Closed-Loop Supply Chain Network Design with Recovery of Glass Containers

Closed-Loop Supply Chain Network Design with Recovery of Glass Containers

Sina Golara (Industrial Engineering Department, K. N. Toosi University of Technology, Tehran, Iran), Nasim Mousavi (Industrial Engineering Department, K. N. Toosi University of Technology, Tehran, Iran), Mohammad Jafar Tarokh (Industrial Engineering Department, K. N. Toosi University of Technology, Tehran, Iran) and Mostafa Hosseinzadeh (Department of Industrial Engineering, Islamic Azad University, Arak Branch, Arak, Iran)
Copyright: © 2012 |Pages: 26
DOI: 10.4018/jsds.2012100101


Reverse logistics (RL) and closed-loop supply chains (CLSC) have recently received enormous attention due to growing environmental concerns and legislations coupled with the lucrative business potential. The main purpose of this paper is to develop a closed-loop supply chain network design model capable of recovering glass containers. A multi-period multi-product mixed-integer linear programming model is proposed to maximize profit. The strategic design of the supply chain is dealt simultaneously with the tactical planning of its operation, which covers procurement, production, storage, distribution, take-back, reprocessing, reuse, and recycling. To illustrate the efficiency and practicability of the model, it is applied to a real-world case of beverage supply chain where the glass containers are either re-used or recycled into their original form, as raw materials. Finally, sensitivity analyses, from a financial perspective, have been conducted to reveal the determinants of profitable product recovery and grasp their managerial implications. The analyses showed that return rate and return acquisition cost have determinant impact on the economic viability of product recovery practice.
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1. Introduction

Supply chain management (SCM) is a holistic and a strategic approach to demand, operations, procurement, customer engagement, and logistics process management. It involves designing and planning activities, procurement and sourcing activities, making products and parts, tracking inventory and order fulfillment, and delivery to the customer and end users (Lin et al., 2010).

In recent decades, high population growth and shorter product life cycles has significantly increased waste generation. While many companies have focused supply chain management to maintain competitive advantage, the concern about environmental protection and consequent strict legislations (e.g., disposal bans on specific products) coupled with the lucrative business opportunity of product recovery has extended the scope of traditional supply chain management to reverse logistics (RL) networks and closed-loop supply chains (CLSC) (Meade & Sarkis, 2007; Petec & Glavic, 1996). Product recovery has enormous economic potential, but, only a small percentage of the value is being recovered (Atasu et al., 2008).

Product Recoveryis the process of reclaiming economic and ecological value from product returns including commercial returns, end-of-use returns, end-of life returns and repair / warranty returns. Product recovery involves return acquisition, reverse logistics, product disposition (sort, test, and grade), remanufacturing/repair, and remarketing (Guide & Van Wassenhove, 2002).

Reverse logistics is defined as the process of planning, implementing and controlling the inbound flow and storage of secondary goods and related information opposite to the traditionalsupply chain directions for the purpose of recovering value and proper disposal (Fleischmann et al., 1997).

Closed-loop supply chain management is today defined as “the design, control, and operation of a system to maximize value creation over the entire life cycle of a product with dynamic recovery of value from different types and volumes of returns over time” (Guide & Van Wassenhove, 2006). CLSCs were proposed to maximize the profit of supply chains after studies showed that integration of forward and reverse supply chains is the key to achieve maximum profit.

This paper presents a dynamic mixed integer linear programming model for the design and optimization of closed-loop supply chain network capable of recovering glass containers. In addition to the particular features of beverage supply chain, this work contains novel features which can be applied to generic CLSC network design problems.

The rest of the paper is organized as follows: In Section 2, first the evolution of reverse and closed-loop supply chain design problem and the relevant literature are reviewed; then R/CLSCs for glass containers are discussed. In Section 3, the function of each entity of the network is described which is followed by the detailed exposition of the model formulation. Section 4 presents a case study of a Malt beverage supply chain optimization using the proposed model. Next, in Section 5, the sensitivity of the solution to the case study is analysed regarding a number of important CLSC parameters. The conclusions and managerial implications are provided in Section 6.

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