Contemporary Logistics. Research on Factors that Affect the Eco-efficiency of Remanufacturing Closed-loop Supply Chain

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1 Contemporary Logistics 02 (2011) X Contents lists available at SEI Contemporary Logistics journal homepage: Research on Factors that Affect the Eco-efficiency of Remanufacturing Closed-loop Supply Chain Wei Yang, Yongzhi Zeng, Yue Wu School of Logistics, Beijing Wuzi University, China, K E Y W O R D S A B S T R A C T Remanufacturing closed-loop Supply chain, Eco-efficiency, Product design At present, there are still lots of resources wasted in manufacturing in our country and the rate of recovery and remanufacturing is highly low. The enterprises don t have a high level of environmental protection consciousness. So it is of great importance and practical significance to study the eco-efficiency of remanufacturing closed-loop supply chain. This article mainly analyzes the possibilities of cutting down the remanufacturing costs and consumption of resources from the perspective of product design and remanufacturing closed-loop supply chain process activities. By studying the factors that affect the eco-efficiency of remanufacturing closed-loop supply chain, it offers a new idea to reduce the remanufacturing costs and the impact on natural environment; besides it provides a scientific reference for improving the sustainable development capability for economics and society in our country. ST. PLUM-BLOSSOM PRESS PTY LTD With the decrease of resources and the deterioration of the environment in our world, people s consciousness for environment protection is increasing quickly, therefore sustainable development has become a main theme in the development of the world. Generally speaking, resources are non-renewable; moreover the use of some resource may bring about negative impact to the environment. Thus, the recycling of waste products has become a hot topic in both academia and the business community currently (Xie Jiaping, 2008). At present, our country is developing into the manufacturing center of the world, but the product recycle rate of the manufacturing industry is relatively low and enterprise environmental awareness is also insufficient, resulting in the serious environment pollution and great waste of resources. Therefore it s very necessary to make a research on the factors that affect the eco-efficiency of the remanufacturing closed-loop supply chain. 1 Introduction 1.1 Remanufacturing closed-loop supply chain Remanufacturing is a process of changing the waste products into new ones functionally by necessary dismantling, overhauling and replacing spare parts (Li Yongjian, 2006). Remanufacturing can reduce environment pollution, cut down the cost of pollution Corresponding author. Tel: English edition copyright ST. PLUM-BLOSSOM PRESS PTY LTD DOI: /J.CL

2 abatement and disposal expenses of the waste, win better social image, and add intangible assets for the enterprise. Research indicates that enterprises can reduce cost of products such as electric refrigerators, automobiles, computers by 40%~60% through the implementation of remanufacturing (Sameer Kumar, 2008). Remanufacturing closed-loop supply chain includes not only traditional forward supply chain, but also reverse supply chain of the recovery and remanufacturing of waste products, showing a closed-loop feature of from source to sink, then from sink to source. Consequently, the closed-loop supply chain transfers the open-loop process of resource-production-consumption-waste to the closed-loop cyclic process of resource-production-consumption-renewable resources through positive delivery of products and reverse recovery and remanufacturing. For details, see picture 1. Figure1 The general process of remanufacturing closed-loop supply chain On one hand, remanufacturing can lessens the manufacturing cost and improves economic efficiency through recycling of resources. On the other hand, the whole process of material obtaining, processing and manufacturing, packing and storing, distribution, using, recovery, remanufacturing and scrap disposal, especially taking environment into consideration at the stage of scrap disposal, can make the adverse influence to environment caused by the whole closed-loop supply chain least, and the efficiency of resources highest. 1.2 Eco-efficiency of remanufacturing closed-loop supply chain With more and more attention paid to "the system of extended producer responsibility" and environment performance of the product terminal link, the research of eco-efficiency gradually extends to all links related to production and circulation. Enterprises no longer care only economic efficiency, but also environmental benefits, that is, more consideration of the eco-efficiency of all links related to products. The eco-efficiency of remanufacturing closed-loop supply chain refers to cutting down the manufacturing cost, resource consumption and minimize the adverse influence to environment to the same level of the ecologic capacity of natural environment, while pursuing improving the quality of products, in all the stages of the whole closed-loop supply chain based on the whole life cycle. So we say the eco-efficiency of remanufacturing closed-loop supply chain is a concept which considers both economic efficiency and environmental benefits. According to some related researches Tohru(2005), a Japanese scholar, analyzed the eco-efficiency of closed-loop supply chain recycle system of used automobiles and household electrical appliances in the eco-city of Hyogo, Japan. The results indicated that it is 57% higher than the traditional processing methods, and the eco-efficiency of recycle system of household electrical appliances is 40% higher in closed-loop supply chain recycle system. 1.3 The selection criteria of factors that affects the eco-efficiency of remanufacturing closed-loop supply chain The eco-efficiency of remanufacturing closed-loop supply chain is ultimately reflected in two aspects: one is to reduce the economic costs and resource consumption in the pursuit of improving product quality; and the other is to reduce the adverse impact on the natural world, which is to minimize the emissions of waste and the proliferation of toxic substances, then promote the sustainable use 76

