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This report evaluates three areas of supply chain and logistics of a manufacturing company in an electronic, digital and optical imaging industry, Canon. The aims of this report are:1. To identify key factors influencing Canon’s transportation decisions,2. To identify and discuss the obstacles involved in Canon’s forward and reverse logistics operations, and3. To identify how Canon understands the capabilities and limitations of its supply chain.
Citation preview
NBS8222 - International logistics
Assessing Logistics and Supply Chain Management Decisions: Canon
Group Assessment
Amal Ashok Ambade 12XXXXX
Andrey Nesterov 11XXXXX
Atiqah Ismail 09XXXXX
Gao Mingshuai 11XXXXX
Huiying Shi 12XXXXX
Jiawen Sun 11XXXXX
Rajesh Kumar Dhanapal 12XXXXX
1
Executive SummaryThis report evaluates three areas of supply chain and logistics of a manufacturing company in
an electronic, digital and optical imaging industry, Canon. The aims of this report are:
1. To identify key factors influencing Canon’s transportation decisions,
2. To identify and discuss the obstacles involved in Canon’s forward and reverse
logistics operations, and
3. To identify how Canon understands the capabilities and limitations of its supply
chain.
Accordingly, this report had been broadly organised into three sections; Topic 1, Topic 2 and
Topic 3. Literature review and company and industry analysis were conducted in achieving
the aims of this report.
Transportation decisions (Topic 1) have been found to be significantly influenced by three
interrelated factors: cost, flexibility and environmental factors. These factors appear to co-
exist and reciprocally shape transportation decisions. Additionally, these factors were also
found to contribute towards Canon’s logistical excellence and the creation of its overall
sustainable competitive advantage as the industry’s lowest-cost producer.
The main differences and obstacles in forward (FL) and reverse logistics (RL) operations
(Topic 2) were mainly attributed to forecasting and planning decisions. Primarily, main
obstacles relate to RL’s forecasting and planning challenges, associated with the
unpredictability of quantity, time and quality of returns. Four out of five areas deemed to
attribute to RL obstacles were investigated and discussed. The fifth area was excluded
because it is a realm of re-marketing.
Analysis of Canon’s production and information operations uncovered that understanding the
nature of its industry and its competitive environment contributes to Canon’s appreciation of
its supply chain capabilities and limitations (Topic 3). The nature of their business and
competitive environments dictate the critical importance of low-cost operation, rapid market
delivery, and information flow, which consecutively, influence Canon’s strategic supply
chain decisions.
2
Table of Contents
Page
Topic 1............................................................................................................................. 4
Cost & Flexibility........................................................................................................ 4
Environment: the Major Factor? ................................................................................ 5
Topic 2............................................................................................................................. 7
Product Acquisition..................................................................................................... 7
Reverse Logistics......................................................................................................... 8
Inspection and Disposition........................................................................................... 9
Reconditioning (Remanufacturing).............................................................................. 9
Topic 3............................................................................................................................. 10
Understanding Supply-Chain Capabilities.................................................................. 11
Production Decisions.................................................................................................. 11
Information Decisions................................................................................................. 13
References
Appendices
3
Topic 1Companies make transportation decisions based on various factors. A considerable amount
of literature has investigated variables affecting the organizations’ transportation decisions
(e.g. Hsiao et al., 2010; Stank and Goldsby, 2000; Morlok and Chang, 2004; McGinnis,
1979; Baumol and Vinod, 1970). The factors proposed by different authors are summarised
in Appendix 1. This section addresses the most common factors derived from the literature:
cost, flexibility and environmental factor.
