The Electronic Industry In China

Published Date: 02 Nov 2017

Lu and Bostel (2007) presented in a remanufacturing network a two-level location problem with three types of facilities. The model considers the integration of the forward and reverse flow of the products due to the fact that the remanufactured products will reach the same market as the new products. The objective is a linear cost function incorporating fixed and variable costs which aims to minimize the operational costs of the logistics network for product recovery at the end of life. However, for this model the authors considered the following constraints: demand satisfaction constraints, opening facility constraints, and that the demand which is met by the two activities (manufacturing and remanufacturing).

Jayaraman et al. (2003) presented mathematical models for the reverse distribution problem including the recycling facilities and allocations problems. In their studies they considered only the reverse flow of the products and the aim was to minimize a linear cost function including the logistics costs of the returned products, and the fixed costs of opening facilities of collection, refurbishing, and recycling. The challenges highlighted in their studies are the capacity problems, establishing minimums and maximums for the opened facilities.

Saadany, A. and El-Kharboutly, A. (2004) proposed a generic reverse logistic network model. This model represents an overall concept of product returns. The aim of the model is the reduction of the general cost encompassing the following costs: fixed costs of facilities (warehouses and disassembly locations), transportation, processing, recycling, disassembly, disposal, refurbishment, repair, remanufacture and inventory costs in all the reverse logistic process. There are two sides that should be taken in to account; the first side is to identify the locations to be opened and the second one to clarify the number on units that would be transported between locations. This model conveys a simultaneous forward and reverse network. There are different constraints that should be highlighted in this model the opening constraints, demand and capacity satisfaction constraints, flow constraints, and finally inventory constraints.

Lieckens,K. and Vandaele, N. (2007) combined the nature of Mixed Integer Programs (MIP) and nonlinear programs (NLP) and as a result they obtained the Mixed Integer Nonlinear Programming (MINLP) which refers to mathematical programming with continuous and discrete variables and nonlinearities in the objective function and constraints. The model permits to analyze two aspects the first one are the dynamic aspects such as lead time and inventory positions and the second one is the higher degree of uncertainty in RL. The final aim is to minimize the total annual profit by selecting the locations where to operate, the capacity, and product flow. The constraints presented are: capacity constraints, supply and demand of products and reprocessing constraints.

The above are models considered by different authors depending the type of flow meaning forward or reverse flow. However, there is more than the type of flow when classifying quantitative models.

The following models focus on the objective function some can distinguish between single versus multiple objectives or economic and environmental objectives. Most of the allocation problems reflect on the objective of minimizing costs or maximizing revenues. In addition of the economic objectives taken into account in common location allocation problems it is important to mention the significance that the environmental and legislative aspects have in the reverse logistic process.

For instance many authors focused their models oriented by the life cycle assessment (LCA) in order to asses all environmental impacts regarding the products cycles like (Sasse et al., 1999 and Caruso et al, 1993). Some others combined the two objectives economic and environmental like Krikke et al. (2001) which focus in minimizing the basic elements: cost, energy and waste. They realized that consumers demand more eco-friendly products and recycle more and that even sustainability seems to be not profitable, firms should manage the environmental and social matters under economic pressures.

Another key characteristic that it should be always present is the uncertainty. As mentioned above in the literature review firms are concern of implementing reverse logistics process because they have no certain information. There is uncertainty in quantity, quality and timing. For that reason deterministic models and scenario basis approaches were created to measure the uncertainty in real life situations.

The first model that is going to be reviewed id the sensitivity analysis which is performed for data analysis reasons. The sensitivity analysis studies the changes that can be presented in the final solutions that result from making changes in the inputs/parameters of the genetic algorithms (GA) model. As some examples, the authors Sadany and Kharboutly (2004) analyzed the effect of three different parameters: amount returned, number of disassembly locations, and batch size on relative cost (the total cost of the problem divided by the cost of the forward problem). Also, Kara et al. (2007) run of out a sensitivity analysis to analyze the effect of incoming goods, the fixed and variable costs of transport, the load and unload times and the inventory cost in their assessing the uncertainty and performance in a reverse logistics network for white goods.

The sensitivity analysis approach can be extended by creating scenarios for the input data and studying the output that comes after a set of scenarios which can be by using simulation modeling. The best way to achieve the results in a simulation modeling id by using sub models for each of the activity in the network. After having all the results a final comparison between the data and simulations is made in order to find which parameter influences the most. The authors Kara et al. (2007) used simulation modeling to analyze the performance of the reverse logistics network in a company of white goods. They realized that the collection strategy, transporter and transportation mode, disassembly plant, one or bi-directional delivery, inventory cost at stations, and number of reusable components per white good were the factors affecting the collection cost.

