Optimal Management of Reverse Supply Chains with Sensor-Embedded End-of-Life Products

Abstract

Reverse supply chain (RSC) is an extension of the traditional supply chain (TSC) motivated by environmental requirements and economic incentives. TSC management deals with planning, executing, monitoring, and controlling a collection of organizations, activities, resources, people, technology, and information as the materials and products move from manufacturers to the consumers. Except for a short warranty period, TSC excludes most of the responsibilities toward the product beyond the point of sale. However, because of growing environmental awareness and regulations (e.g. product stewardship statute), TSC alone is no longer an adequate industrial practice. New regulations and public awareness have forced manufacturers to take responsibilities of products when they reach their end of lives. This has necessitated the creation of an infrastructure, known as RSC, which includes collection, transportation, and management of end-of-life products (EOLPs). The advantages of implementing RSC include the reduction in the use of virgin resources, the decrease in the materials sent to landfills and the cost savings stemming from the reuse of EOLPs, disassembled components, and recycled materials. TSC and RSC together represent a closed loop of materials flow. The whole system of organizations, activities, resources, people, technology, and information flowing in this closed loop is known as the closed-loop supply chain (CLSC).

In RSC, the management of EOLPs includes cleaning, disassembly, sorting, inspecting, and recovery or disposal. The recovery could take several forms depending on the condition of EOLPs, namely, product recovery (refurbishing, remanufacturing, repairing), component recovery (cannibalization), and material recovery (recycling). However, neither the quality nor the quantity of returning EOLPs is predictable. This unpredictable nature of RSC is what makes its management challenging and necessitates innovative management science solutions to control it.

In this chapter, we address the order-driven component and product recovery (ODCPR) problem for sensor-embedded products (SEPs) in an RSC. SEPs contain sensors and radio-frequency identification tags implanted in them at the time of their production to monitor their critical components throughout their lives. By facilitating data collection during product usage, these embedded sensors enable one to predict product/component failures and estimate the remaining life of components as the products reach their end of lives. In an ODCPR system, EOLPs are either cannibalized or refurbished. Refurbishment activities are carried out to meet the demand for products and may require reusable components. The purpose of cannibalization is to recover a limited number of reusable components for customers and internal use. Internal component demand stems from the component requirements in the refurbishment operation. It is assumed that the customers have specific remaining-life requirements on components and products. Therefore, the problem is to find the optimal subset and sequence of the EOLPs to cannibalize and refurbish so that (1) the remaining-life-based demands are satisfied while making sure that the necessary reusable components are extracted before attempting to refurbish an EOLP and (2) the total system cost is minimized. We show that the problem could be formulated as an integer nonlinear program. We then develop a hybrid genetic algorithm to solve the problem that is shown to provide excellent results. A numerical example is presented to illustrate the methodology.

Citation

Ondemir, O. and Gupta, S.M. (2012), "Optimal Management of Reverse Supply Chains with Sensor-Embedded End-of-Life Products", Lawrence, K.D. and Kleinman, G. (Ed.) Applications of Management Science (Applications of Management Science, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 109-129. https://doi.org/10.1108/S0276-8976(2012)0000015009