3 of renewable resources. From the macro and micro aspects, this paper respectively analyzes the factors of the eco-efficiency of remanufacturing closed-loop supply chain based on the two criteria. Microscopically, product design factors not only affect the product quality and performance, but also determine the materials, manufacturing process, recovery ratio and remanufacturing characteristics of products, etc. For example, in the manufacturing stage, product design determines the raw materials, the manufacturing process flow and the consumption of resources; in the remanufacturing stage, product design directly determines the recyclability and remanufacture-ability of products, and thus directly affects the benefits of the entire closed-loop supply chain. So, to a large extent, the product design factors affect the cost of remanufacturing and resources consumption of the products, and the adverse impact on the natural environment, scilicet the eco-efficiency of remanufacturing closed-loop supply chain. As to macro aspect, it is of great importance to analyze the eco-efficiency of each link and phase of remanufacturing closed-loop supply chain process. For only by coordinating all the member enterprises in all stages of the whole supply chain, can the remanufacturing closed-loop supply chain be operated in low cost and high efficiency. Only through analyzing it, can we find the every link that can lower the cost, minimize the impact on the environment, and maximize the resource utilization, so that the eco-efficiency of the whole remanufacturing closed-loop supply chain can be improved. 2 The Analysis of Product Design Factors Most researchers believe that the product design factors determine 70% ~ 80% of products manufacturing cost(zhao Xin, 2008). At present the product design focuses on the convenience of products manufacturing and assembly, as well as the structure simplifying and the reduction of material costs without considering the waste disposal problems at the end of the product life cycle. With the product life increasingly been shortened, there are more and more discarded goods. As a result, the eco-efficiency is gradually reduced. In product designing, the module structure, the connection modes and the diversity of materials composition, etc, to a large extent, affect the recyclability and remanufacture-ability of products, which greatly influences its eco-efficiency. Therefore, only by taking the road of product design for remanufacturing based on the whole life cycle (PDRLC) in the stage of product design, can we reduce the resource consumption, pollution and emissions of the waste to the full extent. Table 1 The differences between PDRLC and traditional product design Differences Traditional product design PDLRC Theoretical basis Use of materials Pollution results Design, relatively homogeneous Poor material recycling& circulation, high energy consumption More serious Comprehensive consideration of the design, ecology, economy and social science, etc Recyclable, environmentally friendly Minimum, consistent with the ecological carrying capacity Economical& ecological Opposite, short-term vision The same, long-term vision Factors focused on The function Environmental functionality protection& Life cycle Single-period Multi-period Dismantling features Relatively difficult Simple & convenient The difficult degree Easy to achieve Relatively difficult The proportion of products returned Little More The PDRLC refers to fully considering the basic attributes of product features, quality, development cycle and cost etc, as well as its environmental attributes, recycling/remanufacturing conditions, and optimizing all the design factors during its whole life period, thus enabling the production and manufacturing process to make the least impact on environment and the resource consumption to a minimum. The PDRLC is the core of the whole product remanufacturing life cycle. Besides reducing the cost of product design, manufacturing, transportation and remanufacturing, the goal is to improve the practical value of products and, to the greatest extent, 77

