Elsevier

Computers & Industrial Engineering

Volume 113, November 2017, Pages 716-726
Computers & Industrial Engineering

Closed-loop supply chain network designs considering RFID adoption

https://doi.org/10.1016/j.cie.2016.09.016Get rights and content

Highlights

  • Consider a closed-loop supply chain network for the remanufacturing of products using RFID technology.

  • RFID technology can be used to improve the efficiency.

  • The adoption of RFID could be highly beneficial to companies.

  • Investigate the effects of parameter values on costs and decisions.

  • Results serve as a reference for business managers and administrators.

Abstract

This paper reports on a closed-loop supply chain network for the remanufacturing of products under RFID technology. RFID technology can be used in a closed-loop supply chain to improve the efficiency of ordering and the operation of a just-in-time remanufacturing system; however, this invariably incurs costs. Companies must carefully consider the opportunities and challenges posed by RFID technology to ensure that such an investment is worthwhile. This study contributes to the body of existing closed loop supply chain literature through formulating the problems as continuous functions to reduce the complexity of the problems and decrease the amount of data required which greatly facilitates development and implementation. The objective of this study was to determine the number of distribution centers, the number of remanufacturing centers, the joint replenishment cycle time, and the investment in RFID required to minimize total network costs. This paper applies a continuous approximation (CA) approach to model the network. Nonlinear programming techniques are developed to solve the optimization problems. The results of numerical analysis demonstrate that the adoption of RFID could be highly beneficial to companies. We also investigate the effects of parameter values on costs and decisions to gain managerial insight.

Introduction

A green supply chain integrating all value-added operations aimed at minimizing the impact on the environment is a growing concern. Researchers have dealt with this issue by investigating the sustainability of supply chains, carbon emissions, and reverse logistic. Several policies have been developed to handle end-of-life products, including product recovery, remanufacturing, and re-use. Closed-loop supply chain management takes into account forward as well as reverse supply chains simultaneously. A forward supply chain takes into account the flow of new products with the aim of minimizing distribution costs, whereas reverse logistics deals with the flow of returned products with the aim of minimizing product recovery costs.

Many industries, including the automobile, telecommunications, and electronics industries, have begun applying reverse logistics for the remanufacture of returned products to reduce costs and the effects on the environment. Hewlett Packard (HP) provides a Consumer Buyback and Planet Partners Recycling Program to buy back old equipment from customers, whereupon they are sorted and disassembled into parts. Valuable components can then be cleaned and reassembled in new products. This has enabled HP to recover 3.3 billion pounds of materials since 1987. More than 80% of the ink cartridges and 38% of the LaserJet toner cartridges manufactured at HP are now made using closed-loop recycled plastic (HP, 2016).

Remanufacturing is an environmentally and economically sound way to achieve sustainable development (Abdallah, Diabat, & Simchi-Levi, 2011). It helps companies to reduce the use of raw materials and waste. Nonetheless, there are still questions to be answered, such as those pertaining to the quality of products, the shortage of returned products, and uncertainty in the yield of returned products (Kulkarni, 2005). Recent technological advances such as radio-frequency identification (RFID) make it possible to characterize the lifecycle of products and components throughout the supply chain.

RFID is the wireless use of electromagnetic fields for the transfer of data to enable the automatic identification and tracking of tags attached to objects. RFID makes it possible to increase asset visibility, enhance information content, speed up the flow of information, and improve inventory management. RFID technology has been applied in manufacturing, retail, logistics, hospital, and libraries. The standards group GS1 US recently revealed that 57% of apparel retailers currently use RFID and another 19% plan to introduce this technology in 2015. This technology provides a means of maintaining highly accurate inventory records (>95%) and has even been shown to increase sales and margins, while enhancing consumer loyalty (Retailer, 2014).

The pitfalls of RFID include high implementation and operating costs, competing standards, technology limitations, and privacy concerns. The critical question for all companies is whether RFID technology creates sufficient value to justify investment. It is expected that the recent adoption of RFID by Wal-Mart, Target, and the Department of Defense will have a ripple effect driving the continued adoption of this technology. It is further anticipated that the return on investment for RFID will initially be low or non-existent; however, future gains are made possible through the redesign of business processes. Various evaluation methods have been developed to support companies in evaluating investment in RFID (see Section 2). It is expected that the adoption of RFID also help the closed-loop supply chain work more efficiently.

