Refillable Container Closedloop Supply Chains

'Product acquisition' refers to product acquisition management, and is actually a number of related processes (Guide and van Wassenhove 2000). First, product acquisition management determines whether re-use is a value creation activity for a specific firm. Second, if re-use activities are profitable, to maximize revenue the appropriate method for managing product returns should be selected. Third, operational issues, such as facility design, product planning and control policies, and inventory policies are dependent on the method selected to manage product returns. Fourth, product acquisition management activities help identify and develop new markets for re-used products, and to balance the return rates with market demands. We are concerned here primarily with the second and fourth product acquisition processes: selection of the appropriate method for managing product returns, and balancing return rates with market demands.

In the case of single-use cameras, the OEM controls the returns process by using cash incentives to motivate the photofinisher to return the empty cameras to Kodak's re-use facility. Xerox also directly controls the returns process for print/toner cartridges. Xerox supplies each customer with a pre-paid mailer and appeals to customers to send back the spent cartridge. Both strategies are extremely successful at ensuring constant volumes of containers, and are examples of market-based returns strategies. Market-based strategies are active strategies to encourage product returns, in contrast to waste stream systems where returns are passively accepted from the waste stream (Guide and van Wassenhove 2000). Both firms enjoy stable returns flows with predictable volumes each period.

Balancing return and demand rates in a refillable container closed-loop supply chain is a relatively easy process, in part because the customer cannot differentiate between re-used and new products. We do not mean that the processes involved in balancing return and demand rates are simplistic (see Toktay et al. 2000 for a complete discussion of this process), but rather that the process is simple in comparison with the other types of closed-loop supply chains. The technology contained in these products is stable and there are very limited secondary markets available for the used containers. There are secondary markets for the refilling of printer cartridges and single-use cameras, but these are small, localized operations that are considered more of a nuisance since the remanufacturing may be sub-standard and damage the firm's reputation. The returned products are mixed with new (replacement) materials as needed and then repackaged and sent back out through traditional distribution channels. There is no need to segment demand by product type (remanufactured v. new) or for a manufacturer to consider market cannibal-ization.

Reverse logistics activities are the processes required to move the products from the enduser to the facility where re-use activities will take place. In both examples of refillable containers, these sets of activities are simple. The photofinisher acts as a consolidator for Kodak and eliminates the need for Kodak to deal with individual customers. Xerox has minimized their contact with end-users by using a pre-paid mailer, which the customer may then use to arrange for pick-up and transport. Fleischmann (2000) provides a complete discussion of reverse logistics networks and their characterization.

The disassembly, test and inspection processes and the remanufacturing processes for refillable containers are simple. The product itself is simple and the costs are low; products that may be questionable may be recycled with little or no concern about replacement materials. Finally, the distribution and selling processes are simple since traditional distribution networks are used and the customer base is the same as for new products.

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