Issues in Reverse Logistics

1. Issues in Reverse Logistics 2003. 04. 08 Eoksu Sim(ses@ultra.snu.ac.kr)

2. Contents • Quantitative models for reverse logistics: A review • A two-level network for recycling sand: A case study • Quantitative Models for Reverse Logistics • Concluding remarks

3. Quantitative models for reverse logistics: A review Moritz Fleishemann, Jacqueline M. Bloemhof-Ruwaard, et. al Faculty of Business Administration, Erasmus University Rotterdam, P.O. Box 1738 DR Rotterdam, The Netherlands European Journal of Operational Research 103(1997) 1-17

4. Introduction • Motivations of RL • Economical attraction • Environmental concerns • Some cases • In Europe(1994) • Paper recycling(43% in total consumption) • Glass recycling(60%) • In Germany • Sales packaging materials • In Netherlands • Industrial waste • This paper • The planning and control tasks • Distribution planning • Inventory management • Production planning

5. Dimensions of the reverse logistics context • Some criteria for the classification of the product reuse situations • (1)Reuse motivation • Economical and ecological motivation • Environmental legislation, producers’ responsibility for the whole product life cycle, take-back obligations • Packaging ordinance(Germany), electronic scrap ordinance, automobile industry(Netherlands) • A ‘green’ image • Remanufacturing of machine parts • Sustainable economy • (2)Type of recovered items • Packages(e.g. pallets, bottles), rotable spare parts(e.g. machine parts, TV-tubes), consumer goods(e.g. copiers, refrigerators) • Lease contracts

6. (3)Form of reuse • Direct reuse, repair, recycling, remanufacturing(Thierry et al. 1995) • Material recovery(recycling) / Added value recovery(repair, remanufacturing) • (4)Involved actors • Reuse by the original producer • Reuse by a third party

7. Reverse distribution • A major issue in reverse distribution systems • If and how forward and reverse channels should be integrated • Who are the actors in the reverse distribution channel? • Which functions have to be carried out in the reverse distribution channel and where? • One important issue is the location of sorting and testing within the network • What is the relation between the forward and the reverse distribution channel? • Remanufacturing and reuse often lead to closed-loop systems • The focus has mainly been on network design issues(Fig. 1)

8. Separate modeling of reverse flow • Divergent network structure • High degree of uncertainty in supply • Quantity and quality of used products returned by the consumers • Caruso(1993): Solid waste management system • Kroon(1995): returnable containers • Sperngler(1997): MIP model in steel industry • Integration of forward and reverse distribution • Location of joint facilities for both networks • Combining routing • Salomon(1996): REVLOG system • Del Castillo(1996): production and distribution planning for reusable containers • Summary • Modifications and extensions of traditional network design models • The interaction between forward and reverse distribution

9. Inventory control in systems with return flows • An alternative input resource • Automobile industry • Spare parts • Electronics industry • Returned modules • The objective of inventory management • To control external component orders and the internal component recovery process to guarantee a required service level and to minimize fixed and variable costs • Difference from traditional inventory control situations (Fig.2) • Loss of monotonicity • Additional set of decisions • Two-echelon inventory system

10. Deterministic models • To strike an optimal trade-off b/w fixed setup costs and variable inventory holding costs • Stochastic models • Repair systems • Product recovery systems

11. Production planning with reuse of parts and materials • The difficulty • Technical conversion to usable raw materials • No well-determined sequence of production steps • Selection of recovery options • ‘Design for recycling’ and ‘design for disassembly’ • Johnson(1995): an optimal disassembly sequence for a given product structure • Penev(1996): optimal cannibalization • A main difficulty is the high amount of input data required • Scheduling in a product recovery environment • MRP for product recovery • Modifications to MRP in product recovery planning • ‘reverse’ bill of materials • Gupta(1994): a situation with demand on component level • Taleb(1996): situation with parts commonality • A separate BOM for used products • Shop floor control in remanufacturing • Non-standard shop floor routing • Guide(1996): an alternative to MRP, focusing control on production bottlenecks

12. Conclusions • Distribution planning • Inventory control • Production planning • Research on RL has been confined to rather narrow views on single issues

13. A two-level network for recycling sand: A case study A.I. Barros, R.Dekker, V.Scholten Erasmus University Rotterdam, P.O. Box 1738 DR Rotterdam, The Netherlands EJOR 110(1998) 199-214

14. Introduction • Growing volume of waste products in the construction industry(the Netherlands) • BRBS intends to establish an efficient sand recycling network • This paper • The approach used to tackle the sand recycling problem • Reports of the main conclusions derived • Special two-level location problem BRBS:Branchevereniging Recycling Breken en Sorteren

15. The sand recycling problem • Waste • Stone materials  to a crushing facility • Otherwise  to a sorting facility  sieved  recyclable components or not • The Dutch government • New environmental laws • To restrict dumping and/or incinerating waste • To improve the recycling process • The sieved sand • Three main group: clean, half-clean and polluted

16. To elaborate a strategic plan that answers the following questions: • What type and how many infrastructures should be installed? • Where can the new infrastructure be locations? • How much sand should each infrastructure handle?

