Designing distribution systems with reverse flows

Jnl Remanufactur (2017) 7:113–137 DOI 10.1007/s13243-017-0036-4 RESEARCH Designing distribution systems with reverse flows Ayşe Cilacı Tombuş1 · Necati Aras2 · Vedat Verter3 Received: 4 April 2017 / Accepted: 21 July 2017 / Published online: 4 October 2017 © Springer Science+Business Media B.V. 2017 Abstract Closed-loop supply chains involve forward flows of products from production facilities to customer zones as well as reverse flows from customer zones back to remanufacturing facilities. We present an integrated modeling framework for configuring a distribution system with reverse flows so as to minimize the total cost of satisfying customer demand and remanufacturing the returned items that are recoverable. Given a set of existing plants and customer zones, our basic model identifies the optimal number and location of distribution centers and return centers assuming that all plants have remanufacturing capability. We devise a Lagrangian heuristic for this problem. The proposed solution method proved to be computationally efficient for solving large-scale instances of the closed-loop supply chain design problem. The potential benefits of the integrated model are demonstrated by comparing its results with those obtained from an alternative approach that determines optimal forward and reverse network structures sequentially. We also extend the basic model to determine the optimal locations for establishing remanufacturing facilities. Using the extended model, we study the conditions under which the return centers can be co-located with remanufacturing facilities rather than being established at the downstream echelons of the supply chain. Different from the existing works on facility location-allocation models for closed-loop supply chain network design, the main focus in this paper is on the investigation of structural properties of the network such as co-locating return centers with remanufacturing facilities and quantifying the benefit of modeling forward and reverse flows simultaneously rather than sequentially.  Necati Aras 1 Department of Industrial Engineering, Maltepe University, İstanbul, Turkey 2 Department of Industrial Engineering, Boğaziçi University, İstanbul, Turkey 3 Desautels Faculty of Management, McGill University, Montreal, Canada 114 Jnl Remanufactur (2017) 7:113–137 Keywords Reverse logistics · Facility location-allocation · Lagrangian relaxation · Mixed-integer programming model Introduction The second half of the twentieth century witnessed the global rise of a consumption-based economy. This trend resulted in an ever-increasing threat to environmental sustainability. Environmentally conscious manufacturing, waste reduction and product recovery have emerged as alternative means of coping with this significant societal problem. In this paper, we focus on supply chains with product recovery, which aim at capturing the remaining economical value in used, unsold, or obsolete products. Based on a survey of nine case studies on product recovery processes in different industries, Fleischmann et al. [11] highlight the following common activities: (i) collection of used products, (ii) inspection and separation of the recoverable returns and those that need to be disposed due to economic and/or technological reasons, (iii) reprocessing the returns, which involves reuse, recycling, remanufacturing or repair, and (iv) redistribution of the recovered materials, components or products. From a logistics viewpoint, these activities create a reverse flow of goods from consumers toward upstream layers of the supply chain. The simultaneous presence of forward and reverse flows cause unique challenges for supply chain design, which we tackle in this paper. To this end, we provide an analytical framework for making structural decisions pertaining to distribution systems with reverse flows. Under pressure from environmental groups and society at large, governments are increasingly involved in regulating product recovery, because it can serve as an effective mechanism for sustaining the environment. The WEEE legislation in the European Union [36] that became effective in February 2014, for example, requires manufacturers to establish environmentally sound recovery processes including remanufacturing for used electrical and electronic equipment. On the other hand, an increasing number of companies have been implementing comprehensive programs in order to reap the potential benefits of remanufacturing. According to the United States International Trade Commission report prepared in October 2012 (USITC Publication 4356, [34]), United States was the world’s largest remanufacturer during the period of 2009-2011 with the total value of remanufactured products exceeding $43 billion. Furthermore, the most remanufacturing intensive industries in the United States comprise aerospace, electrical and electronic equipment, locomotives, machinery, medical devices, motor vehicle parts, office furniture, and retreaded tires. Thanks to HP’s reuse and recycling programs, more than 80% of ink cartridges and 38% of LaserJet toner cartridges are produced with recycled plastic [14]. Moreover, HP Planet Partners have recycled more than 3.3 billion pounds of products since 1987. Xerox reports that their combined returns programs including equipment resale and remanufacturing along with parts and consumable reuse and recycling prevented over 38,000 metric tons of waste in 2003 which otherwise would end up in landfills [37]. Managing the flow of returned products from customer zones to remanufacturing facilities often involves the establishment and operation of return centers. A return center typically offers scale economies in dealing with returned products in much the same way a distribution center plays a role in the distribution networks. It is well understood that the returned products can have considerable variation in their quality level. This implies that the economic value that can be gained from these so-called cores can also vary. To cope with these uncertainty, return centers perform a quality-based classification by means of inspection and screening tests [4]. Those deemed recoverable are shipped to the remanufacturing Jnl Remanufactur (2017) 7:113–137 115 facilities whereas the rest are either sent to recycling facilities or to landfill and incineration sites for disposal. A significant majority of the research on the design of reverse logistics (RL) networks has focused on the structural decisions regarding the reverse distribution networks. The location and sizing decisions associated with only the collection, inspection, recycling and remanufacturing facilities are incorporated in the proposed mathematical formulations. A recent and comprehensive review on these papers, which do not incorporate the configurational decisions pertaining to the forward distribution network, can be found in [1, 13]. There are 31 papers that are immediately relevant to (...truncated)