The use of recycled materials in manufacturing: implications for supply chain management and operations strategy

Abstract

In this study we explore the implications of using recycled versus virgin materials for supply chain structure and supplier relationships, as well as the broader effects on operations strategy in an evolving sustainable environment. We focus 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 a complex environment to observe changes in the supply chain with the addition of a reverse supply chain system using recycled materials. Based on the findings from an in-depth case study we posit several propositions 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, and the ratio of non-integrated to integrated firms using recycled materials will increase. Further, we expect smaller non-integrated firms to access the market for recycled materials differently from 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 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.