Optimizing reverse logistics scenarios: a cost-benefit study using IBM's WIT tool

Abstract

IBM has a long history of product end-of-life management and recycling activities, largely centered around IBM's commercial client base. These activities have expanded over time to include product takeback from both commercial customers and individual consumers worldwide. This growth, along with the decreased margins associated with PC products, has made the task of managing these operations in a cost efficient manner more complex. Coordination of these processes across the various markets in which IBM operates requires better supply and demand and costing information for improved decision making. This paper presents an overview of a conceptual study designed to examine the costs and benefits of product end-oflife disposition decisions for used electronics equipment. The study utilizes a reverse logistics supply chain model to examine these decisions. The model was created using the IBM supply chain optimization tool known as WIT (Watson Implosion Technology) developed by IBM's TJ Watson Research Center. The WIT tool automates the decision making process used to determine the optimal mix of equipment that should be refurbished for resale versus dismantled for parts thereby greatly improving the info'rmation available for determining end of life disposition solutions.The WIT optimization tool can be used to determine a theoretical optimal cost scenario through which projected costs and benefits of product takeback can be better estimated. Using these estimates, an organization could use this information to determine what mix of products to target, what (if any) margins exist, and what costs to focus on for potential reductions. This exercise can be theoretically applied to various product takeback models in an effort to improve efficiencies.

Optimal Price and Quantity of Refurbished Products

“…Since then, much work has focused on these operational areas of closed loop supply chains, but the competition between new and remanufactured items is a relatively recent concern. Fasano et al (2002) use an optimization tool to determine if end-of-life IBM equipment should be sold as whole or dismantled for service parts. They assume that demand for refurbished products in a particular time period is limited, and that a machine will be refurbished only when there is demand and potential positive net revenue that results in a specified profit margin.…”

Economic Feasibility of Recycling Photovoltaic Modules

“…In addition to these theoretical analyses, practical studies have reported using tools to optimize the management of the reverse supply chain of particular industries. Fasano and colleagues (2002) described a tool (Watson Implosion Technology [WIT]) that IBM uses to automate the decision‐making process that determines the optimal mix of equipment to refurbish for resale, versus dismantle for parts. Feldman and colleagues (2000) modeled a tool for DfE activities at Motorola; it calculates environmental impacts of disassembly and recycling scenarios and the associated costs with input information from the user about individual components or subassemblies and material composition, and the types of connections at assembly level.…”

A general queuing network model to optimize refurbishing policies for returned products

“…In areas of distribution and production, Fasano et al (2002) use an optimization tool to determine if end-of-life IBM equipment should be sold as whole or dismantled for service parts. They assume that demand for refurbished products in a particular time period is limited, and that a machine will be refurbished only when there is demand and potential positive net revenue that result in a specified profit margin.…”