The Use of Recycled Materials in Manufacturing: Implications for Supply Chain Management and Operations Strategy

In this study we explore the implications of using recycled versus virgin materials for the supply chain structure and supplier relationships as well as the broader effects on operations strategy. We focus our study on the corrugated cardboard industry, where vertical integration is common, and non-integrated firms are both customers and competitors of integrated firms. These multiple supplier/customer/competitor relationships provide the ideal environment to observe changes in the supply chain with the use of recycled materials. Based on the findings from an in-depth case study of a containerboard mini-mill and supplementary interviews with three other mini-mill managers, we posit several hypotheses related to the use of recycled materials, supply chain structure, supplier relationships, and operations strategy. In summary, because the benefits of the changes in the supply chain and supplier relationships accrue primarily to non-integrated firms, we expect the use of recycled material inputs to be dominated by non-integrated firms, and with decreasing capital costs over time, the ratio of non-integrated to integrated firms will increase. Further, we expect smaller non-integrated firms to access the market for recycled materials differently from the larger integrated firms, with the smaller firms more likely to employ non-price-based means for securing their supply of recycled material inputs. Finally, since non-integrated firms are likely to have systematically different operations strategies than integrated firms, we expect the use of recycled materials to indirectly lead to greater use of non-cost based operations strategies and facilitate the emergence of new operations strategies in the industry. We then generalize these hypotheses to other industries that use recycled materials. (RECYCLING; GREEN MANUFACTURING; SUPPLY CHAIN MANAGEMENT; OPERATIONS STRATEGY)