Master thesis. Value creation in Closed Loop Supply Chain through the implementation of Product Life Cycle management

Transcription

1 Master thesis Value creation in Closed Loop Supply Chain through the implementation of Product Life Cycle management Ioannis Varnavas January 2011 MSc Logistics and Operations Management Supervisor: Dr. ir. Harold Krikke Faculty of Economics and Business Administration Tilburg, 2010

2 MANAGEMENT SUMMARY... 4 CHAPTER INTRODUCTION Problem Indication Problem statement Research Questions... 6 CHAPTER THEORETICAL FRAMEWORK CLSC Operations of CLSC Drivers of CLSC Barriers of CLSC Types of value creation The transformation of SCM to a green one and relation with CLSC CLSC and PLCm Product life cycle management (PLCm) Key issues and methodologies of PLCm Value creation through PLCm Trade off between cost and green Propositions CHAPTER RESEARCH METHODOLOGY CHAPTER RESULTS CASE OCE CASE ASML CLSC Operations Drivers Barriers Values Economic value Environmental value Product life cycle management Product design for X (DfX) Re-engineering Product data management Supporting techniques: LCA, LCC CHAPTER DISCUSSION AND CONCLUSION Discussion Limitations and future recommendations REFERENCES APPENDICES

3 1. ENVIRONMENTAL INDICATORS OCE ECONOMIC INDICATORS OCE ENVIRONMENTAL INDICATORS ASML ECONOMIC INDICATORS ASML CODING SCHEME INTERVIEW QUESTIONS

4 Management summary The increase of product returns have made manufacturers consider the implementation of closed loop supply chains (CLSC) in order to cope with them and to extract the remaining value of products, which otherwise would erode. At the same time public pressure, governmental legislation and the diminishing of raw materials create further pressures for greener operations. Product life cycle management (PLCm) seems to be the means that facilitate both economic and environmental value extraction, by better organizing companies closed loop operations and by making them proactive, since that way companies consider their products from the design phase until their full recovery. This master thesis is researching the way product life cycle management can create value for companies in a CLSC. In order to answer this question, theory is developed and then tested on two cases. More particularly, a literature review is presented addressing the drivers, the values and the barriers of CLSC, as well as the components of PLCm. Furthermore, the connection among CLSC, PLCm and value extraction is described. Two companies were used for the practical illustration of the theoretical framework, of which one is active in the printer industry, while the second in the semi conductor equipment industry. The results show that drivers of CLSC affect the way companies organize their CLSC with the economic driver being the most important one. Furthermore, the economic and environmental values that are created through CLSC were found to go hand in hand. Finally, it was confirmed that PLCm helps companies achieve optimal value extraction, thus proving its central role in the success of CLSC. Key words: Supply chain management, closed loop supply chains, value extraction, product life cycle management, green supply chain management, end of life decisions 4

5 Chapter 1 Introduction 1.1. Problem Indication Supply chain management (SCM) is in charge of the conversion of raw materials into final products and the delivery of the latter to the customers (Beamon, 1999). Rodrigue et al. (2001), mention that new technological developments have greatly improved cost, efficiency and reliability of the above process. However, this has also taken its toll on environmental issues (Rodrigue et al., 2001). At the same time, environmental concern is growing more and more, putting pressure on companies and as a result a change in the manufacturing philosophy is required (Beamon, 1999). This pressure is dictated, according to Parlikad et al. (2003), by environmental considerations, more effective reverse logistics and new marketing opportunities. Moreover, Mazhar et al. (2007), state that the limited natural resources, the growing global population and the environmental impacts require consideration of products manufacturing for their entire life cycle from design, manufacture and sale, through to use and end-of-life in order to optimize the production processes and to reduce impacts on the environment. In support of this view, Fleischmann et al. (2000) mention that an impact of the increasing environmental concern is the reuse of products and materials. End of life management of products, may provide different options for the companies after a product s useful life and aims at recapturing value from end of life of products and components (Parlikad et al., 2003). There are significant opportunities to build competitive advantage through recovery operations, but due to the small fraction of the assets that are being recovered there is a large proportion of the product value that erodes (Guide et al., 2006). As stated by Krikke et al., (2003), in order for companies to regain this value (from an economic, customer service and environmental perspective), closed loop supply chains should be strengthened and component and product reuse seems to be beneficial in that direction. Unfortunately, there are barriers in the recovery of products at the end of their life, some of which are according to Parlikad et al. (2003), lack of infrastructure, excessive costs and lack of necessary information. As a consequence, Krikke et al. (2003) state, that a trade-off between economical costs and environmental impact is required. Parlikad et al. (2003) further mention the necessity of information systems and argue that product life cycle management is necessary to minimize the environmental impact of products, maintaining at the same time the latter s function and quality. Moreover, Krikke et al. (2003) mention that PLCm may extend supply chains into circular supply chains (CSC), which can create additional value by closing goods flows in the supply chain. These values according to Krikke et al. (2003) refer to customer satisfaction, cost reduction and environmental goals and are related to SCM, since the latter (as it is going to be defined below) contains value adding processes. 5