This paper proposes a closed-loop supply chain network design under RFID adoption. Our contributions are as follows. This is the first study to consider closed-loop supply chain under RFID adoption. We examine the effect of RFID adoption to the forward and reserve supply chain through inventory, operation, and returned rate. Second, we formulate the problems as continuous functions to reduce the complexity of the problems and decrease the using data which greatly facilitates development and implementation. Third, the proposed CA model can be used to determine the number of distribution centers (DCs) and remanufacturing centers (RCs) as well as their location, RFID investment levels, and the joint replenishment cycle time at DCs simultaneously. Furthermore, simultaneous RFID investments are made by considering interdependent of the four decisions. We also compare two models involving the use and non-use of RFID technology for the tracking of product information. Finally, this study presents new insights for decision making. It could be a reference for companies/governments to develop a closed-loop supply in the future.

This study is organized as follows. In Section 2, we present a review of the literature on closed-loop supply chains and RFID investment. The problem is described in Section 3. In Sections 4 Model development, 5 The case without RFID adoption, we formulate continuous approximation models in situations with and without RFID adoption. Numerical examples and sensitivity analysis are presented in Section 6. Conclusions and future research directions are outlined in Section 7.

Section snippets

Traditional forward supply chain network design

Most previous research on efficient supply chains has focused on three main categories: inventory control, traditional forward supply chains, and reverse supply chains. Numerous studies have addressed issues pertaining to the design of forward supply chain networks. Shen, Counllard, and Daskin (2003) proposed a distribution network in which some of the retailers act as distribution centers to reduce inventory costs through risk pooling. Teo and Shu (2004) introduced the warehouse-retailer

Problem description

In this study, we consider a closed-loop supply chain (Fig. 1), which involves a two-echelon supply chain with an outside supplier selling products, several distribution centers (DCs), several remanufacturing centers (RCs) and many retailers. Distribution centers help in consolidation of shipments arriving from supplier and delivery to retailers. Remanufacturing centers serve as the intermediary between the returned product and their re-entry to the forward supply chain. Remanufacturing

Model development

In the proposed models, all of the cost functions are modeled using the continuous approximation technique, as follows:

The case without RFID adoption

In the following, we consider the case in which RFID is not adopted, in order to elucidate the influence of RFID adoption on network costs and decision-making. In this case, we assume that the investment in RFID technology is zero. The previous model then becomesTC2=i=1NFCiAiN+i=1N(Cf+CvQi)ζλiδiCiTiNλiδiAiN+i=1NCrfrAiNζλiδiCi+i=1NOTiNCiAiN+i=1NCiAiNhTiNζλiδiCi2+i=1NfCiaiN+i=1NCrfraiNτNζλiδiCi+i=1NCiaiNctβNτNζλiδiCi-Ni=1CiaiPr(1-βN)τNζλiδiCi-Ni=1CiaiPdβNτNζλiδiCiwhere AiN, aiN, and TiN

Numerical analysis

To illustrate the behavior of the proposed model, we consider the following parameter set. Due to the sensitivity of the parameters required for running the models, we extracted empirical data from several case studies in order to generate a realistic scenario (Lee and Lee, 2010, Tsao et al., 2012).

F = 8000; f = 10,000; Cr = 8; O = 30,000; h = 8; Cv = 0.8; β = 0.7; fr = 0.01; z = 1.64483; μ = 1; σr = 0.01; Cf = 1500; M = 1; N = 0.3; γ = 0.001; L = 0.2; U = 1; ψ = 0.002; E = 0.5; A = 1; χ = 0.002; η = 7000; Ce = 8; Ct = 6; τN = 0.6; Pr = 15; Pd = 

Conclusions

This paper considers the implementation of an RFID system within a closed-loop supply chain involving the return and remanufacture of products. The economy of investing in RFID technology is evaluated according to ordering efficiency, JIT efficiency, operating efficiency, remanufacturing efficiency, and the rate of returns. We adopted a continuous approximation (CA) method in designing our problems due to the fact that this approach does not require the data density necessary for mathematical

Acknowledgement

This paper is supported in part by the Ministry of Science and Technology under grants MOST 102-2221-E-011-159-MY3 and MOST 104-2221-E-011-171-MY3.

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