Cost & Flexibility
Third-party distribution has developed rapidly over the past few years (Rushton, 2004)
mainly because of its cost advantages and efficiencies (Lieb, 1992). Reduced transportation
cost may result in lower prices for the end customer (Marijnissen, 2009). Therefore, being the
lowest price producer is a competitive advantage to the firm (Stock, 1999). Using third-party
carriers (3PC) allows companies to reduce the investment in logistics facilities (Rushton,
2004), equipment (Fantasia, 1993; Foster and Muller, 1990), information technology
(Fantasia, 1993; Goldberg, 1990), manpower (Richardson, 1995) and to utilise the expertise
of independent carriers (Sheehan, 1989; Trunick, 1989); therefore organisations can
concentrate on their core activities (Waters, 2003; Africk and Markeset, 1996) and be more
flexible to adjust to evolving market requirements (Lieb, 1992). However, in terms of
communication, insourcing has its advantage since it can be performed more efficiently
between staff members of the same organisation as opposed to inter-organisational
communication (Sikula Sr, 2010). Additionally, control and supervision are perhaps simpler
and cheaper when transportation system is owned by the company (Sikula Sr, 2010). Reward
system and motivation may be controlled, adjusted and executed in-house in an optimal way
to enhance working enthusiasm (Hirscheim, 1998). The boost in productivity and operations’
efficiency could result in cost savings (Rushton, 2004).
The business environment is becoming more complex and unpredictable (Goetz, 1997).
Therefore, logistics operations need to be more flexible. On one hand, large 3PC usually
contract with thousands of carriers and have an extensive network. Hence, they can utilize
vehicles and warehouses more effectively and be more flexible (Handfield, 2002). On the
4
other hand, administration and guidance are easier to accomplish within one organization
(Hirscheim, 1998). Since it has direct contact with end customers, the organization can react
promptly to customer requirements and adjust its processes accordingly (Reilly, 1996).
Moreover, direct contact with the customer could provide an opportunity to develop a better
supplier-to-buyer relationship.
Environment: the Major Factor?
In addition, as green transportation is advocated by many large reputable companies,
environmental factor can be an important. However, whether it could actually be treated as a
fundamental factor in transportation policy or not is a subject to discussion. The
interrelationship between costs, flexibility and environment factors will be uncovered using
Canon as an example.
Since 2002 Canon has been focusing on CO2 emissions generated by its transport operations
(Canon Global, 2013). The enterprise decided to outsource physical distribution to experts to
undertake its core activities more efficiently. In this way they are assumed to preserve the
environment and reduce CO2 emissions. Canon implemented two major changes: reduction
of transport routes and shifting transport mode.
Reducing transport routes
Canon works on routes shortening by reviewing logistics base locations and finding more
direct routes to reduce the environmental impact of logistics operations. After establishing a
distribution center (DC) in North America, Canon set up the west coast DC and is constantly
looking for new DCs (Canon global, 2013).
Cost and environmental factor appear to be linked since both factors encourage a reduction in
transportation distance. Continuous establishment of new DCs triggers significant
investments in equipment, software, facilities and personnel. These investments not only
increase Canon’s transport costs (including empty return costs), but also increase
management and operational costs. This could result in higher product prices and weaker
market competitiveness. However, 3PCs might balance these deficiencies. They have their
own planned route which could significantly decrease transport costs and environmental
5
impact. Thus, low transportation costs seem to positively influence green logistics’
development and vice versa.
Shifting transport mode
Canon strives to reduce transport-related CO2 emissions through modal shifts inside and
outside Japan, from road and air transportation to a more environmental-friendly combination
of ocean and rail freight (Canon global, 2013). For example, the company switched from
truck to rail on the route from Oita (Japan) to Korea in 2011 and CO2 emissions were
reduced by 33 tons as a result (Canon global, 2013).
Railways are often associated with very high costs of track and network construction, and the
costs of buying or leasing the trains (Economics online, 2013; Chase et al., 2002). It might
stop a company from shifting to rail transport. Nevertheless many reputable 3PCs have
invested in railway transport or developed their own. These networks can be used if cargo
shipments are outsourced to external carriers that have invested in railway systems.
Moreover, flexibility of 3PC is another advantage that allows for modal shifts. Compared to
the truck transport, railways are relatively inflexible. Although mixed provision
transportation has higher volume and flexibility, an increase in costs (e.g. empty return costs)
may result in flexibility being reduced. Therefore, flexibility seems to be closely related to
green transportation factor since costs are connected to the environmental factor (as discussed
above).
