Closed Loop Supply Chains

Closed Loop Supply Chains

The closed-loop supply chain management is “the design, control and operation of a system to maximize value creation over the entire life-cycle of a product with dynamic recovery of value from different types and volumes of returns over time” (Guide & Wassenhove)

Closed-loop supply chains (CLSC) are mainly concerned with idea of recovering value from used products or some of its components.  CLSC focuses on managing the entire process of recovering these products if they carry any economic value that can be transferred into the production planning.

There are some activities that require special attention in the reverse supply chain. One has to consider the processes; product returns management, remanufacturing operational issues and remanufactured products market development.  There are questions raised for each one of these processes before delving into CLSC. From a market perspective, one needs to answer whether customers are willing to buy remanufactured products. If there happens to exist a customer pool then in the remanufacturing process of the used products will it be possible to create value at a reasonable cost? From procurement and product returns management perspective is it within the realms of possibility to access a sufficient amount of used product?

CLSC can be studied under two different mainstream optimization approaches which in turn change the interest of the company. It might be a market-driven approach in which profit maximization is aimed or it might be a waste-stream approach in which cost minimization is targeted.

CLSC brings potential new roadmaps to follow and investigate unexplored regions in classical supply chains. One needs to reconsider the entire supply chain if s/he wants to use CLSC. For example, how the inventory management will be affected after the introduction of sourcing remanufactured components.


Reference: The Evolution of Closed-Loop Supply Chain Research INSEAD Business School V. Daniel R. Guide, Luk N. Van Wassenhove

added 3 years ago

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