6 1.2. Problem statement How can product life cycle management create value for the companies in a closed loop supply chain? Supply chain management (SCM) is defined by Krikke et al. (2003), as the integration of key business processes from end user through original suppliers that provide products, services and information that adds value for customers and other stakeholders. Furthermore, Krikke et al. (2003), define product life cycle management (PLCm) as the process of optimizing service, cost and environmental performance of a product over its full life cycle. Key issues include product design for recovery, re-engineering, product data management, installed base support and evaluating (end-of) life scenarios. The same authors state that value creation refers to traditional supply chain objectives, customer satisfaction and cost reduction, as well as environmental goals (Krikke et al., 2003). Furthermore, by closed loop supply chain (CLSC), is meant the design, control, and operation of a system to maximize value creation over the entire life cycle of a product with dynamic recovery of value from different types and volumes of returns over time (Guide et al., 2009). Finally, Srivastava (2007) describes green supply chain management (GrSCM) as integrating environmental thinking into supply-chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers as well as end-of-life management of the product after its useful life. This research has an organizational aspect as it tries to investigate the relation of the above key issues in a company level and not in a particular department of it Research Questions Which are the CLSC s drivers? Which types of values can be distinguished? What are the barriers of CLSC? How can product life cycle management help overcome the barriers of CLSC and boost value creation? 6

7 Conceptual Model Drivers of CLSC Barriers of CLSC Two values CLSC (Economic, environmental) PLCm 7

8 Chapter 2 Theoretical framework This chapter provides the theoretical framework of the research. More specifically the three main concepts of the paper are developed, which are the CLSC, the values of CLSC and the PLCm CLSC This section describes closed loop supply chain (CLSC), the operations it includes, its drivers, the values it can create, the barriers that it encounters and its relation with product life cycle management (PLCm). Geyer et al. (2007) mention, that the subjects of CLSC are the reverse supply chains created by commercial, warranty, end-of-use, and end-of-life product returns, as well as their relationships with the traditional forward supply chains. According to Guide et al. (2003), manufacturers have difficulty in recovering the maximum value from products that are being returned through the supply chain and that an efficient CLSC may save large amounts of money for them. That makes product returns an important issue for many industries ranging from carpets to computers, however it creates many complexities (Guide et al., 2003). As stated by the same authors a CLSC is needed in order to encounter these complexities. This may become feasible as CLSC have traditional supply chain structures for forward movement of goods to the consumer and also have a number of specialized activities required for the reverse supply chain (RSC) activities as well Operations of CLSC Guide et al. (2009), state that CLSC may be viewed with a focus on the type of returns or on activities and discern commercial, end-of-use and end-of-life returns. According to the same authors commercial returns may happen within 30, 60 or 90 days after purchase, end-of-use returns occur when products are technologically upgraded and end-of-life returns follow when a product becomes technologically obsolete or when it loses its utility for the user. Furthermore, Guide et al. (2009) mention the repair and warranty returns which may happen throughout a product s life cycle. Krikke et al. (2003) mention the following activities that take place in reverse supply chains: collection, inspection/separation, re-processing, disposal and re-distribution. These are described below: 8

9 Collection: all activities rendering used items (product, component or material) available and physically moving them to some point for further treatment. This may involve product acquisition, transportation and storage. Inspection/separation: results in splitting the flow for various recovery and disposal options. This may involve testing, disassembly, shredding, testing, sorting and storage. Re-processing: reusable flows undergo the actual transformation of a used item into a reusable item of some kind. Depending on the recovery option chosen, this comprehends various activities such as disassembly, shredding, repair, replacements etc. Disposal: the non-reusable flows are disposed of to incinerators and landfills. Re-distribution: directing reusable items to markets, and physically moving them to potential new users. This involves sales activities, transportation and storage. Moreover, Krikke et al. (2003), describe six recovery options in a multi-loop product lifecycle, which are direct reuse, repair, refurbishing, remanufacturing, cannibalization and scrap. These are provided in table 1. Table 1: Outline of recovery options, Source: Krikke et al. (2003) According to Parlikad et al. (2003), the above recovery options aim at recapturing value from end-of-life (EOL) products and components. The same authors further describe the operations as following: Reuse: products are returned in working order and their quality could be less than that of the new products Refurbishing: products are brought to a specified quality level by disassembly to the module level, inspection and replacement of broken modules Remanufacturing: products are brought up to quality standards that are as rigorous as those for new products by complete disassembly down to the component level and extensive inspection and replacement of broken/outdated parts 9