Another important approach in optimization under uncertainty is the robust optimization (RO) model. This model instead of being based in probabilities as the scholastic model is deterministic and set-based. Meaning that the decision maker creates an optimal solution for any situation where the uncertainty is presented. For example, Realff et al. (2004) analyzed the case of designing a carpet recycling network using the robust optimization model. The basic idea is to represent uncertainty through scenarios and to show the best configuration achieved for each of the scenarios.

Finally, the stochastic approach is also considered under uncertainty but instead of using deterministic numbers the probability distributions are reused by allowing for random variations in one or more inputs. In this model the problem is analyzed and approached in two stages.

First stage:

Several decisions have to be taken before the simulation. These decisions are the first-stage decisions and the period is called the first stage.

Second stage:

Several decisions have to be taken after the simulation. These decisions are the second-stage decisions and the period is called the second stage.

The general model is as follows (Birge and Louveaux , 1997):

min z = cT x + E ξ [min q(ω)T y(w)] (1)

subject to

Ax = b (2)

T(ω)x +Wy(ω) = h(ω) (3)

x ≥ 0, y(ω) ≥ 0 (4)

The decisions of the first-stage are represented by the vector x, while the second-stage decisions are represented by the vector y or y (ω) or even y (ω, x) and ξ (ω) is the random event. The sequence of events and decisions is therefore summarized as x →ξ (ω) → y (ω, x). The definitions of the first and the second stages are only related to before and after the random simulation and might contain sequences of decisions and events.

Salema et al. (2007) considered the scholastic approach in the closed loop design problem. Two decisions are made: strategic and tactical. The case highlighted a simultaneous design and planning over established scenarios was required. Thus, the structural decisions were considered in the first-stage, while operational variables were used in the second-stage. The aim in the two stages was the cost minimization. Investment costs were assigned to the first-stage, while operational costs (storage, penalty, transport, and production) were allocated to the second-stage.

Case studies

A case study is a good tool for exploratory studies. According to Yin, a case study is an effective strategy for exploring "how" or "why" questions (Yin 1994). In order to analyze the benefits of adopting and applying a reverse logistics procedure this research is based in the case study methodology. The aim of analyzing the following cases and the primarily motivation of choosing them is basically to know and study how the different cultures and regulations influenced the implementation of reverse logistics in each of the countries.

The electronic industry (China)

One of the reasons for the increasing attention on reverse logistics is the need to process the rapidly growing amount of EoL electronic products such as computers and mobile phones in compliance with environmental regulations. Simply dumping the EoL products in landfills is not a viable solution. In fact, most of these scrapped electronic products can be recycled or remanufactured to recapture value. According to guide and Van Wassenhove (2003), the estimated annual sale of remanufactured products in the USA alone exceeds $50 billion. Therefore, reverse logistics has become a critical strategic issue for many firms particularly those in the electronic industry.

Reverse logistics is driven by factors such as environmental legislations (Nnorom and Osibanjo, 2008), extended producer responsibility (EPR) (Khetriwal et al., 2009; Lee et al., 2000), economics (Liu et al., 2008), and improved customer service (Wu and Cheng, 2006). Owing to increased public concern about the environment, most developed countries have made legislations mandating manufacturers and importers to take back used electronic products at the end of their useful lives. Consumers can now return goods within warranty period as part of the after-sales service if the products fail to meet their needs or when the products have reached the end of their useful lives. The returned products may then be refurbished or remanufactured to extend their periods of usage or recycled to recapture value (Brito and Dekker, 2002; Chen, 2001; Srivastava and Srivastava, 2006, Tang and Naim, 2004).

Reverse logistics plays an important role in the electronic industry of developed countries particularly upon the implementation of the Waste Electrical and Electronic Equipment (WEEE) and the Restriction of Hazardous Substance (RoHS) directives of the European Community (EU) in 2005 and 2006 respectively (Wikipedia, 2009a,b). The industry has undergone major changes in recent years due to increased public awareness of environmental protection (Bossone, 1990) and hyper competition (D’Aveni, 1994). Governments of developed countries have all introduced laws and regulations to govern the use of materials for production, the recycling of products at the end of their useful lives, and the handling of e-waste during recycling (Nnorom and Osibanjo, 2008). As we can see in Figure 2 the needs to comply with government regulations, to achieve greater profitability by reducing wastes, and to enhance corporate image through promotion of recycling have urged manufacturers to implement reverse logistics in their supply chains. However, rapid technological advances, together with fashionable designs to entice frequent purchases of new products, have significantly shortened product life cycle and generated pressure on reverse logistics (Helo, 2004).

