Reverse Logistics

Saturday, February 11, 2006

The Ecological Perspective

If we extend the supply chain metaphor from raw material source to landfill and include the consumption of fossil fuels leading to the creation of greenhouse gases the resulting schematic clearly shows that SCM concepts are at the heart of the ecological challenges facing space ship Earth.

This drawing does not consider waste material recycling or energy generation from renewable sources such as wind, solar or biomass. Neither does it consider energy generated by nuclear sources.

In this context Reverse Logistics can be seen to have ecologically sound benefits.

According to Dyckhoff et al. SCM and RL 2004
‘In SCM, the “way back” is not very important. If any recycling processes are considered, for example, in newer releases of the SCOR-Model, they only affect the return processes for reasons of warranty or maintenance. However, these processes merely describe a small proportion of the recycling processes in real life. A widespread management of circular systems will, therefore, only be possible if SCM is enhanced to Close Loop Supply Chain Management (CLSCM) by looking at different types of collection, reduction and induction processes, and especially by integrating corresponding processes of reverse logistics.’

Most supply chains are managed by commercial organisations that have as a prime objective the maximisation of value for their shareholders. The implementation of initiatives, no matter how ecologically sound, that are not profitable are in contravention of that prime objective. Good corporate citizens do however follow the law. Initiatives that are backed by legislation (e.g. The WEEE Directive and the RoHS Directive) are therefore required where the objectives are ecologically required but not economically justified within the context of a single commercial organisation. This does not mean that companies resent such legislation. Since legislation is applicable to all competitors, in the marketplace where the legislation applies, then the implementation of a legally binding ecologically sound initiative will not result in any one company being at a competitive disadvantage.

Reverse Logistics researchers and practitioners are moving toward an analysis of Closed Loop Supply Chains (CLSC). These CLSCs are populated by three types of organisation not normally considered in SCM.
* Collectors collect, accumulate, and may do some sortation of waste streams.
* Reducers complete the sortation process and process the waste stream into raw materials which are available for consumption.
* Inducers then introduce the recycled raw materials into new manufacturing processes. It is quite common, for example, for a percentage of recycled plastic to be used when moulding new products.

It is important to realise that CLSCM does not necessarily mean that material on the ‘way back’ does not necessarily follow the same path, in reverse, as material on the ‘way there’.

Dyckhoff et al. SCM and RL 2004 proposes the following diagram to represent the CLSC. The upper layer lists the actors and transactions while the lower layer represents material flow and transformation.

The reduced depletion of natural resources when materials are recycled is the intrinsic advantage of viewing Supply Chains as closed loop rather than linear.

Unfortunately there is a need for government intervention in order to implement ecologically sound but commercially expensive initiatives. For example, The Montreal Protocol (1987 and subsequent amendments) limiting the use of Chlorofluorocarbons (CFCs) has been successful at reversing the ozone depletion layer at the polar caps. Failure by the USA to adopt the Kyoto Protocol (1997) on the creation of greenhouse gases has seriously damaged its ability to achieve its objectives.

Within the EU, the implementation of the WEEE Directive, and the RoHS Directive, has had dramatic beneficial effects on the environment. These initiatives put the responsibility for the cost of recycling on the producers and state the specific percentage of these products that must be recycled. These initiatives (especially the WEEE directive) are creating opportunities for companies in collection, reduction and induction within the closed loop supply chain.

As a practitioner in Reverse Logistics it is nice to feel that the sector has the capacity to contribute to the ecological wellbeing of the planet.