4 to reduce the resources consumption and environmental pollution, which closely combines the basic attributes of products and environmental attributes. The case based on the PDRLC made by Netherlands shows that it can be reduced by 30% to 50% of the environmental load(xu Qijin,2008). By taking the product s remanufacture-ability into consideration in the product design stage, the remanufacturing capacity of products at the end of product life can be significantly improved. The differences between the PDRLC and the traditional product design are shown in table 1. In a word, the quality of PDRLC is closely related with the level of economic costs and the treatment cost of environment. It can reduce the economic costs, environmental impacts and resource consumption mainly through the following measures: raising utilization ratio of the material with a high regeneration rate; saving the procurement and usage costs of raw materials; improving the design of light-weight, energy-saving, modularization and dismantling for products. The starting point of these measures is consistent with the goal of eco-efficiency, and embodies the requirements of eco-efficiency. 3 Analyzing the Factors of Activity Procedure of Remanufacturing Closed-Loop Supply Chain On the angle of fluid engineering, remanufacturing closed-loop supply chain activity procedure can be divided into two aspects of fluid and the carrier, which are the product level and enterprise logistics level. Through the research in factors on the product level, we can create a detailed analysis of the fluid (materials, components, modules and finished products) operating conditions for the remanufacturing closed-loop supply chain at every stage, and their impact on the eco-efficiency. According to the analysis of enterprise logistics level, we can sort out the carrier operating conditions at every stage of the remanufacturing closed-loop supply chain, identify the process that can be improved, and eventually improve the eco-efficiency of it in practice. 3.1 The product level On the product level, we analyze how it affects the eco-efficiency of remanufacturing closed-loop supply chain mainly in different product forms (materials, components, modules and finished products) that are produced in material flow, components flow, modules flow, products flow respectively in manufacturing stage. For details, see picture 2. (a) Material flow: raw material supply component manufacturing module assembly product assembly warehousing product use disassembly inspection material recycling raw material supply Material flow mainly happens in the following four stages: raw material supply, material recycling, thermal recovery and disposal. The quality, economy and regeneration at the raw material supply stage have a direct impact on the economic cost and treatment cost of environment for the entire remanufacturing closed-loop supply chain, that is, its eco-efficiency; at the material recycling stage, the proportion of material circulation largely affects the cost and benefit of remanufacturing; at the thermal recycling stage, we can recover the energy and maximize the use of materials by making use of those that can not enter the recycling; and at the disposal stage, the disposal of those acyclic materials, although some of the costs consumed, can reduce the impact on the external environment utmostly. (b) Component flow: component manufacturing module assembly product assembly warehousing product use disassembly inspection material recycling component manufacturing Component flow is mainly carried out in the stages of component manufacturing and inspection. Both the rationality of component design and the reliability of processing technology in the component manufacturing stage affect the economy of products; in the inspection stage, the higher proportion of component in re-manufacture circulation, the stronger economy of the closed-loop supply chain will be. 78

5 Material flow Module flow Component flow Product flow Material supply Component manufacturing Module assembly Product assembly Warehousing product Material recycling Module rebuilding Thermal recycling Disposal Inspection Disassembly Use Figure2 The flowchart of closed-loop supply chain for remanufacturing products (c) Module flow: module assembly product assembly warehousing product use disassembly inspection ---- module rebuilding module assembly Module flow mainly works in the following four stages: product assembly, disassembly, inspection and module rebuilding. At the stage of product assembly, the rationality of module design and the economy of assembly largely affect the fixed and variable costs of products; at the disassembly stage, the higher percentage of modularity, the easier the disassembling work will be, and then the lower labor and energy cost consumed will be; at the inspection stage, the higher proportion of module recycling after inspecting, the stronger the economy of the whole remanufacturing closed-loop supply chain will be; and at the module rebuilding stage, after simple re-processing, the more the modules enter the stages of module assembly and product assembly, the lower the remanufacturing cost will be. (d) Finished product flow: warehousing product use disassembly inspection ---- module rebuilding product assembly warehousing product Finished product flow mainly happens in the warehousing product stage and use stage. At the stage of warehousing product, the quality, weight and environment protection character of products will affect the economic benefits of warehousing activities; and at the use stage, the product flow allows for the realization of the product value. Therefore the quality of products is particularly important and we would also aim to minimize the damage of products to the environment at this stage. 3.2 The enterprise logistics level The implementation of remanufacturing closed-loop supply chain is to a large extent based on the daily operation through enterprises behaviors. Therefore, the research on the stages of remanufacturing closed-loop supply chain from enterprise logistics, aiming to find the process of reducing resource consumption, production costs and adverse impact on environment, is of great practical significance for the eco-efficiency of remanufacturing closed-loop supply chain. From enterprise logistics, remanufacturing closed-loop supply chain can be divided into the following six stages: 1Supply logistics stage: Supply logistics is the input point and starting point of the entire closed-loop supply chain. The transportation costs of supplies, recyclability of the material and its environment protection character can not only directly determine the remanufacture-ability of products, but also have severe impact on the economic cost and environmental cost. 2Production logistics stage: Production logistics is a key activity of the entire closed-loop supply chain. For example, if the production level cannot be handled properly, it will result in multiple transportation in the parts processing and special maintenance needed in the later stage of product, which will eventually lead to increased production cost and waste of resources. 3Package logistics stage: Packaging logistics is an important activity of the closed-loop supply chain. Packaging greatly influences the cost and efficiency of the whole system, especially the efficiency and effectiveness of transportation and storage. It can greatly reduce the impact on the environment and economic costs through simple packaging and environmental protection materials. 4Transportation stage: Transportation stage is a key activity of the entire closed-loop supply chain. Through improving the efficiency of the cargo transport, choosing the mode of rational transportation measures and adopting optimal path, we can greatly reduce unnecessary transportation cost and energy consumption. 5Warehouse logistics stage: Warehouse logistics is an important activity of the closed-loop supply chain. Products warehousing need a lot of human, material and financial resources. Storage environment and the product life cycle both have a significant effect on the influence of quality and efficiency of products. 79

