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Advanced green supply chain management policies under circular economy

Advanced green supply chain management policies under circular economy
Mehran Ullah
Biswajit Sarkar
Issue Date
2019. 8
Over the past few centuries, the manufacturing sector expanded significantly due to technological developments and rise of consumer demand, which boosted the consumption of non-renewable natural resources. The depletion rate is exceeding nature's capacity to replenish these resources and absorb the generated waste, producing disastrous environmental impacts. These devastating environmental impacts of the supply chain management have resulted in government legislation, customer awareness, and pressure from various stakeholders to implement environmentally sustainable strategies. The high rate of resource depletion and global warming are the two most important problems that are faced by supply chain managers. However, overcoming resource depletion and carbon dioxide (CO2) emissions by economic degrowth is not the solution, therefore, researchers moved to the concept of the circular economy. The circular economy business model disengages economic growth from resource depletion and waste generation by reuse, remanufacturing, recycling, refurbishment, and waste management. This research analyzes the hybrid closed-loop supply chain (CLSC) management for its economic and environmental performances. Then, develops different green supply chain management (GSCM) techniques to improve circular economy enablers based on economic and environmental performance. Finally, the results are compared and presented. Historically, the remanufacturing, one of the most important enablers of the circular economy, is considered as a green option by both practitioners and researchers. However, the literature did not investigate it for its environmental impacts such as carbon emissions. In the first phase, this dissertation studies the impacts of carbon emissions and transportation in a three-echelon CLSC network, which comprises a manufacturer, multiple retailers, and a third party logistics (3PL). Reusable containers, the so-called returnable transport items (RTIs), are used to reduce supply chain solid waste generation. The impacts of transportation and carbon emissions cost on remanufacturing rate are studied to provide management policies that are sound both economically as well as environmentally. Furthermore, system specifications based RTI design and management strategies are developed and the economic implications of these RTIs are examined. The aim is to minimize the cost, emissions, and solid waste of the CLSC networks simultaneously. The strategic decisions, optimized in this model, are container capacity, required number of containers, shipment sequence of retailers, cycle time, and remanufacturing rate. The numerical results prove that the combined optimization of financial and environmental factors promotes less remanufacturing. Moreover, ignoring these factors leads to obtain false optimal solutions, resulting in a high economic loss. Furthermore, the system specification based RTI is less expensive, compared to disposal packaging. These results provide insights into the significance of carbon emissions and transportation in CLSC management and remanufacturing. In the second phase, CLSC management is studied considering a carbon-constrained situation. In compliance with the updated environmental legislation, a new decreasing-carbon-cap policy is devised. Both the strict cap policy and the cap-and-trade strategy are studied under the decreasing cap system. A stochastic quality-based sorting method is introduced to manage the used product's quality in reverse logistics. Furthermore, to improve the economic performance of remanufacturing, a quality dependent production rate and cost are considered. The system specification based RTI design is extended with the ergonomic factors to facilitate manual handling of RTIs. The relationships between supply chain emissions and allotted cap
used product quality and production rate
the remanufacturing rate and used product quality, emissions and remanufacturing rate
and RTI design considering management and size relationship are examined using comparative statics and Kharush-Kuhn-Tucker (KKT) method. The results show that quality-based segmentation of used products and quality dependent production rate are better policies compared to former management methods. The total costs of both the developed models are less than the previous model. Among the strict cap policy and cap-and-trade method, the results reveal that the former is an expensive policy compared to the later one. Although the cap-and-trade policy is cheap initially, its total cost increases annually. However, for strict cap policy total cost remains the same. However, after emission exceeds the cap, the strict cap system does not hold anymore in decreasing carbon cap policy. Moreover, those returned products that have a quality level of less than 20% does not qualify for the remanufacturing. Several numerical examples and sensitivity analysis are given to expose some interesting insights into the strategic decision making of the CLSC networks under the new carbon-curbing legislation. The results of decreasing cap policy in CLSC management are still not compromising enough to be considered as a strategy for deep decarbonization. The deep decarbonization refers to a substantial decrease in supply chain emissions. To reduce the supply chain emissions considerably, the third phase of this research considered carbon capture and sequestration (CCS), instead of decreasing cap policy. A multi-objective problem is developed considering three objectives including maximization of goodwill and minimization of cost and emissions. The multi-objective framework provides an opportunity to capture the trade-off between different conflicting objectives. A hybrid solution methodology, composed ε-constraint method and goal programming method, is developed to solve the model. Findings of this model show that CCS is the best strategy to save the environment and reduce the global warming. Furthermore, with the incremental cost of only 3.07%, CCS reduces 70% of the total supply chain emissions. In this particular example, the cost of protecting the environment is $0.06 per kilogram of carbon emissions. All the developed models are compared based on economic and environmental performance. The comparison results reveal that the two best policies among the developed models are cap-and-trade model and multi-objective strategy with CCS. Among these two, the cap-and-trade policy is the less expensive one, while the CCS policy is the most efficient one based on carbon emissions. With a marginal cost increment of 3%, between the two policies, 77% of emissions are reduced. The results provide different insights for practical applications of this study. The findings present a comprehensive solution for CLSC managers to devise economically and environmentally sustainable policies. The disclosed results will help organizations to counter the environmental impacts of manufacturing and logistics while minimizing total cost of the system.
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