6.2.1 Characteristics of the equal exchange recovery strategy
The equal exchange of new-for-old (or full-for-empty, as is also known when referring to packag- ing elements) recovery policy has received a variety of names in literature: one-for-one system (Breen, 2006), full-for-empty swapping (Roseneau et al., 1996; Twede and Clarke, 2004; Jo- hansson and Hellström, 2007), full-for-empty switch (Hellström and Johansson, 2010), direct replacement (Flapper, 1996), “new for old” (Flapper, 2003) or direct old-for-new exchange
(Fleischmann, 2003). All these authors refer to the recovery strategy consisting of the following rule to be observed by supply network partners: at the moment of delivery of an order, the customer has to return as many reusable articles (RA) as the number of RA being delivered in the new order. However, there is not an standard term in literature for referring to this policy. Therefore, we put forward the use of the term “equal exchange" and propose the following de…nition :
Recovery strategy used in practice in closed-loop supply chains of reusable articles consisting in the following rule to be observed by supply network partners: at the moment of delivery, the customer is requiered to return exactly n units of used RA in order to receive an order of n units of as-new RA.
Note that this de…nition can be applied to all the three types of RA put forward in this thesis: RTI, RPM and RP. The words as-new and used can be replaced by full and empty respectively, in the case of packaging elements, or sterile and contaminated in the case of some reusable products, such as surgical instruments.
The equal exchange strategy is a quite extended control mechanism in reuse CLSC. From our interaction with companies using RA,we found this strategy to be widely extended in practice, especially in the context of packaging articles (RPM and RTI of medium and low value). We have contrasted the use of the equal exchange recovery in the following case studies (Chapter 4): industrial and medical gases industry (cylinders, case #1), lique…ed petroleum gases LPG industry (cylinders,case #2), roll cages in the horticultural industry (Flora Holland, case #6). Moreover, this recovery strategy also appears frequently in other case studies published in the academic literature: roll containers in the diary manufacturer Arla Foods (Johansson and Hellström, 2007), reusable containers and racks in the automotive industry used for suppliers to directly deliver in the assembly line (Roseneau et al., 1999; Twede and Clarke, 2004, Volvo case), bottle crates and bottle pallets in a company in the beverage industry (Kärkkäinen et al., 2004), beer kegs in a brewery (Breen, 2006), soft drink glass bottles to be delivered in the HORECA channel (Del Castillo and Cochran, 1996, Privé et al., 2006), pallets in the consumer goods industry (Ilic et al., 2009). High value RTI (maritime containers, railcars), as well as RP (bikes, cars, surgical instrumentation,...) rely as typical physical incentive on direct return
after use.
The equal exchange policy results advantageous because it constitutes a simple mechanism for preventing losses (no administrative e¤orts are required) and also because its application simpli…es transport organization integrating forward and reverse ‡ows. Vehicle routing is done attending to forward ‡ows and empty RA are returned in the backhauls of delivery routes (using both legs of the vehicle route generally leads to transport cost savings). Capacity constraints in the vehicle usually lead to restrict the number of articles that can be recovered to the number of articles delivered (having left room in the vehicle). This issue is part of the rationale for using the equal exchange recovery strategy.
However the equal exchange strategy also has a number of disadvantages. First, in this chapter we postulate that equal exchanges policy is not suitable for RA which requirements heavily ‡uctuate. This is the case of RA linked with products showing a marked seasonality in its demand patterns, such as beer, LPG or medical oxygen: during the high season the customer will be willing to place larger orders but their consumption is restricted because of not having enough old/empty articles to give in exchange. On the other hand, articles left after a peak in sales cannot be returned before the next peak. Therefore, the equal exchanges strategy in seasonal products requires a container ‡eet size wider than strictly necessary.
Other disadvantage of the equal exchange strategy is related to the exceptions to be made the …rst time a customer is delivered, as no old/empty RA are available to be exchanged in that case. Moreover, the policy has to be complemented with other economic incentives in order to encourage customers to return old/empty articles if they decide not to buy the product again. Another disadvantage is related to the fact that with the equal exchange policy, the RA return ‡ows pass through all the stages (echelons) of the forward supply chain. In the case of supply chain networks with a high number of intermediaries, cycle time will be negatively a¤ected by the use of this strategy, as some stages cannot be by-passed in order to obtain shorter lead times for returns.
On the contrary, the equal exchanges strategy may notably be useful in the case of just-in- time (JIT) deliveries and is reported to be used in the automotive sector for reusable containers exchange between suppliers and the assembly line (Rosenau et al., 1996, Twede and Clarke, 2004, Volvo case). JIT systems work well in environments with an even demand pattern, which
seem to be the most suitable to equal exchange recovery strategy.
The models put forward and solved in this chapter will enable us to con…rm the state- ments postulated in this subsection, regarding the suitability of the equal exchanges strategy in di¤erent industrial situations.
6.2.2 Positioning the research problem: related work
The research conducted until now on closed-loop supply chains has not deeply dealt with the impact that recovery strategies have in reusable articles return ‡ows. Incentives for product recovery in the general framework of reverse logistics are addressed in De Brito et al. (2005) and Flapper (2003); some of the tools they enumerate can be directly applied in the narrower context of reuse CLSC. Dubiel (1996), Flapper (1996), Fleischmann (2003, section 3.5) or Breen (2006) also refer to some strategies to stimulate the desired behaviour of partners in the particular case of RTI, but limit themselves either to list possible strategies or to brie‡y characterize them, but they do not model the impact that these strategies can have in the behaviour of customers and suppliers. To the best of our knowledge, this is the …rst attempt done in academic literature in order to check the impact that the use of one particular recovery strategy can have in the performance of a closed system with return ‡ows.
Somme common characteristics can be found between the problem we research in this chap- ter and the body of literature related with parts batching in the context of repair services, such as Deneijer and Flapper (2005). In this paper, new service parts are in the vans of service engi- neers and when a breakdown appears, an exchange of a defective spare part by a new spare part takes place. However, the situation is not exactly the same in both problems. First di¤erence is that no exceptions arise in the service parts problem (parts are always taken back) while with packaging elements an exception has to be made in the …rst delivery. Second, the order lot-size in the context of repair at the customer locations is usually one (or the number of spare parts required to solve the problem) whereas with packaging elements the lot-size is typically bigger than one. Another di¤erence is that breakdowns appear randomly, unexpectedly. In the case of packaging elements, the demand is, at least, predictable. Finally, it should be emphasized that the objectives of an equipment replacement model or a spare parts model are di¤erent to the ones in RA (especially packaging elements and containers systems). In repair, salvage value
of the old spare part is important. In RTI and RPM, such salvage value is not an objective of managers. Their focus is in minimizing the investment in new units of packaging.