Reverse Logistics Networks Steven Walker Logistic Systems: Design and Optimization (Chapter 6)

Introduction Definition Reverse logistics – Handling of the return flows of product or equipment back from consumer for reuse, recovery, or recycling. How is it different? Reverse flow of goods back from customer May require additional facilities and transportation costs for material handling (disassembly)

Introduction Reasons for Reverse Logistic (RL) Networks: Environmental Green initiatives Electronic waste Hazardous metals (RoHS) Economic Reduced raw material costs Customer Service Customer satisfaction

Introduction Applications Facility Location* Inventory Management* Transportation* Production Planning *Example problem will focus on these applications.

Recovery Programs Economic interests Reduces raw material costs Types of Recovery: Product – recycled directly or repaired and sent back under warranty Component – Product is dismantled and components are used in same or similar products Material – recyclables like metal, paper, or glass Energy - Incineration

Types of Networks Directly Reusable Easily re-used with very little added effort. Example – pallets, bottles, or containers Remanufacturing Returned products dismantled and parts or components used like new Example – copy machine, aircraft engine

Types of Networks (cont’d) Repair Service Defective products returned and repaired Recycling Recycling of raw materials

RL Network Framework Suppliers Material Recycling Production Distribution Customers Collection Intermediate Processing

Types of Decisions Strategic Must include reverse flow recovery path in network Must consider costs related to forward and reverse channels that returned material travel through Location of plants and warehouses for recovery Ex.- collection points and remanufacturing plants.

Types of Decisions (cont’d) Tactical Integration of return flows with forward flows. Combining or separating return flow goods with forward flow? Isolating forward goods from reverse goods in warehouses to prevent shipping errors?  Designated holding areas, “QA Jail” Deciding when to use new or recycled parts? Organization of labor? When should products be repaired?  Repair, Scrap, Send back to OEM

Types of Decisions (cont’d) Operational Production Scheduling Assignment of Labor Disassembly and reassembly

Example Problem Closed-loop logistics model for remanufacturing Closed-loop – forward flows are closely related to reverse flows Model involves both inventory costs, facility location, and transportation Remanufacturing is both environmentally and economically friendly in the re-use of returned products Cores = returned used products Source: Jayaraman, V., et.al. (1999). A closed-loop logistics model for remanufacturing. Journal of the Operational Research Society, 50:

Example Problem (cont’d) Parameters d ik

Example Problem (cont’d) Decision variables

Example Problem (cont’d) Objective Function Minimize costs Inventory holding Facility Location Transportation

Example Problem (cont’d) Constraints (1) Total number of remanufactured products does not exceed the demand (2) Total number of remanufactured products is less than the total cores of the product brought into the facility.

Example Problem (cont’d) (3) Product storage capacity constraint (4) Core storage capacity constraint (5) Total number of facilities is less than P

Example Problem (cont’d) (6) Restricts the amount of cores that can be supplied from a collection zone (7) Non-negativity (8) Binary (yes/no) decision variable Z j

Example Problem (cont’d) How is the problem solved? Can be solved with LP solvers (GLPK) Commercial Solvers (CPLEX) Because these problems can get large in a hurry, commercial solvers are necessary due to the # of variables Interfaces with C++ Uses the simplex method much like other LP solvers Heuristics also used due to the size of these problems.

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