6 6 Recycle logistics stage: Recycle logistics is a key activity of the entire closed-loop supply chain. As regard to the recycle logistics, on the one hand, the quantity and quality of recycled products has not only seriously affected the conduct of the remanufacturing activities, but also largely determined the economy and environmental friendliness of the remanufacturing closed-loop supply chain. On the other hand, we should rationally layout recycling distribution network, inspection facilities and trade off transportation costs and the solid construction costs. In addition, we should minimize the transportation distance between remanufacturing centers, reduce energy consumption, environmental impact and transport costs. Through the above analysis we can see, at every stage of enterprise logistics, we can reduce the economic cost, energy consumption and environmental pollution by strengthening management, optimizing design, and meanwhile, improve the public appearance of the enterprise and customer value. Furthermore, from a long-term perspective, it is helpful to promote manufacturing enterprises into the economic and ecological operation mode, which is in an accord with the scientific development concept and the circular economy development ideas and requirements, and will also help enterprises to obtain good economic benefits, taking on a great significance to the economy and society. 4 Conclusion This article applies eco-efficiency into the analysis of remanufacturing closed-loop supply chain, and put forward the concept of the eco-efficiency for remanufacturing closed-loop supply chain. It analyzes the influencing factors of the eco-efficiency for remanufacturing closed-loop supply chain from product design and the activities procedure of remanufacturing closed-loop supply chain, which can significantly improve the activities efficiency of the remanufacturing closed-loop supply chain, enhance the sense of enterprise s responsibility for environmental protection, and reduce waste emissions, resource consumption and the remanufacturing cost. It will help solve many social problems at the present stage in china, such as the more and more serious shortage of resources and environmental pollution, and can improve the sustainable development ability of economy and environment and bring about tremendous environmental benefits and economic benefits. Acknowledgements: This paper is sponsored by logistics system and technology research lab of Beijing Wuzi university. References [1]. Xie Jiaping, Huang Xueqi, Chen Rongqiu. (2008). Research on Closed-loop Supply Chain Network Location Model [J]. Journal of Systems & Management, 6 (17) (in Chinese) [2]. Li Yongjian. (2006). The new elements of supply chain-enterprise reverse logistics management practice [M]. Beijing: People's Traffic Press, November, (in Chinese) [3]. Zhao Xin, Bao Hong. (2008). The green product design based on the life cycle assessment [J]. Household appliances,12 (in Chinese) [4]. Xu Qijin. (2008). Research on the ecological design of products [J]. Science and Technology Information, 11(in Chinese) [5]. Sameer Kumar, Valora Putnam. (2008). Cradle to cradle: Reverse logistics strategies and opportunities across three industry sectors [J]. Int. J. Production Economics, [6]. H. Krikke, J. Bloemhof-Ruwaard and L. N. Van Wassenhove. (2003). Concurrent Product And closed-loop supply chain design with an application to Refrigerators [J]. International Journal Production Research, 41(16): [7]. Tohru, Morioka, Kiyotaka, Tsunemi, Yugo, Yamamoto, Helmut, Yabar, Noboru, Yoshida. (2005). Eco-efficiency of advanced loop-closing systems for vehicles and household appliances in Hyogoecotown: A case study of solid waste management [J]. Journal of Industrial Ecology, 9,

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