INCORPORATING ENVIRONMENTAL CONCERNS IN SUPPLY CHAIN OPTIMIZATION - Environmentally Conscious Materials Handling - page 117

Raw material
extraction

Processing
(production)

Product use Disposal

Product Reuse
(as-is)

Used product
remanufacturing

Used product
collecti o n

Used product
recycling

Other
applications

Arrows indicate direction of material flow.
Solid lines indicate forward flows-dashed lines indicate reverse flows.
Lines also indicate related logistical activities.

Figure 4.1 Forward and reverse flows

Supply chain optimization (SCO) refers to either the collective or individual
optimization of one or more objectives by supply chain link(s) subject to vari-
ous constraints, either voluntary or mandatory. With the changing landscape of
dimensions along which business performance is evaluated, it is no longer obvi-
ous that profit maximization should be the sole objective in decision making.
Likewise, the set of constraints to be applied extends beyond the obvious capac-
ity and sales limits to both regulatory and voluntary impositions that echo the
intricate trade-off between economic and environmental interests.
Rather than ambitiously prescribe an all-encompassing optimization model
detailing every parameter, decision, and constraint that an SCO effort may incor-
porate, our focus in this chapter is to highlight the pertinent changes to SCO
necessitated by environmental considerations so that these changes can be appro-
priately recognized and incorporated by supply chain managers in their decision
making.
We organize this chapter around three factors — legislative, economic, and
social — that have introduced environment-related complexities into SCO deci-
sions. For each of the factors, we describe how the accompanying complexities
can be characterized within SCO models in the form of parameters, objectives,
or constraints. Section 2 discusses how SCO is affected by legislative instru-
ments, such as those that prescribe design and emissions standards or impose
requirements on end-of-life products. In Section 3, we discuss economic factors
such as scarcity of resources, low-cost competitors, and competitive advantage
arising from environmental efforts. In Section 4, we discuss social factors such as
increased consumer sensitivity to the life-cycle environmental impacts of prod-
ucts, and stakeholder demands for voluntary environmental efforts that go beyond
compliance. In Section 5, we recommend nontraditional optimization methods
that are capable of accommodating the SCO refinements we propose.