Figure 2. Reasons for implementing reverse logistics in the electronic industry.

Since its accession to the World Trade Organization, China as a developing country has become more and more influential to the global economy. Despite the large scale of operation, only a few manufacturers in the electronic industry of China have implemented reverse logistics while others remain uninterested.

This case study is about the electronic industry of China. According to Zhu et al. (2007), the electrical/ electronic industrial sector in China appears to be leading in green supply chain management practices probably because of its long-term international experiences compared to other sectors.

The cases selected in this study include four major companies, which are referred to as A, B, C, and D for commercial confidentiality reasons (Company A in Beijing, Company B in Shanghai, Company C in Qingdao, and Company D in Shenzhen). The first two are multinational giants in the electronic industry while the other two are major local electronic manufacturers in China. They are among the largest corporations in the industry and are more capable than smaller manufacturers to implement reverse logistics that requires significant resources. The choice of two foreign and two domestic companies for study may help determine if reverse logistics practice is related to local political and cultural characteristics.

The exploratory interviews reveal that drivers for reverse logistics in the consumer electronic product manufacturing industry of China vary from company to company. (Appendix 1)

Company A has 15 manufacturing facilities in nine countries, R&D centers in 11 countries, listed in Helsinski, Stockhol, Frankfurt and New York. Its net sales in 2005 were of 34.20 billion euros and in 2003 employed 58,000 employees. The main functions of the company are basically customer and market operation, technology platforms, brand and design, developer support, research and venturing, business infrastructure and their products are mobile devices. Their scale of operation in China consists of four manufacturing bases, six R&D centers.

Regarding the reverse logistics topic they are fully aware of the importance of it. They take this process as a business strategy instead of the company’s strategy. Their main interests of adopting this process are competitive advantage, reducing costs and improve customer satisfaction. They outsource 3PL and selected recyclers for reverse logistics and recycling mode. The company’s reverse logistics in China includes the implementation of the "Green Box" in 2005 which requires recyclers to strictly follow the company’s standards.

The principal threats faced by this company implementing reverse logistics are the lack of laws and public awareness of environmental protection.

Company B employed 121,700 employees in 2003; it has 15 manufacturing facilities in 60 countries. Their net sales were 29.00 billion euros in 2005. Their main functions are purchasing, manufacturing, marketing and distribution, research and development in technology. The main products this company offers are consumer electronic products and medical equipment. Their scale of operation in China consists of 35 joint ventures and six research centers.

As company A, company B takes reverse logistics process as business strategy. They fully understand the meaning and importance of reverse logistics. The company’s reasons for implementing reverse logistics are to comply with laws and regulations, and enhance customer’s and shareholder’s awareness. They use 3PL and collaborate with competitors to achieve economies of scale. Their activities of reverse logistics in China consist of moving all WEEE to a selected recycler but without any strict standards to follow. The lack of efficient recycling systems is the major difficulty in implementing RL in China for this company.

Company C manufactures refrigerators, refrigerating cabinets, air conditioners, washing machines, televisions, mobile phones, home theatre systems, computers, water heaters, DVD players and integrated furniture. They employed in 2005 over 50,000 employees and their net sales were of 8.6 billion euros . The company has over 240 subsidiary companies, 110 manufacturing facilities, R&D in 30 countries listed in Hong Kong and Shanghai stock exchanges. Their scale of operations in China is 18 original designing centers and ten manufacturing plants.

Reverse logistics has been adopted by this company as their company’s green product strategy to respond to local government support and the EU’s directives, and achieve material reuse and energy conservation they uses self-support collection network and offers monetary incentive to users for returns of WEEE. In 2003 they set up the first trial point for WEEE disposal in China. The lack of technology and public awareness of environmental protection are the major difficulties in implementing the reverse logistic in China.

Company D is the smallest one in comparison with the others, it employed over 20,000 employees in 2005 and their net sales were of 0.95 billion euros. It has 14 subsidiary companies, six science and technology research centers, two overseas manufacturing bases. Their main products color TV, DVD, home theatres, mobile phones and satellite receivers. In China they have ten manufacturing bases, one science and technology industry park.

