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The purpose of this paper is to introduce the reader to the field of closed-loop supply chains with a strong business perspective, i.e., we focus on profitable value recovery from returned products. It recounts the evolution of research in this growing area over the past 15 years, during which it developed from a narrow, technically focused niche area to a fully recognized subfield of supply chain management. We use five phases to paint an encompassing view of this evolutionary process for the reader to understand past achievements and potential future operations research opportunities.
Subject classifications: closed-loop supply chains; reverse logistics; remanufacturing; value-added recovery.
Area of review: OR Forum.
History: Received March 2007; revision received January 2008; accepted May 2008.
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1. Introduction
Closed-loop supply chains (CLSC) focus on taking back products from customers and recovering added value by reusing the entire product, and/or some of its modules, components, and parts. Over the past 15 years, closedloop supply chains have gained considerable attention in industry and academia. This paper serves as an overview of this evolution from a business perspective and makes some observations about future research needs. It is not intended to be a comprehensive review of published literature. Rather, based on our close collaboration with companies and researchers in this field, we provide our personal (and perhaps biased) perspective.
Today we define closed-loop supply chain management as the design, control, and operation of a system to maximize value creation over the entire life cycle of a product with dynamic recovery of value from different types and volumes of returns over time. This is clearly a business definition. Fifteen years ago, the definition given by a practitioner or researcher would have been operational and technical. This paper will describe this evolution. Our discussions are restricted to value-added recovery from a purely business perspective. However, we note that product recovery and reuse do serve as the foundation for the development of industrial systems that are both economically and environmentally sustainable.
Closed-loop supply chains have enormous economic potential. The remanufacturing sector is presently larger than the U.S. domestic steel industry in terms of sales and employment with annual sales in excess of $53 billion (Lund 1996). Large retailers,...