Closed supply network modelling for end-of-life ship remanufacturing

• DOI: https://doi.org/10.1108/IJLM-01-2021-0038
• Published date: 27 July 2021
• Date: 27 July 2021
• Pages: 431-454
• Subject Matter: Management science & operations,Logistics
• Author: Prem Chhetri,Mahsa Javan Nikkhah,Hamed Soleimani,Shahrooz Shahparvari,Ashkan Shamlou

Closed supply network modelling

for end-of-life

ship remanufacturing

Prem Chhetri

School of Accounting, Information Systems, and Supply Chain, COBL,

RMIT University, Melbourne, Australia

Mahsa Javan Nikkhah

Caspian Higher Education Institute, Qazvin, Iran

Hamed Soleimani

School of Accounting, Information Systems, and Supply Chain, COBL,

RMIT University, Melbourne, Australia and

School of Mathematics and Statistics, University of Melbourne, Melbourne, Australia

Shahrooz Shahparvari

School of Accounting, Information Systems, and Supply Chain, COBL,

RMIT University, Melbourne, Australia, and

Ashkan Shamlou

Caspian Higher Education Institute, Qazvin, Iran

Abstract

Purpose –This paper designs an optimal closed-loop supply chain network with an integrated forward and

reverse logistics to examine the possibility of remanufacturing end-of-life (EoL) ships.

Design/methodology/approach –Explanatory variables are used to estimate the number of EoL ships

available in a closed-loop supply chain network. The estimated number of EoL ships is used as an input in the

model and then it is solved by a mixed-integer linear programming (MILP) model of the closed-loop supply

chain network to minimise the total logistic costs. A discounted payback period formula is developed to

calculate the length of time to recoup an investment based on the investment’s discounted cash flows. Existing

ship wrecking industry clusters in the Western region of India are used as the case study to apply the

proposed model.

Findings –The MILP model has optimised the total logistics costs of the closed-loop supply network and

ascertained the optimal number and location of remanufacturing for building EoL ships. The capital and

variable costs required for e stablishing and operating re manufacturing centres are c omputed. To

remanufacture 30 ships a year, the discounted payback period of this project is estimated to be less than

two years.

Practical implications –Ship manufacturing businesses are yet to re-manufacture EoL ships, given high

upfront capital expenditure and operational challenges. This study provides management insights into the

costs and benefits of EoL ship remanufacturing; thus, informing the decision-makers to make strategic

operational decisions.

Originality/value –The design of an optimal close loop supply chain network coupled with a Bayesian

network approach and discounted payback period formula for the collection and remanufacturingof EoL ships

provides a new integrated perspective to ship manufacturing.

Keywords Remanufacturing, Closed-loop supply chain network, End-of-life ship, Mixed-integer linear

programming, Discounted payback period

Paper type Research paper

End-of-line ship

remanufacturing

431

This paper forms part of a special section “Resilient supply chains through innovative logistics

management”, guest edited by Peggy S. Chen and Jiangang Fei.

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0957-4093.htm

Received 21 January 2021

Revised 18 May 2021

Accepted 22 June 2021

The International Journal of

Logistics Management

Vol. 33 No. 2, 2022

pp. 431-454

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-01-2021-0038

1. Introduction

Growing pressure to implement supply chain sustainability into practices of managing

global production systems necessitates ship manufacturers to explore different strategies to

reduce carbon footprint and minimise waste generation in ship wrecking/dismantling

processes. In addition, ship manufacturers are also expected to improve triple bottom line of

their production practices as a part of Social Corporate Responsibility. Remanufacturing of

end-of-life (EoL) ships is one such strategy to produce or assemble a new ship from reusable,

repairable and replaceable parts extracted from EoL ships. Remanufacturing involves

returning of used products from customer, dismantling, cleaning, inspecting, recovering,

replacing damaged parts with new ones, repairing, reassembling and testing (Yi et al., 2016b).

With the rapid increase in the number of ships close to the EoL, ship remanufacturing is

paramount in achieving sustainable development goals and targets; whist providing

business opportunities for remanufacturers to keep the cost down to remain competitive in a

globalised marketplace. Despite this, ship remanufacturing is still almost non-prevalent when

compared to other industries such as aerospace, automotive and railways. The life cycle of

ships is similar to other products as its ageing is affected by aspects of design, control and

operations (Wahab et al., 2018). With growing environmental concern, ship remanufacturing

is seen as a more sustainable option when compared to ship wrecking. However, the low level

of ship remanufacturing uptake by the industry provides little guidance to help understand

and model the complexity of remanufacturing process, distribution and logistics integration

and cost-effectiveness of remanufacturing.

Shipping vessels can stay commercially operational for over 25–30 years. They thus incur

higher maintenance costs as they get older. Older vessels also consume more fuel and emit a

greater amount of pollution. In addition, ship-scrapping and ship-wrecking businesses are

labour-intensive. They are highly segregated in low-income countries such as India, Pakistan

and Bangladesh. Furthermore, the ship dismantling requires low-skilled low-paid workers to

operate in highly polluted environment. Although, the shipping industry is highly regulated

through tighter labour laws and stringent environmental regulations in terms the way they

supply products, handle wastes and recycle product returns (Wahab et al., 2018). Yet the risk

of human fatality and environmental damage to pristine and highly fragile coastal

ecosystems remains relatively high.

Ship wrecking generates a large quantity of highly toxic wastes such as oil, chemicals and

hazardous metals, which needs to be carefully handled and treated prior to disposal to protect

the environment as well as the workers specifically employed in material handling

operations. The discharge of toxic materials in the open sea causes irreparable ecological

harm to aquatic ecosystems. Hence, the ship wrecking, or scrapping industry is often called

“the dirty industry”. The shipping manufacturing industry is looking for practical solutions

to mitigate environmental risk and protect the lives of those who suffered the most working in

poor conditions in highly vulnerable parts of the world.

There are numerous studies on Closed Loop Supply Chain Network (CLSCN) (Mutha and

Pokharel, 2009; and Mota et al., 2015), which developed mathematical models to design a

reverse logistics network. Mutha and Pokharel (2009) have examined the optimal sites for

dismantling and reassembling and identified potential hubs for remanufacturing from

dismantled assets and residue. Mota et al. (2015) have developed a multi-objective Closed

Loop Supply Chain (CLSC) design to reduce costs and environmental effects whilst

sustaining profitability of business operations. Their study has not considered the optimal

number of warehouses in their model to reduce the total cost in the supply chain network.

More recently, Yi et al. (2016a) designed a CLSCN for remanufacturing the EoL construction

machinery and developed a MILP model to integrate the reverse logistics network into the

forward logistics network. An enhanced hybrid genetic algorithm was implemented, and the

efficiency of the model was analysed using optimization software LINGO. However, none of

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