Abstract
In this paper we investigate a manufacturer’s sustainable sourcing strategy that includes recycled materials. To produce a short life-cycle electronic good, strategic raw materials can be bought from virgin material suppliers in advance of the season and via emergency shipments, as well as from a recycler. Hence, we take into account virgin and recycled materials from different sources simultaneously. Recycling makes it possible to integrate raw materials out of steadily increasing waste streams back into production processes. Considering stochastic prices for recycled materials, stochastic supply quantities from the recycler and stochastic demand as well as their potential dependencies, we develop a single-period inventory model to derive the order quantities for virgin and recycled raw materials to determine the related costs and to evaluate the effectiveness of the sourcing strategy. We provide managerial insights into the benefits of such a green sourcing approach with recycling and compare this strategy to standard sourcing without recycling. We conduct a full factorial design and a detailed numerical sensitivity analysis on the key input parameters to evaluate the cost savings potential. Furthermore, we consider the effects of correlations between the stochastic parameters. Green sourcing is especially beneficial in terms of cost savings for high demand variability, high prices of virgin raw material and low expected recycling prices as well as for increasing standard deviation of the recycling price. Besides these advantages it also contributes to environmental sustainability as, compared to sourcing without recycling, it reduces the total quantity ordered and, hence, emissions are reduced.
Highlights
When sourcing strategic materials, manufacturers, especially for electronic products, nowadays are confronted with two main developments
Including correlations between demand and recycling price qC;D in the analysis leads to the result that strong correlation results in higher cost savings compared to weaker correlation
We investigated a manufacturer’s sustainable green sourcing strategy with the opportunity to procure strategic materials from virgin raw material suppliers and from a recycler, taking into account new and recycled materials simultaneously
Summary
Manufacturers, especially for electronic products, nowadays are confronted with two main developments. Including (a certain amount of) recycled materials in the production process contributes to a reduction of greenhouse gas emissions through restraining the consumption of virgin resources and reduces the environmental impact of production (Boone et al 2012; Beall 2015; Achebe 2016) This results in better resource efficiency and a reduction in imports of critical and/ or conflict materials (European Commission 2010, 2014a). Consider a European manufacturer for electronic devices and components (e.g. high performance capacitors) that sources strategic materials used as raw material inputs for the production of short life-cycle products with high demand uncertainty (i.e. newsvendor products) These strategic raw materials like gold, tantalum or other rare earth elements are usually sourced via virgin material suppliers directly from mines located in Asia or Africa.
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