Closed-Loop Supply System
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Abstract
Companies are looking for different ways to be sustainable. The objective of this paper was to determine whether closed-loop supply system (CLSCM), through reverse logistics, optimizes sustainability issues that minimize logistics and consumer costs through recycling materials and waste. The study explores how CLSCM maximizes financial benefits and decreases the wastage of valuable resources while also reducing harmful emissions. There is also an exploration of the Reverse Logistics Processes and the different stages involved, including product acquisition, collection, sorting and inspection, and disposition. There is also an examination of how reverse logistics leads to sustainability, like improving programs aimed at achieving sustainability performance in organizations. Sustainable and efficient RL has the potential of creating a competitive advantage because there is saving in different aspects such as transportation and distribution. Finally, different data is examined to establish how various scholars have predicted the relationship between reverse logistics and sustainability.
Keywords: closed-loop supply system, reverse logistics, sustainable development, supply chain.
Closed-Loop Supply System
Sustainable initiatives have become a norm as companies and businesses aim to stop wasting resources, as earth resources become scarce by the day. Consumerism, especially for personal electronics and other consumable products such as plastic, has become a sustainability issue in the last couple of years as global wastes continue to pile up (Szmelter, 2015). Businesses are now adopting closed-loop supply systems, which focus more on maximizing value on their resources by producing less waste compared to the old policy of concentrating on a product’s life cycle until it reaches the consumer (Szmelter, 2015). This paper will seek to determine that closed-loop supply system (CLSCM), through reverse logistics, optimizes sustainability issues that minimize logistics and consumer costs through recycling materials and waste.
The supply chain includes activities like manufacturing, marketing, purchasing, and distribution. These activities provide value to the consumer. There has been a growing demand for green economics and sustainable development in the last two decades in different fields, coupled with the emergence of various studies in areas related to logistics and supply chains(Szmelter, 2015). In comparison to traditional methods, the closed-loop supply system tries to modify different aspects, including the goals of a business. Traditional modes aim at lowering cost while improving efficiency across the supply chain, thus maximizing the financial benefits (Govindan, 2015). CLSCM tries to maximize financial benefits and decrease the wastage of valuable resources while attempting to reduce harmful emissions. This is done to create balance economic, environmental, and social effects of manufacturing products (Govindan, 2015). CLSCM also tries to change the management structure in a supply chain. Environmental performance is considered in a company’s external and internal management, which is still lacking within traditional supply chains (Govindan, 2015).
Elements such as environmental protection and low carbon emissions are included in every logistics and supply chain. These measures help in the creation of a supply chain that is green with minimal carbon emission in the entire lifecycle of a product (Kumar& Kumar, 2013). The business process is also altered by the CLSCM as traditional supply chains begin with suppliers ending with users, making the flow irreversible and one way (Kumar & Kumar, 2013). CLSCM, on the other hand, makes the flow reversible and circular as products are managed in the entire lifecycle so that wastes can have a second life or can be converted into raw products for other purposes (Autry et al., 2015). Lastly, another aspect altered is the patterns of consumption. The traditional supply chains are fueled by customer interests, while CLSCM can be encouraged via green government initiatives and corporate social responsibilities (Szmelter, 2015). CLSCM has four sections that include green operations, green design, green production, and waste management
Green Operations
It is also referred to as Reverse Logistics (RL) since it is the opposite of traditional logistics (Szmelter, 2015). Reverse logistics is the process whereby a manufacturer accepts already shipped products from consumption to possible recycling for remanufacturing (Szmelter, 2015). Reverse logistics has been used widely in the motor vehicle industry. The first step in reverse logistics is the collection of products where items are collected and taken to different facilities for remanufacturing (Kumar & Kumar, 2013). The next step is sorting and recycling, where the sorting of reusable items is made. The product design is accomplished with minimal effect on the environment.
Green design
This is a crucial section in CLSCM since it is all about providing a service or product that encourages the masses on environmental awareness (Szmelter, 2015). Big industries with diverse supply chains should consider the benefits that lie with the adoption of reverse logistics. Companies are being pressured into “greening” their supply chains. There are different activities involved in this section, including designing products to reuse or regenerate the product (Kumar & Kumar, 2013). The product is also produced with minimal harm to the environment and provided with materials that can later be used in other products (Quariguasi et al., 2010).
Life Cycle Assessment of a Product
This is a crucial sub concept in Green design, and it was implemented to examine environmental related items to the process of production. These processes are in stages and range from the acquisition of raw materials, manufacture, distribution and recycling, remanufacturing, and the last disposal (Szmelter, 2015). According to Kumar 2013, lifecycle analysis quantifies and examines materials and energy used and makes an assessment on the product’s impact on the environment.
