From my doctoral course
This note comes from the doctoral course “Supply Chain Network Design”. I rewrote the explanations in my own words and recomputed the numerical example. The course’s main sources include Watson et al. (2013), Chopra and Meindl, and Dekker et al. (2004).
What is it?
Reverse logistics returns product flow from the consumer toward the producer: returned products, used parts, packaging. When we combine this flow with the forward network, we have a closed-loop supply chain. The classic reference: Dekker et al. (2004), Reverse Logistics: Quantitative Models for Closed-Loop Supply Chains.
Why has it become important?
- Law and producer responsibility (mandatory recycling),
- Economics: the residual value of the product (reusable parts),
- Brand image and sustainability.
Main activities
- Collection of product from the consumer or retailer.
- Test and sort: the condition of each product is checked and its route determined.
- Recovery: reuse, repair, remanufacturing (rebuilding to the level of a new product), or material recycling.
- Disposal (landfill, incineration) for the remainder.
- Return to market (sale as a second-hand or remanufactured product).
What makes designing the reverse network hard?
It differs from the forward network:
- High uncertainty on the supply side: the quantity, quality and timing of returns are unpredictable (in the forward network demand is unknown, in the reverse one supply).
- Heterogeneity: the condition of each returned product differs.
- A “many-to-one” network (many collection points to few processing centres) versus “one-to-many” in forward.
- Degree of centralisation in test and sort: do we test at each collection point (decentralised) or take everything to one centre (centralised)? Centralised means more transport of low-value product but economies of scale.
Network patterns
- Recycling network (as for metals and paper),
- Remanufacturing network (as for electronic equipment and car parts),
- Reusable packaging (crates, pallets, glass).
Modelling
- MIP models with decisions: where the collection, test, remanufacturing and disposal centres are; what flow passes through each.
- Integrated forward and reverse (closed loop): shared capacity (a plant that both makes new product and remanufactures), synergy benefits and cost reduction.
- With uncertainty: stochastic programming on the quantity and quality of returns.
My note
The “closed-loop design” view goes back, conceptually, to the idea of a system: the output of one stage is the input of another and we no longer have “waste”. See System. And I think its main effect is on product design too: a product designed for remanufacturing makes reverse logistics cheap.
Related: Multi-objective network design: cost, sustainability and resilience and Supply chain network design: concept and motives.