Multi-period reverse logistics network design with emission cost

• Date: 13 February 2017
• DOI: https://doi.org/10.1108/IJLM-08-2015-0143
• Pages: 127-149
• Published date: 13 February 2017
• Author: Sajan T. John,Rajagopalan Sridharan,P.N. Ram Kumar
• Subject Matter: Management science & operations,Logistics

Multi-period reverse logistics

networkdesignwithemissioncost

Sajan T. John and Rajagopalan Sridharan

Department of Mechanical Engineering, National Institute of Technology Calicut,

Calicut, India, and

P.N. Ram Kumar

Department of Quantitative Methods and Operations Management Area,

Indian Institute of Management Kozhikode, Calicut, India

Abstract

Purpose –The purpose of this paper is to develop a mathematical model for the network design of a reverse

supply chain in a multi-product, multi-period environment. The emission cost due to transportation activities

is incorporated into the model to reduce the total cost of emission and study the significance of inclusion of

emission cost on the network design decisions.

Design/methodology/approach –Mixed integer linear programming formulation is used to model the

network. The developed model is solved and analysed using the commercial solver LINGO.

Findings –The mathematical model provides a unified design of the network for the entire planning horizon

comprising of different periods. A reduction in the total cost of emission is achieved. The analysis of the

problem environment shows that the network design decisions significantly vary with the consideration of

emission cost.

Research limitations/implications –A single mode of transportation is considered in this study. Also,

a single type of vehicle is considered for the transportation purpose.

Practical implications –The developed model can aid the decision makers in making better decisions

while reducing the total emission cost. The quantification of the emission cost due to transportation activities

is presented in an Indian context and can be used for future studies.

Originality/value –An all-encompassing approach for the design of reverse logistics networks with explicit

consideration of product structure and emission cost.

Keywords Transportation decisions, Supply chain management, Reverse logistics

Paper type Research paper

1. Introduction

In recent years, the concept of reverse logistics has gained significant attention in both

academia and practice, due to a variety of reasons, especially, those pertaining to

environmental concerns. Another motive is the economic potential associated with the used

products and the resulting business options. There are many firms such as Dell, GM, HP,

Kodak, Xerox (Üster et al., 2007), ReCellular Inc. (Guide and Wassenhove, 2001) and third

party logistics providers such as FedEx, ASTRA and GENCO (Krumwiede and Sheu, 2002),

which recognize the importance of reverse logistics activities. Activities in a typical reverse

supply chain include collection, testing or inspection, separation, reprocessing and

redistribution (Hanafi et al., 2008). Around the world, the sales of many electronic items are

growing at a fast pace.For example, Euromonitor International’s estimate in 2010 shows that

between 2004 and 2009, portable compu ters sold in Australia rose from about

2.53 million to 3.88 million units, an increase of about 35 per cent (Rahman and

Subramanian, 2012). After its useful life, these products require a proper disposal, without

which it may pose a seriousthreat to the environment. This is not onlythe case for computer

industry, but also for other products such as refrigerators, mobile phones, automobiles, etc.

The management of returned products is an arduous task as it requires special logistics The International Journal of

Logistics Management

Vol. 28 No. 1, 2017

pp. 127-149

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-08-2015-0143

Received 27 January 2015

Revised 29 August 2015

14 October 2015

Accepted 24 November 2015

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

www.emeraldinsight.com/0957-4093.htm

The authors express sincere thanks to the editor and the reviewers for their constructive comments,

which have helped immensely to bring this paper to the present form.

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Multi-period

reverse

logistics

network design

requirements andmay involve handling hazardous materials which are dangerous to human

health (Sinha-Khetriwal et al., 2005).Hence, a proper design of the reverselogistics network is

essential. The network design decision involves the selection of sites for the location of new

facilities, determination of the number and size of the facilities, identifying the distribution

channels as wellas transportation requirementsto meet customer demands (Melo et al.,2014).

Until recently, transportation cost, collection cost, processing cost and fixed facility cost are

the most widely considered costs in the network design studies. Nowadays, in addition to these

costs, consideration of the costs associated with emission of greenhouse gases is becoming

important. Transportation activities between network entities form an important source of

greenhouse gas emissions in supply chains (Paksoy et al., 2011). The combustion of fossil fuels

contributes significantly to the problem of global warming. In order to contain the effect of

global warming, the United Nations facilitated the signing of Kyoto Protocol which imposes

specific binding targets on individual economies to reduce greenhouse gases emissions in

phases. Naturally, it becomes imperative on the part of the manufacturers in these countries to

abide by their country’s legal emission requirements. This gave rise to the concepts of

emissions trading and carbon tax. According to the CDP, more than 150 companies around the

world use carbon prices in their businesses, including Google and Microsoft (CDP Report, 2014).

World Business Council for Sustainable Development states that the growth in the

amount of energy consumed is increasing at a faster rate in the case of road freight

transport than the energy used by cars and buses and is forecasted to outpace it by the

beginning of the 2020s (Tacken et al., 2014). The cost of emission is an external cost since it

affects other people than those who produce it (Forkenbrock, 2001). A number of exhaust

gases in various proportions are generated from transportation activities. These emissions

also cause air pollution in addition to global warming. The major constituents of emissions

from the transporting vehicles are nitrogen oxides (NO

x

), particulate matter (PM), carbon

dioxide (CO

2

) and methane (CH

4

).

The estimation of the emission cost is a difficult process. Data regarding the

emission rate per unit distance and the cost per ton of emission are required to quantify

the total emission cost. There are different studies conducted by different government or

quasi-government bodies such as Automotive Research Association of India (ARAI),

Environment Protection Agency, USA , Central Pollution Control Board (CPCB), India,

Office of Management and Budget (OMB), USA, etc. which estimate the emission rate and

the corresponding cost from transportation activities. The term social cost of carbon is used

to define the economic cost caused by an additional ton of carbon dioxide emissions (or more

clearly carbon) or its equivalent (Nordhaus, 2011). The emissions of greenhouse gases

change the earth’s climate by increasing temperature, changing precipitation patterns and

increasing weather variability (Greenstone et al., 2011). The study conducted by the

Interagency Working Group, USA found that the central value of CO

2

emission per metric

ton is $21 for 2010. Their report in 2013 revised this value to $32 (US IAWG, 2013).

An expert committee report of the Government of India in 2014 states that the emissions

due to transportation activities can cause respiratory illness and in extreme cases, contribute to

creating conducive conditions for carcinogenic action (Report of the expert committee,

Government of India, 2014). Global Burden of Disease estimates that over 2 million premature

deaths and 52 million years of healthy life were lost in 2010 due to ambient fine particle air

pollution (Health Effects Institute, 2012). The studies conducted by CPCB in India have

revealed that the release of PM from the transportation sector is 20.5 per cent in Delhi and it is

as high as 48.3 per cent in Chennai (CPCB, 2010). According to the data obtained from USEPA

2014, NO

x

reacts with ammonia, moisture, and other compounds to form small particles

and these particles can cause or worsen respiratory disease such as emphysema and

bronchitis, and can aggravate existing heart disease, leading to increased hospital

admissions and premature death (www.epa.gov/oaqps001/nitrogenoxides/health.html).

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