Company D fully understands the importance of reverse logistics and they adopted RL for their business strategy in order to respond to the EU’s RoHS directive and China’s call for green products. They outsourced to a 3PL and selected recyclers. Their activities in China consist of moving WEEE to a selected recycler. The lack of support from top management represents a difficulty for implementing RL in China.

All of the four large consumer electronic product manufacturers under study have a clear understanding of reverse logistics and are implementing it in China to different degrees. This indicates a general increase in awareness of reverse logistics in the electronic industry. However, only Company C has taken reverse logistics as its corporate strategy in contrast to the literature on effective reverse logistics management strategy being used as a crucial weapon to compete (Chan and Chan, 2008; Deshmukh et al., 2006). This discrepancy suggests that manufacturers in China may still be focusing more on short-term gains than long-term benefits.

For Companies A, B, and D, the transaction cost of setting up and managing a self-support reverse logistics system is higher than that of outsourcing. While outsourcing may help a firm save operating cost in the short-run, it does not add much value to its product or service.

The disadvantages of contracting 3PL services are that these companies are nonexclusive and accessible to all firms. Any advantage gained through outsourcing can easily and rapidly be mitigated by competitors, not to mention the loss of control as a serious disadvantage (Lau and Zhang, 2006).

On the other hand, the amount of resources invested by Company C in reverse logistics is significantly greater than that of the other three companies surveyed. Company C to obtain long-term sustainable competitive advantage through green and reverse logistics is comparatively strong that it positively influences operational performance (Prahinski and Kocabasoglu, 2006; Green et al., 2008).

The study also shows that government support can play an important role in implementing reverse logistics in developing countries. However, for Company C in order to embrace reverse logistics whole-heartedly may be due to the fact that the local government of Qingdao in Shandong province, where the headquarters of Company C is located, is providing support through subsidies to help build Company C as a pilot in reverse logistics business in China. Though, the other three companies are not enjoying the same preferential treatment even though Company D is also a local firm.

As for the obstacles to reverse logistics implementation, all the interviewed companies (except Company C which receives preferential treatment from the local government) agree that the lack of laws and legislations is the major barrier to implementing reverse logistics

Based on the findings of the case studies, it can be seen that full and mature implementation of reverse logistics in the electronic industry of China is still a distance away. To promote development of reverse logistics in developing countries like China, efforts have to be made to enhance awareness, introduce legislations, provide economic incentives, invest in infrastructure and technology, and enhance collaboration among companies. It is observed that while the driving forces for reverse logistics vary from company to company, the barriers are common to most firms and are related mainly to the external environment. To begin with, there is a lack of enforceable laws and legislations to motivate companies to implement reverse logistics or to standardize recycling procedures. The lack of supportive economic policies from the government discourages small firms from investing in reverse logistics because of its prohibitive start-up cost and slow return on investment. In addition, the lack of publicity and knowledge of reverse logistics hampers public awareness of environmental protection.

Nespresso Reverse Logistics (France)

The main characteristics which lead Nespresso success are: the best quality in coffee, their ingenious machines and the service they offer.

Nespresso has launched Ecolaboration™, a consolidation of all of its sustainability efforts in coffee, capsules, and machines and across its entire operation into one concerted programme. Within the Ecolaboration™ framework Nespresso is making the following commitment by 2013. Nespresso will put systems in place to triple its capacity to recycle used capsules to 75%. Even there is not a law until now, nor is mandatory for customers to follow the sustainable plan of Nespresso, they trust in the green culture French people has and hope that members of the Nespresso Club will be interested in participating in this recycle process.

The first challenge when you want to recycle is setting up a reverse logistics system; implementing the reverse logistics process is part of their strategy as company. This can be possible by using a parcel carrier delivering the new coffee. Also, the Boutiques will have to be equipped to receive (potentially) large quantities of used coffee capsules, delivered in all sorts of (smelly) packaging. The capsules need to be collected and taken to the recycling installations. The coffee can be made in to fertilizer and the cups can be melted and the aluminum re-used. Assuming they have cost effective installations and processes for that, this completes the reverse logistics system.

Nespresso’s main service is to give members of their club a unique and personalized experience. The aim of the Nespresso Club is to provide members with exceptional coffee every day and to make the world Nespresso reachable for them at all times. They strive to meet all customers’ requirements by delivering the standard of quality they expect and by evolving according to customers’ needs.

There are two innovative services in the company: Nespresso yourTime and Nespresso Boutique Pick-up. There are about 20 boutiques around France and they are about hundreds of thousands capsules consumed each day.