To conclude, the environment is an important factor as stated by Canon (Canon Global,
2013). However, it appears to be influenced significantly by cost and flexibility factors, with
cost playing a fundamental role in outsourcing decision making process. It seems that factors
influencing transportation decisions are interconnected, multidimensional and should be
treated as such.
Topic 2
6
Companies form reverse supply chains (RSC) for different reasons: customer pressures,
government environmental regulations (Guide and Van Wassenhove, 2002) and/or value
recovery (profitability) incentives (Meyer, 1999; Ayres et al., 1997). This section will
highlight the key differences between forward logistics (FL) and reverse logistics (RL),
identify typical obstacles to performing FL and RL operations and analyse obstacles that are
the most relevant to Canon. The main focus is on the RSC as certain aspects of forward
supply chain and logistics have been analysed in the previous and following topics.
Despite certain obvious similarities, reverse logistics is quite different from its counterpart.
The fifteen core differences distinguished by Rogers and Tibben-Lembke (2002) are
presented in Appendix 2. The differences between FL and RL seem to uncover, to some
extent, the main obstacles to executing RSC activities. For instance, FL allows more precise
forecasting and planning. RL operations are more reactive and difficult to forecast: decisions
are made on the basis of customers’ actions (Rogers and Tibben-Lembke, 2002). This
difference points to a problem of uncertainty investigated by Guide et al. (2000): it is hard to
predict the quantity, time and quality of returns. Nevertheless, some differences explored by
Rogers and Tibben-Lembke (2002) are obstacles per se. For example, unclear disposition
options are referred to as a RL problem by Guide et al. (2000).
An extensive range of problematic issues is investigated in the academic literature (e.g. Guide
and Van Wassenhove, 2002; 2009; Guide et al., 2000; Fleischmann et al., 2001; Rogers and
Tibben-Lembke, 2001). The typical RSC obstacles relevant to the majority of industries are
summarised in Appendix 3. The obstacles may be roughly attributed to the five major
components (Appendix 4) of a RSC distinguished by Guide and Van Wassenhove (2002).
Product Acquisition
Canon deploys multiple acquisition methods including retail outlets, post offices, service
centres, stations, business and local authorities’ offices, shopping centres and schools.
Collection at schools is combined with consumer education programs on environmental
issues (Canon, 2013b). Additionally, the corporation has combined its efforts with other five
printer manufacturers to collect ink cartridges. It has established common points of collection
in 3600 offices in Japan. The collected cartridges are sent to a common sorting facility and
7
later on distributed to each company separately. This project increased return rates
dramatically (Canon, 2013b). Moreover, the company ensures sufficient quantities of returns
(discussed by Guide and Van Wassenhove, 2009) through a trade-in collection system
(Canon, 2013) which provides an incentive for customers to return products.
Reverse Logistics
Collection of business machines is handled by members of Canon Group, such as Canon
Ecology Industry. It performs remanufacturing, repair and high-level recycling. The returns
collection is partly outsourced to increase efficiency (Canon, 2013). Outsourcing to 3PC,
such as Fedex (Canon, 2013b), might facilitate transportation of smaller quantities and
variable product types (Fleischmann et al., 2001). However, it may add to overall RSC
complexity (Guide and Van Wassenhove, 2009).
When returned products are collected, a barcode is placed on each item for monitoring
purposes and process accuracy (Canon, 2013). This measure allows for better management
and alignment of the whole RL process which might help reduce operations’ complexity
(Guide and Van Wassenhove, 2009) and uncertainty (Gudie et al., 2000).
There are no standard readymade information systems (IS). An IS has to be tailored to
specific industry and specific company (Rogers and Tibben-Lembke, 2001). Canon deploys
an information exchange system with its third party RL contractors. The system allows
information sharing on matters of usage of special equipment with partners (Canon, 2013). It
might partly reduce the risks of outsourcing (Guide and Van Wassenhove, 2002).
