INCORPORATING ENVIRONMENTAL CONCERNS IN SUPPLY CHAIN OPTIMIZATION - Environmentally Conscious Materials Handling - page 122

conjunction. Toktay et al. (2000) demonstrate the value of new component
sourcing policies that take into account future product returns; in a later
study Toktay et al. (2003) describe how hybrid manufacturing or remanu-
facturing production and inventory decisions can be made optimally; Debo
et al. (2006), Ferrer and Swaminathan (2006), and Ferguson and Toktay
(2006) discuss why and how product pricing for new and remanufactured
products should be undertaken jointly; Fleischmann et al. (2001) discuss
the design of the distribution network, incorporating considerations for
eventual product collection; and Sava¸kan et al. (2004) analyze changes
to the manufacturer-retailer relationship that arise with the addition of
product collection.

3.2 Competition from Low-Cost Producers

International boundaries have become relatively seamless during the past decade.
As a result, domestic producers have to contend with low-cost competitors from
abroad. Low-cost competitors typically have access to inexpensive labor and
are subject to less stringent regulatory limitations in their respective countries.
The accompanying competitive pressures necessitate changes to SCO similar to
those summarized for resource scarcity in section 3.1. We list four such changes
below.

1. Considerations for alternative or new material-process combinations .For
example, successful manufacturing companies in the United Kingdom
have altered their methods and procedures in order to compete with
low-cost foreign imports that have saturated the UK market. Furniture
makers who have implemented lean manufacturing principles have been
able to minimize waste and reduce costs (Burbidge 2008).
2. Considerations for reverse material flows . This relates to evaluating the
viability of planning for and recovering value from products during or at
the end of their economic lives through reuse, remanufacture, or recycling.
From the authors' experience, remanufacturing an automotive component
can be 60 to 80 percent less expensive than manufacturing anew.
3. Appropriate incorporation of intangible competitive priorities, such as the
overall environmental appeal of a product . This provides an interesting and
untraditional flavor to SCO in that it entails the incorporation of subjective
elements such as customer utilities that can help tilt purchasing decisions
in favor of more expensive, but environmentally benign, products. Several
methods have been posited in the academic literature for incorporating
such customer utilities into SCO models (Chen 2001). In Section 3.3, we
further discuss the need to address “green” customer segments.
4. The presence of low-cost competition and whether and to what extent
to lobby for the enforcement of regulatory standards (such as standards