17. Modeling • Waste management • Strategic and the operating level decision making • Despite of the interconnection, analysis is often done separately for simplicity • The BRBS • Strategic point of view • The advantages and disadvantages of opening certain facilities and the annual costs involved • Two types of facilities • Regional depots • Receive the flow of sieved sand • Classify it according to its pollution level • Store the clean and half-clean sand • Treatment facilities • Clean the polluted sand • Store it

18. Technological issues • Costs • Transportation costs (road distance matrix) • Processing costs • Fixed costs • Possible location set for both types of facilities • A treatment facility • Higher fixed costs than ones of a regional depot • Profitable if it processes a minimum of 100,000 tons of polluted sand per year • Same fixed costs of the all treatment facilities • A regional depot and a treatment facility can be installed at the same site • There is always enough space at the site for storage

19. Treatment facilities Regional depots Project sites Sources of sand Sand recycling network Total fixed costs Transportation costs

20. Supply of the sieved sand Demand of the different types of sand Flow conservation of different types of sand Storage capacity of regional depot Processing capacity of treatment facility

21. Problem formulation • Given • The potential locations of regional depots and treatment facilities • The capacities of these facilities • The cost structures • Transporting, processing and fixed costs • The location of the sources of sieved sand • The sites of the projects and respectively their availability and demand of sand • Find out • Which facilities should be built • How the sand should be classified, sorted, cleaned and delivered to the projects • So that the total costs of the system are minimized • Basic model  MILP

22. Solution techniques • The SP is NP-hard • The two-level capacitated facility location problem • The solution procedures considered are heuristics • The quality of the obtained feasible solutions is assessed by means of the linear relaxation • Lower bound procedures • LP relaxation을 통해 tight한 LB를 구하기 위해 몇 가지 추가 제약식을 반영 • 평균 11.70%의 bound 개선 • Upper bound procedures • LP relaxation의 결과를 이용한 0/1 setting • Given limit 를 이용한 cyclic heuristic

23. Results • The treatment facilities • Located at the same site of project 10 • Fully uses its processing capacity • Higher density of sources of polluted and • The biggest quantity demand of clean sand in project • More profitable • To open new regional depots, instead of shipping the sand over long distances

24. Conclusions • All the scenarios • Always to open on average 22 regional depots near the sources of sieved sand and the projects • The demand of clean sand can be satisfied using mostly the regional depots

25. Quantitative Models for Reverse Logistics Dr. Moritz Fleischmann Lecture Notes in Economics and Mathematical systems 501 Springer-Verlag Berlin Heidelbert 2001

26. A characterization of logistics networks for product recovery • Moritz Fleischmann, Hans Ronald Krikke, Rommert Dekker, Simme Douwe P. Flapper • Omega 28 (2000) 653-666

27. Part I. Reverse Logistics: An Introduction • 1. Introduction • 2. Reverse Logistics at IBM: An Illustrative Case • 3. Structuring the Field • Part II. Reverse Logistics: Distribution Management Issues • 4. Product Recovery Networks • 5. A Facility Location Model for Recovery Network Design • 5.1. Recovery Network Design Models in Literature • 5.2. A Generic Recovery Network Model • 5.3. Examples • 5.3.1. Example 5.1: Copier Remanufacturing • 5.3.2. Example 5.2: Paper Recycling • 5.4.Parametric Analysis and Network Robustness • 5.5. Extensions • Part III. Reverse Logistics: Inventory Management Issues • 6. Inventory Systems with Reverse Logistics • 7. Impact of Inbound Flows • 8. Impact of Multiple Sources • Part IV. Reverse Logistics: Lessons Learned • 9. Integration of Product Recovery into Spare Parts Management at IBM • 10. Conclusion

28. A Generic Recovery Network Model • The NDP considered in this chapter • The number of facilities • Their locations • The allocation of the corresponding goods flows

29. All customer demand and returns are taken into account Facility opening condition

31. Examples • Copier Remanufacturing • Decisions • Locations for the inspection/disassembly centers • Allocations of the return goods flows • An integral design optimizing both forward and return network • The sequential and the integrated recovery network design approach • Different solutions but negligible cost differences • The fixed forward network structures does not impose significant restrictions on the design of an efficient return network • Paper Recycling • Based on LP network flow model • An integral design optimizing forward and return networks • Optimizing the forward and return network simultaneously • A different solution than a sequential approach • Results in a significant cost reduction in this case.

33. Extensions • Integrating forward and reverse locations • Combining forward and reverse transportation • Selecting recovery processing technologies • Value of information concerning quality of returns • Regional legislative requirements • End-of-life management