Canon’s reverse activities are centralised with a focus on profitability which they attribute to
an efficient RL programme (Global logistics and Supply chain strategies, 2008). In other
words, the corporation is focused on keeping costs as low as possible which is another typical
corner stone of a RSC as stated by Guide and Van Wassenhove (2002).
Inspection and Disposition
8
Canon Ecology Industry’s plant performs inspection and recycling of cartridges automatically
(Canon, 2013). It is a way of adding speed and efficiency to the process which is crucial for
electronics industry (Guide and Van Wassenhove, 2009; Rogers and Tibben-Lembke, 2001).
Automatic plant addresses technical disassembly issues (discussed by Guide and Van
Wassenhove, 2009; Guide et al., 2000).
Reconditioning (Remanufacturing)
Companies have a set of options to return goods into the market: repair, reuse, recycling or
remanufacturing (Ayres et al., 1997). Canon expands the activities aimed at reduction of
waste and resource usage through extensive reuse of returned products (Canon, 2013a). To
address the problems of value recovery (Guide and Van Wassenhove, 2002), technical
remanufacturing issues (Guide and Van Wassenhove, 2009) and disassembly challenges
(Guide et al., 2000) Canon developed its own remanufacturing techniques. For instance, the
company deploys technologies of deep cleaning of exterior parts of photocopiers to achieve
84% rate of reused parts which in turn decreased CO2 emissions attributed to manufacturing
by 80% (Canon, 2013a).
Canon designs its products with remanufacturing and recycling in mind. In 1998, the
corporation issued The Environmentally-Conscious Design Guidance to promote product
planning, development and design that facilitates minimisation of wastes and resource
utilization. The guidance is partly consonant with the EU’s Waste Electrical and Electronic
Equipment (WEEE) Directive that was issued only in 2005 (Canon, 2013). Essentially, by
employing a proactive approach to remanufacturing standards Canon adapts to emerging
legal issues in advance, addresses the issues of corporate policies (Rogers and Tibben-
Lembke, 2001) and satisfies the environmental requirements discussed by Guide and Van
Wassenhove (2002).
To conclude, the focal company is successfully using the concepts of RSC and environmental
concern as a means of marketing, image and brand building (Dekker et al., 2004). Since
Canon puts extreme efforts into RSC, it is possible that the company’s strategic goal is to
achieve economies of scale for products and materials that do not deteriorate quickly in
value.
9
Topic 3A supply-chain consists of a network of organisations. Supply chain theory and practice have
realised that supply-chains compete as one unit, rather than as single companies (Handfield,
2002; in Done, 2011; Erturgut, 2012). Thus, it is important for a company to understand the
capabilities and limitations of its supply-chain.
Companies in any supply chain must make decisions individually and collectively in five
major areas outlined in Table 1 (Hugos, 2011).
Table 1: Key supply chain decisions
Supply-Chain Decisions
DescriptionExamples of Activities (Beamon, 1998; Hugos, 2011; Islam et al., 2012)
Production decisions
Decisions relating to the planning, design and management of the entire manufacturing process including the capacity and ability of the company to produce (Beamon, 1998; Hugos, 2011).
Production planning and control,Unit size,Handling systems
Inventory decisions
Decisions relating to the design and management of storage processes, policies and procedures of inventories across the supply chain (Beamon, 1998).
What to stock,Where to stock,How much to stock
Transportation decisions
Decisions determining transportation modes and how products and inventories are retrieved, transported and distributed from the warehouse to retailers (Beamon, 1998; Hugos, 2011).
InfrastructureTransport mode options,Modal transfer points,Load planning,Routing and scheduling
Location decisions
Decisions relating to the selection of sites where facilities and warehouses are to be established (Melo et al., 2009; Hugos, 2011).