The reverse logistics on this company is focused in the capsules which are 100% aluminum therefore, 100% recyclable. The question here is how they are going to collect the capsules for recycling?

Nespresso has a dedicated place for the collection of capsules where key customers can deposit their used capsules and Nespresso has alliances with logistics enterprises to transport all the packages to the treatment center of Nespresso. Afterwards, Nespresso can recycle the capsules as it is mentioned before the coffee residual can be made in to fertilizer and the cups can be melted and the aluminum re-used. The following figure 3 explains the process of reverse logistics.

Figure 3. Reverse Logistics process at Nespresso France

Additionally, Nespresso co-founded the Club du Recyclage des Emballages Légers en Aluminium et Acier (or CELAA – Club for Aluminum and Steel Light Packaging) in 2009. Its mission is simple: to increase recycling capabilities for small-scale aluminum and steel packaging such as capsules, pet food containers and bottle tops.

As part of CELAA, Nespresso is implementing new technology solutions. In France, small-size packaging cannot always be processed in packaging sorting centers. With CELAA, they have developed an electromagnetic system that separates small-scale aluminum packaging from other waste, allowing the capsules to be recycled.

Moreover, Nespresso also apply reverse logistics with the machines they sell. Meaning, in the case they have to be repair because of any damage, technical problems, and so on. Usually 8 to 9 cases out of 10 are solved by phone. However, what is the solution for the rest of the cases?

Nespresso has the service of pick-up which consists of picking up the damage machine, giving the customer a replacement of the damage machine while the other one is repaired. At the end of the reparation process Nespresso handle the machine directly to the customers place.

For further service innovations Nespresso is planning to improve their pick-up service with a guarantee of picking and returning the repaired machine in 2 hours taking in to account the zone inside France.

Returnable Containers (Netherlands)

This study is based in the application of reverse logistics in the area of physical distribution: the reuse of secondary packaging material. Secondary packaging is packaging material used for packaging products during transport from a sender to a recipient, either in retail or in industry. Returnable packaging is a type of secondary packaging that can be used more than once in the same form. Although returnable packaging may be have different types, such as returnable containers, pallets, or slipsheets, for this article purpose is used the term returnable containers.

An initial fact should be taken into account when thinking about introducing this process is whether it offers real environmental benefits. This means that the processes of producing and disposing of returnable containers, together with the additional return logistic activities, should not be more harmful to the environment than the use of one-way packaging material. This question has been investigated by the Frauenhofer Institute, which specializes in studies of material flows and packaging logistics. In 1993 this Institute published the results of an ecological comparison of one-way packaging and returnable containers. On the basis of four criteria, it concluded that returnable containers are less of a burden to the environment than one-way packaging material, provided each container is used a certain minimum number of times during its lifetime.

A consequence of the use of returnable containers is that, after a container has been used for carrying products from a sender to a recipient, the container has to be transported from the recipient to the next sender, who need not be the same as the first one. In addition to transporting the containers, the return logistic system also involves the cleaning and maintenance of containers, as well as their storage and administration.

Lützebauer distinguishes three types of systems: switch pool systems, systems with return logistics, and systems without return logistics. Which are described in table 5.

Table 5. Description of systems related to reverse logistics by Lützebauer

Type of System

Description

Switch pool systems

Every participant has his own allotment of containers, for which he is responsible. Thus cleaning, control, maintenance and storage of the containers are the responsibility of each pool participant. Pool-participants may be the senders and recipients, or the senders, carriers, and recipients of the goods.

Systems with return logistics

(Lützebauer systems)

Containers are owned by a central agency. This agency is also responsible for the return of the containers after they have been emptied by the recipient. The main prerequisite for such a system is that the recipient bundles the empty containers, and stores them until a sufficient number has accumulated for cost-effective collection.

Transfer system. The essence of this system is that the sender always uses the same containers. The sender is responsible for the tracking and tracing of containers, their administration, cleaning, maintenance and storage.

Depot system. In this system the containers that are not in use are stored at container depots. From a container depot the sender is provided with the number of containers he needs. After having been transported to the recipient, the empty containers are collected and returned to a container depot. Here the containers are cleaned and maintained, if necessary.

(Two variants from the Depot System)

Book system. The sender has an account with the agency. When a number of containers are delivered to the sender, the quantity involved is debited in the sender’s account.

When the sender sends the containers to a recipient, the quantity involved is credited in the sender’s account, and debited in the recipient’s.

