INCORPORATING ENVIRONMENTAL CONCERNS IN SUPPLY CHAIN OPTIMIZATION - Environmentally Conscious Materials Handling - page 121

between the costs of environmental efforts and their economic benefits has been
debated at length in the literature (Walley and Whitehead 1994, Porter and van
der Linde 1995). What is clear, though, is the fact that global supply chains
are currently having to contend with varying intensities of economic factors. In
this section, we describe how resource scarcity, competition, and the presence of
“green” customer segments, influence SCO.

3.1 Resource Scarcity

Quoting from the 2008 Barclays Equity Gilt Study (Barclays Capital 2008),

... resource scarcity is the single most important social, political and economic
factor of our era and will remain so for the foreseeable future.

Although regulation (such as product take-back) is a powerful impetus for
resource conservation, resource scarcity and the accompanying price increases
prompt supply chain managers to revisit traditional, purely forward models of
material flows. SCO should include the evaluation of alternatives such as reuse,
remanufacturing, or recycling to offset the economic disadvantages of resource
scarcity or increased prices. Additionally, resource scarcity allows for the consid-
eration of either previously eliminated or new material-processing combinations.
A holistic SCO effort should plan and optimize not only the forward flows of
materials but also the reverse flows. In particular, SCO is affected by resource
scarcity in several ways, four of which we outline here:
1. Cost parameters and availabilities (i.e., constraint limits or RHSs) associ-
ated with various materials/components have to be dynamically updated.
2. Alternative material-processing combinations must be introduced into the
optimization problem since they may become attractive under certain
scenarios.
3. Planning horizons must be carefully chosen due to the inherent dynamism
of commodity markets. In addition, robust methods of optimization must
be chosen to accommodate such dynamism. For example, Realff et al.
(2004) develop a robust mixed-integer program to support the design of
an appropriate reverse production infrastructure, using the carpet industry
as context. Given significant infrastructural resource commitments, their
approach takes into account uncertainty in both the volumes of collected
product and the prices of recovered materials.
4. Considerations must be made to allow for the assessment of the viability
of product recovery. Costs of product recovery include reverse logistics
costs and the costs of processing returned products. If product recov-
ery shows promise, SCO must be expanded to jointly optimize forward
and reverse supply chain activities. Many researchers have highlighted
the importance of treating forward and reverse supply chain activities in