Location,NumberSize,TypeCargo handling
Table 1: Continued
Supply-Chain Description Examples of Activities
10
Decisions(Beamon, 1998; Hugos, 2011; Islam et al., 2012)
Information decisions
Decisions relating to the management of information systems that underpins the effectiveness of the four previous factors. Appropriate, timely and accurate information should provide effective supply-chain decisions on what and how much to produce, inventory and facility locations, and the most efficient distribution methods (Hugos, 2011).
Information systems,Control and forecasting.
Understanding Supply-Chain Capabilities
Understanding a company’s own supply chain capabilities (i.e. strengths and limitations) will
enable itself to determine its operational and supply chain strategies by leveraging its own
capabilities and differences with those of other supply chain members.
It is very difficult to simultaneously deliver high-level performance in all areas of operations
(Hill, 2009). Thus, in dealing with the five major areas of supply-chain decisions, each
supply-chain member will maximise its performances and their capabilities in areas that are
of greatest strategic value for the firm through a combination of outsourcing, partnering, and
in-house expertise (Hugos, 2011).
Accordingly, by using an example of Canon, the following will identify how the company
understands the capabilities and limitations of its supply-chain by analysing two of the five
elements in understanding supply chain capabilities. Due to reasons of parsimony, production
and information decisions are chosen as the two subjects of discussion.
Production Decisions
Canon’s production decisions are mainly driven by its dual aim of cost-reduction and product
innovation (Canon, 2013e). Canon’s production decisions include make-or-buy decisions,
fully-automated production, outsourcing of non-core components and production-facility
locations (Fawcett et al., 2007; Canon, 2013d; d). Canon has full ownership and control over
11
its production activities involving in-house production of proprietary key components and
devices, functional parts, circuit boards, moulds and manufacturing equipments used to create
camera parts (Canon, 2013e). The following outlines how Canon’s production decisions are
shaped based on its supply chain capabilities and constraints:
Understanding the Nature of High-tech Industry and Competitive Environment
A manufacturer’s capability to constantly innovate is critical in the competitive digital
camera manufacturing (DCM) market as products are constantly evolving and emerging
(Tseng et al., 2009; BBC, 2006; Tesseras 2011). This forces Canon to operate at low cost to
accommodate constant research and development (R&D) in imaging technology (Canon
USA, 2012; Tesseras, 2011). Therefore, the need for constant innovation plays a major factor
in production decision relating to make-or-buy decisions in the DCM market in terms of time
and cost limitations. These limitations contribute to the complementary need for rapid market
delivery of high-value products at low-cost.
Make-or-buy decisions: Realising Core Competency and Production Capacity
The competitive need to constantly innovate while minimising cost may have influenced
Canon’s make-or-buy decisions. Canon’s recognition of its core competency in digital optical
and imaging technologies underlies its production capacity decisions for in-house production
and innovation of critical technology and components (Canon, 2013c; d). Accordingly,
Canon focuses on the production of high-value critical components and R&D activities while
outsourcing other low-value components (Canon, 2013e). For example, as Canon focuses on
its core competency in the production of high-value critical components (e.g. lenses and
image sensors), it outsources the manufacturing of low-value accessories (e.g. rubber hand-
grip) to its supply-chain partners with expertise in the production of those components
(Canon, 2013d; Canon USA, 2012a).
Canon’s ability to synchronise these different manufacturing capabilities of supply-chain
partners with its own has resulted in a sustainable competitive advantage and supply chain
effectiveness (Hayes and Pisano, 1994; Fawcett et al., 2007).
12
Moreover, Canon’s in-house competency to manufacture, develop, and innovate digital
imaging technologies has enabled itself to achieve rapid and low-cost production of high
quality product through self-designed, fully-automated production and investments in cost-
saving technology such as computer-aided engineering which enables ‘prototype-less
technology’ (Canon UK, 2012; Canon, 2013d). Thus, allowing greater control over its value
chain and production operations at minimum cost.
Information Decisions
Similar to production decisions, understanding the nature of high-tech industry and
competitive environment shapes and influences Canon’s information decisions. As mentioned
previously, low-cost production and operation and speed to market are important competitive
requirement to survive in the capital- and technology-intensive industry. Thus, efficiency
needs to be assured through accurate and timely information, thereby eliminating wastes (e.g.
overproduction, poor design, and new-product run-up) (Taylor and Brunt, 2001). Therefore,
the need for accurate and timely information influences Canon’s information decisions.