Deposit system. The sender pays the agency a deposit for every container he uses. The deposit equals at least the value of the containers. The sender debits his recipient for this deposit, who does the same with his recipient, and so on. The moment the containers reach their final destination in the logistic chain, they are collected by the agency. At this point, the agency refunds the deposit to the party from which the containers were collected.

Systems without return logistics

In this system the containers are also owned by a central agency. The user of this system, the sender, rents the containers from the agency. As soon as the sender no longer needs the containers, they are returned to the agency. The sender is responsible for all activities involving the containers, such as return logistics, cleaning, control, maintenance and storage. By using this system, the sender can decrease his fixed costs by renting varying numbers of containers as required.

This case study is related to the design of a return logistics system for returnable containers in Netherlands. The return logistics operation took the form of a depot system with a deposit structure, as described in Table 3. The returnable containers are collapsible when they are empty. By collapsing the containers, a 75% reduction in their volume is obtained. The containers are available in six different sizes, all based on the dimensions of the Euro-pallet. Five parties are involved in the system:

The central agency

A logistics service organization

The senders of the containers

The recipients

The carriers that actually transport the full containers from senders to recipients

Supposing a sender s intends to send goods to a specific recipient r, and wants to use returnable containers for packaging these goods. The information and goods flows related to this shipment are represented in Figure 4.

Figure 4. Information and goods flow for the reverse logistic process

First, the sender notifies Agency A, of the fact that he wants to use returnable containers (1). Then the agency notifies the logistics service organization (2). Next, the logistics service organization distributes the desired number of containers from the nearest container depot d1 to the sender (3). After having packed the goods to be sent in the containers, the sender sends the goods to the recipient. This shipment may be handled by the logistics service organization, but it may also be carried out by another carrier (4). After the recipient has received a certain number of containers, he notifies the agency of this fact (5). Next, the logistics service organization is notified by the agency (6). Then the logistics service organization collects the containers from the recipient and takes them to the nearest container depot d2 (7). Before the containers can be used again, they are cleaned, and, if necessary, also maintained in this container depot.

The logistics service organization is responsible for having the appropriate numbers of containers in stock in the container depots. Hence, if at some point of time the numbers of containers in the depots get unbalanced, then a number of containers may have to be relocated from depots with an excess of containers to the depots with a deficit (8). This transfer of containers is accomplished within the internal distribution system of the logistics service organization.

As mentioned previously, the system is a deposit system. That is, the sender pays a deposit for the containers received. Next, the sender charges his recipient a deposit for the number of containers sent out. Finally, the recipient regains the deposit from the agency after the containers have been collected by the logistics service organization. This closes the "deposit loop". Besides the deposit, the sender also pays the agency a fixed service fee per container for the services provided. Furthermore, the agency pays the logistics service organization a fixed distribution fee for the distribution of the containers, and a fixed collection fee for their collection.

In order to implement this process it is important to address several questions as follows: How many containers should be available in the system? How many container depots should there be and where should they be located? How should the distribution, collection, and relocation of the containers be organized? What are appropriate service, distribution and collection fees?

For the agency point of view, the most important questions relate to the number of containers and the appropriate service, distribution, and collection fees. For the logistics service organization the main questions concern the number of container depots and their locations and the appropriate distribution and collection fees. The logistics service organization owns a large number of distribution centers. Within this organization it was decided that container depots could only be established at these centers. Hence the question of the appropriate number of container depots and their locations can be reformulated as follows: which of the distribution centers of the logistics service organization should be designated as a container depot?

The return system described in this case study is comparable to a system in Germany that was successfully introduced some years ago by the same agency. Of course, there the success is stimulated by strict environmental legislation, and by the problems of the Duales System Deutschland. Thus, the success of the system in a different environment, and on a larger scale, is still being proved. However, as the systems are organized separately in each country, containers do not normally cross international borders. For example, senders who may want to send containers as far as Spain can hardly use this system, because no international return logistics systems currently exist. A more open international system will probably develop in the future that will be accessible by any partner, and not restricted by any border.

Several advantages can be highlighted from this implementation for example, for the sender are among others, the just-in-time reception of empty containers, stable pallets, the optimal usage of truck loads, and the redundancy of shrink wraps. Another advantage for the sender is the service to his recipients, who will have no cardboard boxes of which to dispose. Furthermore, in some cases the containers may be used within the sender’s material handling system, which leads to a reduction in handling activities and costs.

Finally, the advantage of the system of returnable containers for the logistics service organization is obvious. If the distribution and the collection fees are sufficiently high, then this organization makes a profit on each container distributed or collected. For the logistics service organization the required investments in the system are relatively low.