Green Production
In CLSCM, Green production is a sustainable method in designing and engineering activities in product development (Szmelter, 2015). Manufacturing companies remain the most significant contributor to products that destroy the environment, and they are, therefore, encouraged more to adopt these initiatives (Geyer & Jackson, 2004). Among the dangers that the environment faces is the slow destruction of the ozone layer, climatic change, and destruction of valuable natural resources. The green approach can trace its roots many years back since the Greeks were known to use solar power (Geyer & Jackson, 2004). Going green entails, there be a green economy, which also means that various social and environmental issues are addressed while also creating job opportunities (Geyer & Jackson, 2004). When a business decides to adopt green initiatives, its processes become more efficient while utilizing clean technology that does not harm the environment or create harmful wasteful materials. Adopting green operations also benefits supply chain partners as a company that embraces these initiatives can differentiate itself from other organizations, and customers may be willing to cash out extra money for premium rates for the sold products (Szmelter, 2015).
Waste Management in CLSCM
The recycling programs focus on managing wastes that have already been manufactured. In contrast, Source reduction concentrates on preventing and reducing wastes produced, rather than managing them after they have been created, with the goal of efficiency. Using resources by evaluating how business is done and how raw materials are utilized (Savaskan et al., 2004). Source reduction is achievable with measures such as using disposable materials, removing certain items, using durable products, and recycling (Savaskan et al., 2004). Recycle and reuse waste management programs, focus on the management of waste. Pretreatment is used when the trash has surpassed a three-point examination, and all three points have been passed. The three points include that the item has to be a thermal, physical, biological, or chemical. The second point is that it must change the characteristics of the waste. Lastly, it must decrease the volume of its harmful nature (Savaskan et al., 2004). According to Kumar 2013, there are eight strategies that a manufacturer can do if they intend to protect the environment including, decrease waste by enhancing efficiency, selling produced waste to other businesses, building a new plant to convert waste into useful products that can be valuable to another company or people, working with local and state authorities to make agreements on the proper disposal of wastes, negotiation with local authorities on emission standards, building a treatment plant collaborating with other partners to dispose of residual waste, making the treatment plant with its staff, pitching the successful implementation to other businesses with similar problems.
Reverse Logistics Processes in CLSCM
Research on reverse logistics has increased over the years, along with its definition. Reverse logistics has been referred to as the purpose of logistics in source reduction, recycling, waste disposal, and product returns (Savaskan et al., 2004). There are significant differences between forwarding logistics and RL concerning purpose and processes. RL is associated with sustainability as products are taken back from the consumer either for recapturing the value of the item or by disposing of the item correctly or through repossessing (Kumar & Kumar, 2013). Forward logistics is only concerned with getting the product to the consumer. Most research has been conducted on forward logistics, ignoring RL. As mentioned previously, there are different processes in RL, including acquisition of the product, collection, sorting, and proper disposition.
Product Acquisition in RL
This is the process of taking back products from consumers for more processing. This is an essential aspect of the success of RL since there is uncertainty on time and the quality and quantity of the recycled product. Gatekeeping refers to a set-off decision made on whether a product should be resent for reprocessing or whether the consumer should be given back the product (Govindan & Kannan, 2015).
Collection in RL
This is the process following acquisition where collected items are sent to new facilities for disposition, sorting, and inspection. These methods have been categorized into three groups. Businesses collecting products from consumers directly, manufacturers taking back returned products through retailers and finally manufactures taking their products through third-party logistics (Govindan & Kannan, 2015)
Sorting and Inspection in RL
Collected items are sorted and inspected. Product returns can either be customer-related, manufacturing, or distribution. Sorting is crucial since products are categorized in terms of their condition or their quality (Govindan & Kannan, 2015).
Disposition in RL
Once the items are sorted and inspected, the next step is making decisions about the disposition of the item, which is a crucial process in the RL. There different available disposition options that include repair, reuse, recycling, and disposal (Govindan & Kannan, 2015).
Sustainability Performance in CLSCM
Sustainability has become a recurring strategic theme for businesses. It is considered as the combination of social, economic, and environmental objectives while providing a balance between these three aspects (Quariguasi et al., 2010). Businesses understand nowadays that they have a responsibility to society and the environment (Quariguasi et al., 2010). Large international corporations are under increased pressure to consider issues related to sustainability and to create nonfinancial measures of measuring their performance besides the traditional ones. Organizations view sustainable development as crucial goals because it helps companies achieve competitiveness in the long-term.
Reverse Logistics and sustainable development
RL has the potential to make a significant impact on improving programs aimed at achieving sustainability performance in organizations (Govindan & Kannan, 2015). There is an impact in different aspects, including cost-saving, increase in revenue from products recycled and remanufactured, there is better customer satisfaction, and there is a positive effect on global warming and climate change since the carbon footprint is reduced when products are taken back. Sustainable and efficient RL has the potential of creating a competitive advantage because there is saving in different aspects such as transportation and distribution. At the same time, the organization improves its corporate image to the public (Govindan & Kannan, 2015). To ensure sustainable RL, organizations need to keep a close eye on evaluating their RL performance often. Implementation of RL has been proven to have positive effects on an industry’s economic and environmental performance (Govindan & Kannan, 2015).
