Studies. Dusseldorf, Germany: VDM Verlag. For those interested in the technical details, see Martin, P., V.D.R. Guide, and C.W. Craighead. 2010. Supply chain sourcing in remanufacturing operations: an empirical investigation of remake versus buy. Decision Sciences 41: 301–324.

For a detailed look at Dell’s outsourced remanufacturing/refurbishing strategy, see Vitasek, K., Ledyard, M., & Manrodt, K. 2013. Vested outsourcing: five rules that will transform outsourcing. Palgrave Macmillan. pp. 185–198.

Caterpillar is proud of their industry-leading remanufacturing and reuse systems. To say that remanufacturing and reuse is a core competence of Caterpillar would be an understatement. In any given year, Caterpillar reuses more than 120 million pounds of iron alone. For a detailed look at Caterpillar’s remanufacturing operations, see their website at http://www.caterpillar.com/en/company/sustainability/remanufacturing.html.

For a fascinating look at the adverse and even beneficial consequences of third-party remanufacturing, see Agrawal, V., A. Atasu, K. van Ittersum. 2015. Remanufacturing, third party competition, and the perceived value of new products. Management Science 61(1): 60–72.

For a look at the broad range of products—some of which are only available in remanufactured form—that Cardone Industries remanufacturers, see their website at https://www.cardone.com/.

Titel: Closed-Loop Supply Chains: A Strategic Overview
verfasst von: James D. Abbey
V. Daniel R. Guide Jr.
Verlag: Springer International Publishing
Buch: Sustainable Supply Chains
Print ISBN: 978-3-319-29789-7

Electronic ISBN: 978-3-319-29791-0

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-3-319-29791-0_17