Reverse Logistics Networks

Steven WalkerLogistic 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

ProductionDistribution Customers

CollectionIntermediate 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, 50:497-508.

Example Problem (cont’d)

Parameters

dik

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 Zj

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.

Questions?

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