The organization has been trying to minimize its impact on the environment by adopting a green supply chain whose aim is to reduce or eliminate wastage of energy and materials that might affect the environment negatively through the entire life cycle of the product (Savaskan, 2004). There, however, lacks conclusive evidence that establishes that there is a relationship between green supply chain and RL(Savaskan,2004). Recycle, and recovery are essential parameters of reverse logistics since they play a significant role in operating costs. However, it is vital to analyze products, which should be done correctly. Any error in this process can lead to an increase in the expenses in the organizations (Autry et al., 2013).
Different researches have been conducted to support the argument that reverse logistics helps organizations become more sustainable. According to Kumar and Kumar 2013, the trend of making more environmentally friendly items is on the rise across different organizations globally. This means that these companies have to change how they manufacture products. According to the same authors, closed-loop supply systems has been recognized as the appropriate approach to use to improve performances of products and processes under regulations on the environment (Kumar & Kumar, 2013). Closed-loop supply systems consider economic and ecological elements when formulating objectives. If implemented correctly, closed-loop supply systems have the capabilities of reducing wastes, environmental pollution while optimizing the utilization of resources and reducing costs. However, there needs to be appropriate policies designed to address diverse environmental problems (Kumar & Kumar, 2013). According to Govidan and Devika 2015, the implementation of RL has proven to have an impact on a business’s economic and environmental performance. Studies conducted on supermarkets and food and beverage companies utilizing RL found that there was growth in all essential aspects. According to the findings of their review, it was established that when RL is looked upon in the context of green supply chain management (Govindan & Kannan, 2015).
According to Savaskan et al., 2004 firms that design and use closed-loop supply chains can enhance their market demand and profits after utilization and can also have a positive impact on the return rate of used products. There is a suggestion of coordination mechanisms to achieve the set-up objectives by giving out the right incentives. Another study by Szmelter 2015, sought to determine the role of closed-loop supply systems on the food industry. The study discovers that CLSCM possesses good potential in regards to ecological factors, but it is still greatly unexploited. Depletion of energy resources should lead to the development of technology capable of extracting energy from biomass which is only possible in the food industry (Savaskan et al., 2004)
As with other sectors, there are challenges identified among them, lack of enough data, or research conducted on the link between the two aspects. There are several opportunities for further analysis based on the data analyzed (Govindan & Kannan, 2015). One of the possibilities is to do new research on the link between sustainability, CLSCM, and Green supply chain (GSC) in reverse logistics as it was evident there were few data on the relationship between the two. There should be a few more surveys, case studies, and reviews conducted on the effects of reverse logistics to the sustainable production of products (Govindan & Kannan, 2015). In most supply chain structures that already can support reverse logistics, marginal costs associated with collecting a used unit are mostly independent of the scale of operations, as this study has continuously assumed (Savaskan, 2004). These are two exciting avenues that require further research on the costs associated with collection efforts (Savaskan, 2004). There should be an examination of “capacity investment decisions in the closed-loop supply chain” (Govindan & Kannan, 2015).
There are numerous benefits that accompany businesses that opt to implement closed-loop supply chain systems. Among these benefits include conserving natural resources that might be exhausted at some point in the future. CLSCM revolves around composting, recycling, and the reuse of used products. CLSCM forces manufacturers to create innovative ways to utilize end of life products instead of throwing away and increasing the global waste management problems. CLSCM leads to low environmental pollution by reducing the use of raw materials, conservation of energy, and also helping companies comply with energy waste regulations. A closed-loop supply chain enables businesses to cut costs associated with production. The sale of recovered products also helps in boosting revenues.
References
Autry, C. W., Whipple, J. M., Bell, J. E., Mollenkopf, D. A., & Stolze, H. J. (2013). Natural resource scarcity and the closed‐loop supply chain: a resource‐advantage view International Journal of Physical Distribution & Logistics Management. https://doi.org/10.1108/IJPDLM-03-2012-0092
Geyer, R., & Jackson, T. (2004). Supply Loops and Their Constraints: The Industrial Ecology of Recycling and Reuse. California Management Review. https://doi.org/10.2307/41166210
Govindan, K., Soleimani, H., & Kannan, D. (2015). Reverse logistics and closed-loop supply chain: A comprehensive review to explore the future. European Journal of Operational Research, 240(3), 603-626. https://doi.org/10.1016/j.ejor.2014.07.012
Kumar, N. R., & Kumar, R. S. (2013). Closed-loop supply chain management and reverse logistics-A literature review. International Journal of Engineering Research and Technology, 6(4), 455-468.
Szmelter, A. (2016). Specifics of closed-loop supply chain management in the food sector. Logistyka Odzysku, (3 (20)), 82-86.
Savaskan, R. C., Bhattacharya, S., & Van Wassenhove, L. N. (2004). Closed-loop supply chain models with product remanufacturing. Management Science, 50(2), 239-252. https://doi.org/10.1287/mnsc.1030.0186
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