Economic sustainability of closed loop supply chains: A holistic model for decision and policy analysis

a r t i c l e i n f o Keywords: Closed-loop supply chain Economic sustainability Environmental sustainability System dynamics Product design End of life returns We develop an end-to-end model of a closed-loop supply chain (CLSC), and identify the systemic decision making required for economic viability of participants in this chain. Economic viability is a key ingredient for environmentally sustainable behavior and policies, and our decision making framework includes producers, refurbishers and recyclers. We model the lifecycle of a consumer electronics product to examine the complex interactions among different participants and their decisions. Using data from recyclers and marketing and supply chain literature, we find that i) sustainable CLSC policies require a well-calibrated return rate among types of products (new and refurbished) and consumers (innovators and imitators); ii) a sustainable return policy increases sales significantly for both types of customers; and iii) product design that improves refurbishability, and marketing efforts that create perceived differentiation between products and at the same time social awareness and acceptability for refurbished products, is critical for economic sustainability of refurbishers and recyclers. Our model can be used at a company or industry level to conduct cost–benefit scenarios for all participants of the CLSC, and make decisions based on systemic value. It can also be used to create public policies and incentives to reward companies that meet these benchmarks, for sustained economic and environmental benefits. Today, the life cycle of many consumer electronic products (e.g., cell phones, computers) is becoming shorter [26]. Cutting-edge products can quickly become obsolete or outdated with the introduction of new ones. Therefore, millions of products in good working condition are replaced every year and in many cases laid to waste. These can create new business opportunities for refurbished products on secondary markets; on the other hand, create a global environmental concern due to the growing amount of electronic waste (e-waste) generated. Gartner [22] estimated that more than 120 million PCs will be refurbished, remarketed and reused over the next five years (2012–2016) in the global secondary market. The Environmental Protection Agency estimates that " …recycling 1 million cell phones can recover about 24 kg (50 lb) of gold, 250 kg (550 lb) silver, 9 kg (20 lb) palladium, and more than 9000 kg (20,000 lb) copper " [17]. At 2013 metal prices, that is over 1.45 million USD. In 2010 the U.S. got rid of 2.4 million tons of …