Understanding the Structure and Nature of Supply Chain: Global Supply Chain
Canon is a global company, with operations and supply chain extended over the world
(Canon UK, 2013). Understanding the supply-network structure, flows, operations and
dynamics enables early identification of potential complexity associated with global supply
chain such as lack of ownership arising from outsourcing, and inertia due to general lack of
responsiveness (Juttner et al., 2003). Global supply chains are often exposed to inertia, where
it is difficult to control suppliers’ flexibility and ability to adapt to changing environments
(Juttner et al., 2003). Accordingly, the following further discusses how the need for accurate
and timely information influences Canon’s information decisions.
Information Sharing and Exchange Decisions
Information sharing requires firms to exchange strategic supply chain information and not
only transactional data, such as materials or product orders (Prajogo and Olhager, 2012).
13
Canon has implemented Integrated Information System (IIS) through systems like Electronic
Data Interchange System (EDIS). EDIS is designed for Canon’s suppliers, in which quotation
or order data can be transferred between Canon and suppliers (Canon, 2013f). To facilitate
this, Canon also engages in the development of supply-chain partners’ information sharing
system (The Times 100, 2013).
IIS plays a central role in Canon’s supply chain management in the following aspects; first, it
allows firms to increase the volume and complexity of information which needs to be
communicated with the inter-trading partners. Second, it allows firms to provide real-time
supply-chain information (Prajogo and Olhager, 2012). Increased access to real-time
information enables Canon to synchronise its inventory level, delivery status, and production
planning and scheduling which enables firms to manage and control its supply chain
activities. Third, it also facilitates the alignment of forecasting and scheduling of operations
between Canon and its supply chain partners, allowing better inter-firms coordination.
Exchange of information has revolutionized most of Canon’s operation leading to a greater
visibility of technology and resources. Thus, benefiting Canon through quality assurance (i.e.
conformance to specification by Canon to its partners, in terms of consistency of services
provided by its agents globally), synchronized distribution system, and timeliness to market
(through reliable production planning, ordering and distribution systems).
However, Canon needs to carefully consider which information to disclose and exchange
among its supply chain partners. For instance, possible patent conflicts may arise from
specific buyer-supplier investments and information-sharing in supply-chain integration or
alliances when intellectual properties and technologies are shared among key suppliers or
customers within the supply chain.
14
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Appendix 1Authors Factors influencing
transportation decisionsNotes
(McGinnis et al., 1995) Price,Competitive responsiveness (flexibility, responsiveness to changes in customers’ needs),External environment,Logistics strategy
Price is only considered when the performance requirements are met.
(Hsiao et al., 2010) Lack of own transport,Transportation is not the core activity,Cost reduction,Cost pressure,Lack of skills
These are more likely to be looked upon as reasons for outsourcing of transportation. However, the example gives an idea of general motivation for outsourcing with cost being one of the major drivers.
(Baumol and Vinod, 1970) Freight rates (costs),Speed,Reliability (variance in speed),En-route lossage
This paper, however, states that speed and reliability factors allow for lower inventory of the shipper which decreases overall costs.
(McGinnis, 1979) Speed and Reliability,Freight rates (costs),Loss and damage
The research coincides with the findings of Baumol and Vinod (1970). The current paper assumes that reliability is closely related to costs as mentioned above; and speed of delivery is assumed to be greater when outsourcing is chosen since transportation is the core activity of a third-party carrier. Hence, speed and reliability are not analyzed in the conducted research and should rather be treated as factors that are included into speed and flexibility factors.
(Stank and Goldsby, 2000) Transit time requirements,Product characteristics,Transportation cost constraints
These are factors for integrated carrier selection.
(Morlok and Chang, 2004) The study points out the importance of flexibility as a characteristic of a transportation system.
