This paper investigates the current development in research and practice in reverse logistics (RL) through content analysis of the published literature. We have used various web based search engines, ...books and conference proceedings to locate and review the literature. The review finds that research and practice in RL are focused on all aspects of RL—from collection of used products, their processing and finally to the outputs of processing, namely, recycled materials, spare parts, remanufactured products and waste material disposal. Many of the literature have also focused on case studies on various aspects of RL. The review also shows that mathematical modeling in RL research is mainly focused on deterministic methods and there are limited research papers considering stochastic demand for the remanufactured products and supply of used products by the customer. Also, it is found that the pricing models for acquiring used products are still developing. We believe that the characteristics of RL provided here can help the researchers/practitioners to advance their work in the future.
The reverse supply chain - in which used products are collected from end-users and remanufactured for resale - includes a consolidator, broker, and remanufacturer. The used products entering the ...reverse supply chain tend to be of heterogeneous quality levels and require different amounts of remanufacturing effort and cost. The consolidator collects these products from the end-users and sells them in unsorted form to the broker; the broker sorts them into different grades and offers the graded units to the remanufacturer. This article analyzes the business-to-business transaction between the broker and the remanufacturer. We determine the broker's optimal assortment in terms of the optimal number of grades, their expected remanufacturing costs, and selling prices. We show that: (i) the optimal grades created by the broker and their prices depend on the distribution of the remanufacturing costs for the used products acquired by the broker and the remanufacturer's demand distribution; and (ii) the expected remanufacturing costs and selling prices for each grade follow a specific ordering and constitute a convex hull. Comparative statics analyses show the malleability of the grading process to the changes in the broker's exogenous parameters. A numerical study using data from prior research on reverse channels shows that the optimal grading policy results in higher profits for both the broker and the remanufacturer as compared with a heuristic policy for creating grades.
Establishment of reverse logistics (RL) networks for various original equipment manufacturers (OEM’s) is gaining significant importance. Various green legislations are forcing OEMs to take back their ...used, end-of-lease or end-of-life products, or products under warranty to minimize wastes and conserve resources. Therefore OEMs have turned to a better design of their products for maximum reuse and recycling and to retrieve back the used products through a network for reuse, remanufacture, recycle or disposal, so that maximum value can be achieved from their used products. However, designing of network points and assigning capacities to them depend not only on the volume of returned products but also on the demand for remanufactured products and the parts of used products. If OEMs are not able to add value to the used product, there would be no incentive to design a complex network.
In this paper, a mathematical model for the design of a RL network is proposed. It is assumed that the returned products need to be consolidated in the warehouse before they are sent to reprocessing centres for inspection and dismantling. Dismantled parts are sent for remanufacturing or to the secondary market as spare parts. Recycling and disposal of these modules are also considered in the model. The use of the model is shown through its application in a numerical example.
We discuss the optimal raw material acquisition strategy for a third party remanufacturer (3PR). We specifically investigate whether a 3PR should acquire used products or cores in bulk with uncertain ...quality levels, or in sorted grades with known quality levels; and whether to acquire and remanufacture cores before the demand is realized (planned acquisition), or after the demand is realized (reactive acquisition), or on both occasions (sequential acquisition). When only sorted cores are acquired, we find that, (i) it is optimal to acquire cores in multiple grades to balance acquisition and remanufacturing costs; (ii) if reactive acquisition is possible, it reduces the assortment size (number of grades in which cores are acquired) and the total inventory acquired in the planned acquisition; and (iii) the optimal portfolio of grades to acquire and the optimal acquisition and remanufacturing quantities of these grades can be determined analytically. When bulk cores are acquired in addition to sorted cores, the property of reduction in assortment size of the planned acquisition is preserved. We also show that the 3PR should acquire only a fraction of the demand in planned acquisition, and leave the rest for reactive acquisition. This fraction changes during the lifecycle of a remanufactured product. Using a combination of empirical and realistic data from a smartphone remanufacturer we show that sequential acquisition increases expected profit by up to 8% and 27% over only planned and only reactive acquisitions respectively, and reduces the inventory acquired by up to 21% over only planned acquisition.
