Why Do Companies Need Operational Flexibility to Reduce Waste at Source?

Yara Kayyali Elalem,Isik Bicer,Ralf W Seifert

doi:10.3390/su14010367

Abstract

We analyze the environmental benefits of operational flexibility that emerge in the form of less product waste during the sourcing process by reducing overproduction. We consider three different options for operational flexibility: (1) lead-time reduction, (2) quantity-flexibility contracts, and (3) multiple sourcing. We use a multiplicative demand process to model the evolutionary dynamics of demand uncertainty. We then quantify the impact of key modeling parameters for each operational-flexibility strategy on the waste ratio, which is measured as the ratio of excess inventory when a certain operational-flexibility strategy is employed to the amount when an offshore supplier is utilized without any operational flexibility. We find that the lead-time reduction strategy has the maximum capability to reduce waste in the sourcing process of buyers, followed by the quantity-flexibility and multiple-sourcing strategies, respectively. Thus, our results indicate that operational-flexibility strategies that rely on the localization of production are key to reducing waste and improving environmental sustainability at source.

Highlights

Reduce Waste at Source?Improving sustainability on the production and consumption sides of product life cycles has proven to be critical in reducing the carbon footprint and combating global warming [1]
We quantify the impact of key modeling parameters for each operational-flexibility strategy on the waste ratio, which is measured as the ratio of excess inventory when a certain operational-flexibility strategy is employed to the amount when an offshore supplier is utilized without any operational flexibility
We look at the impact of the three operational-flexibility strategies on the excess inventory in order to quantify the environmental benefits of operational flexibility

Summary

Introduction

Reduce Waste at Source?Improving sustainability on the production and consumption sides of product life cycles has proven to be critical in reducing the carbon footprint and combating global warming [1]. The industry is dominated by strong brands that outsource production to contract manufacturers in offshore countries that rely on coal-fueled power plants. These contract manufacturers sometimes even outsource production to yet other countries to further reduce production costs and increase their capacity to fulfill increasing global demand [5]. The industry is reported to be responsible for around 35% of oceanic microplastic pollution, 20% of industrial water pollution, and more than 8% of global carbon emissions [4] Despite this environmental destruction, for 30–40% of clothes produced, there is no customer

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