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(Ying and Dayong, 2005) Operations’ time and cost,Customer service level,Integration with business processes
It accentuates the possible positive influence of IT and e-commerce deployed by 3PLs on the supply network. The information systems can be viewed as a factor in itself leading to decreased costs, delivery times etc.
(Knemeyer et al., 2003) Trust,Commitment,Investment,Dependence,Communication,Shared benefits
Behavioral perspective on aspects that influence the relationships between shippers and 3PLs.
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Appendix 2Forward logistics Factors Reverse logistics
Straightforward Forecasting More difficultOne to many Transportation Many to oneUniform Product quality Not uniformUniform Product packaging Often damagedClear Destination/routing UnclearStandardized Channel of distribution Exception drivenClear Disposition options Not clearUniform Pricing Dependent on many factorsRecognized Importance of speed Often not a priorityVisible & closely monitored Visibility of costs Less directly visibleConsistent Inventory management Not consistentManageable Product lifecycle More complexStraightforward Negotiation between parties Has additional considerationsWell-known Marketing methods Has complicating factorsReal-time tracking available Visibility of process Less transparentDifferences in forward and reverse logistics (Rogers and Tibben-Lembke, 2002, p. 276)
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Appendix 3Author, Year Obstacles Notes
Guide and Van Wassenhove, 2002
Consumer education, Outsourcing decisions, Ways of keeping costs low, New ways of value recovery, Satisfying the environmental
requirementsGuide and Van Wassenhove, 2009
Lack of access to returns, Technical remanufacturing
issues, Managerial concern of market
cannibalisation, Excessive complexity due to
additional independent actorsGuide et al., 2000 Uncertainty in timing and
quantity of returns, Balancing returns with
demands, Disassembly, Materials recovery
uncertainty, The requirement for a reverse
logistics network, Material matching restrictions, Stochastic routings for
materials for repair and remanufacturing and highly variable processing times
Seven obstacles that add to uncertainty of RL
Fleischmann et al., 2001 Transportation of returns Smaller quantities and variability in product types increase the transportation costs (Rogers and Tibben-Lembke, 2002)
Rogers and Tibben-Lembke, 2001
Importance of reverse logistics relative to other issues,
Company policies, Lack of systems, Competitive issues, Management inattention, Personnel resources, Financial resources, Legal issues
Clarification: the first obstacle refers to the tendency of RL to be viewed as an issue of secondary importance
Obstacles involved in RL operations mentioned in academic literature
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Appendix 4Author, Year Components of RSC Notes
Guide and Van Wassenhove, 2009
Front End: product return management (refers to the 1st and 2nd components highlighted in the section below)
Engine: remanufacturing operational issues (3rd and 4th components)
Back End: remanufactured products market development (5th)
It is a generic process flow perspective. Remanufacturing does not necessarily involve remanufacturing per se. It might be reuse, recycling or repair processes just as well. The authors accentuated exactly these three sub-processes because any of them might be a bottleneck for the whole RSC. The three sub-processes include the respective components mentioned below.
Guide and Van Wassenhove, 2002
1. Product acquisition
2. Reverse logistics
3. Inspection and disposition
4. Reconditioning
(remanufacturing)
5. Distribution and sales
Within each part costs, options and benefits should be examined.Reverse logistics.The network design is specific to a certain product and industry. The issues to be considered here are transport and storage costs, speed of the product’s value deterioration, the necessity to keep control over the products. The decision to outsource this function might also be considered.Inspection and disposition.In order to increase the speed to market and decrease logistics costs, decisions concerning disposition of returned products should be made as soon as possible. This part might cost time and involve significant labour resources.Reconditioning.Uncertainty is an important issue at this stage. The timing, quantity and quality of returns appear to be difficult to predict.Distribution and sales.It is crucial to establish whether there is demand for remanufactured products. Significant investments into marketing might be undertaken at this stage in order to educate consumers and address the target customers – in particular, when the target group is different from the consumers of the new products.
Components of reverse supply chains
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