We investigate the tension between accounting and financial functions of an OEM who manufactures and remanufactures capital‐intensive products. The OEM operates a servicizing business model in which ...it leases a product, remanufactures the product returned at the end of the lease, and re‐leases the remanufactured product (usecycle), with multiple such usecycles. The accounting function at the firm would suggest that the OEM: (i) recovers the initial manufacturing cost of the product over its useful life as prescribed by IRS guidelines via depreciation; (ii) remanufactures the product as long as its initial manufacturing cost is not fully recovered; and (iii) removes the product from the books immediately after it has completely depreciated. In contrast, the financial function would consider the initial manufacturing cost of the product to be a sunk cost and would suggest that the firm continues to remanufacture the product as long as the remanufacturing cost is lower than the cost of a new unit. In this study, we investigate and prescribe ways to resolve this tension using analytical models. Specifically, we first show that the optimal durations over which the product should be used and lease prices that maximize the OEM's accounting profit and financial profit are different. We then discuss two operational approaches to align the accounting and operational perspectives while following IRS guidelines. Finally, informed by this analysis, we develop policy prescriptions to promote remanufacturing of multiple usecycle products. Overall, this analysis highlights the role of regulatory guidelines on remanufacturing operations and the inter‐functional effort required by OEMs to successfully integrate remanufacturing operations in their business strategy.
This paper analyzes the business‐to‐business transactions in which a supplier sells assortments of used products to third‐party remanufacturers. The supplier offers used products in different quality ...conditions, called grades. We model this buyer–supplier transaction as a Stackelberg game in which the buyer chooses his optimal purchase quantity of various grades, and the supplier chooses the optimal assortment and the prices of the grades in the assortment anticipating buyer’s behavior. We first develop an analytically tractable solution to the buyer’s and supplier’s problems. Subsequently, we show several structural properties of the optimal assortment offered by the supplier, including (i) the optimal prices set by the supplier are such that high quality grades have a higher profit margin for the buyer; and (ii) the grades in the optimal assortment constitute a convex hull of the remanufacturing and acquisition costs. We also extend the results to the case when the supplier’s acquisition costs are marginally increasing in the quantity acquired.
The modeling-based case study is useful for two purposes: introduce closed-loop supply chains and highlight and model some of its unique aspects that the traditional newsvendor formulation does not ...capture. The case focuses on a third-party remanufacturer (3PR) who buys used cellphones in different quality grades in anticipation of demand. Phones in high grade have been used gently—they have a high acquisition cost but low remanufacturing cost. Low-grade phones have been used extensively—they are cheaper to acquire but have a higher remanufacturing cost. Medium-grade phones have intermediate acquisition and remanufacturing costs. The 3PR needs to trade off these two costs and determine which grade(s) of used phones to buy. The 3PR restores all phones to the same like-new standard during remanufacturing. Extensive use of the case in supply chain management courses shows that in the absence of a mathematical model, students systematically deviate from the optimal decisions because of contextual features. Overall, students believed the case was challenging and that it provides a valuable learning experience, both as an exposure to the closed-loop supply chain domain as well as developing models with industry-specific factors.
Supplemental Material:
The Teaching Note and Excel solution are available at
https://doi.org/10.1287/ited.2021.0254ca
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The essays in this dissertation analyze the process of acquiring used products for remanufacturing operations. The dissertation has three papers. The first paper (Chapter 2) discusses the product ...acquisition strategy of a third party remanufacturer (3PR). The decisions regarding the quality, quantity, and timing of acquiring used products are analyzed in this paper. The second paper (Chapter 3) discusses the selling strategy of a supplier selling used products to a 3PR. The decisions of selling prices and the assortment of used products that the supplier should offer to the 3PR are analyzed. The third paper (Chapter 4) considers an OEM who designs, manufactures, leases, and remanufactures capital-intensive products that can be used for multiple lifecycles. The paper discusses the tension between accounting profits and financial profits arising due to remanufacturing operations. Chapters 5, 6, and 7 contain the supplemental material for Chapters 2, 3, and 4, respectively.
Throughout its history, Operational Research has evolved to include a variety of methods, models and algorithms that have been applied to a diverse and wide range of contexts. This encyclopedic ...article consists of two main sections: methods and applications. The first aims to summarise the up-to-date knowledge and provide an overview of the state-of-the-art methods and key developments in the various subdomains of the field. The second offers a wide-ranging list of areas where Operational Research has been applied. The article is meant to be read in a nonlinear fashion. It should be used as a point of reference or first-port-of-call for a diverse pool of readers: academics, researchers, students, and practitioners. The entries within the methods and applications sections are presented in alphabetical order. The authors dedicate this paper to the 2023 Turkey/Syria earthquake victims. We sincerely hope that advances in OR will play a role towards minimising the pain and suffering caused by this and future catastrophes.
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