10 Cannibalization: recovery of relatively small number of reusable parts and modules from the used products, to be used in any of the three operations mentioned above Recycling: reuse materials from used products and parts by various separation processes and reusing them in the production of the original or other products Parlikad et al. (2003) also state that disposal and energy recovery are other operations used for parts and materials that cannot be recovered by the above operations Drivers of CLSC Deterioration of the environment Srivastava (2007) argues that GrSCM is becoming more and more important because of the deterioration of the environment, e.g. diminishing raw material resources, overflowing waste sites and increasing levels of pollution. Jan-Wu et al. (1995) further add that the economic growth has caused serious environmental problems like depletion of the ozone layer, disappearance of rain forests, pollution of air and water and scarcity of landfills. The growing population is also a major reason for the world s environmental deterioration and poverty, according to Jan-Wu et al. (1995). As mentioned by the same authors, the above situation demands for environmentally responsible business management. Environmental concern According to Beamon (1999), public pressure is driving the transformation of supply chains to greener ones, as consumers are becoming more environmentally aware and are willing to pay more for environmentally friendly products. Moreover, Hall (2000) mentions that non-regulatory pressures, that influence the environmental performance of firms, are stemming from environmental advocacy groups, neighbors and consumers. In addition, Jan- Wu et al. (1995) state that public awareness directly affects the publicity of the companies and picture the environmental disaster that Exxon Valdez caused with the oil leak. In support of that, Hall (2000) argues that environmental groups influence firms publicity, the consumers, and firms policies, through their campaigns and protests, picturing the issue with the disposal of Shell s Brent Spar oil storage platform. Legislation Jan-Wu et al. (1995) state that governmental regulations have an impact in companies environmental policies, as government functions as a regulator, facilitator and buyer. This, according to the same authors, is taking place through policies such as vehicle emission standards, noise control, recycling requirements, through supporting research in the specific field and by providing investments and incentives to firms. In addition to that, Darnall et al. (2008) mention that regulators encourage CLSC, by funding programs and creating 10

11 partnerships with universities and companies. Finally, Jan-Wu et al. (1995), state that government is often the largest buyer of green products, which offers monetary incentives for companies. Hall (2000) argues that even though regulations are not perfect due to the centralized, bureaucratic control they implement, they still remain the primary driver for environmental improvement. Consequently, environmental legislation is an important driver for CLSCm (Beamon, 1999). Extended Producer Responsibility An important issue of the legislation concerns the extended producer responsibility (EPR). According to McKerlie et al. (2006), EPR is a policy measure that recognizes the producer s role in reducing the impacts of their product throughout its entire life cycle, including waste management or recovery at end-of-life. The aim of this policy is to shift that responsibility from taxpayers, local authorities and conventional waste dealers to the producers, so that more sustainable materials management systems will be developed and design for environment will be encouraged (McKerlie et al., 2006). The same authors mention as examples of these practices the dematerialization, the elimination of toxics and the re-use of products and packaging. McKerlie et al. (2006) further add that the ultimate result is for producers to realize that it is them that can most directly make environmental improvements and influence changes in the upstream manufacturing and downstream phases of a product s life. The extension of producer responsibilities is presented in figure 1. Fig. 1: Extended Producer Responsibility encompasses both the upstream and downstream stages of a product s life cycle. Source: McKerlie et al. (2006) EPR may have the form of legislation or it can be voluntary in case that companies lease their products and take back discards for refurbishment and reuse (McKerlie et al., 2006). In 11

12 addition, McKerlie et al. (2006), state that the EPR policies are targeting in stimulating product innovation and pollution prevention activities such as: Reducing materials, resources and energy usage Eliminating the use of toxic chemicals in the product Increasing recyclable and recycled content Streamlining and improving the efficiency of transportation systems and production processes Extending the useful life of the product Increasing opportunities for recovery and re-use of the product at end-of-life Creating new forms of product delivery such as leasing/product service systems However, as stated by Walls (2006), there exist different types of EPR in each country. Some examples of the different legislations are going to be presented below. EU Sachs (2006) provides the legislation in the European Union as follows: The writer states that European Union s legislation is based on the EPR, by assigning producers to be responsible for their products through take-back legislation, in order to transform supply chain into cradle to cradle system that encourages recycling, reuse and improved product design. EU is implementing product-oriented legislation for a staggering array of products and product packaging. The EPR product can be enforced either at a national or supranational scale, however, individual nations have supplemented the traditional regulation. Sachs (2006), though, states that EU programs do not always provide the expected ecological design incentives, due to the large logistical hurdles and transaction costs that have come up. Nevertheless, the product oriented approach of the EU s legislation aims in addressing the full life cycle impacts of products by influencing how products are designed, marketed, used, and disposed of, with the goal of reducing the environmental footprint of products as they move through industrialized economies. Indicatively some regulations are presented by Walls (2006) for the Netherlands, Germany and UK below: Walls (2006) mentions, that the Netherlands was the first country in Europe to implement EPR for electronic and electrical equipment. According to the regulation, retailers are forced to take back old goods in exchange for new ones, while manufacturers accept these products and are in charge of transportation and recycling. In addition, recovery and recycling targets are set after negotiations according to the industry and the type of products. As regards Germany, according to Walls (2006), 12

13 producers and retailers are responsible for taking back the packaging associated with products and recycling rates are set for each different material. Finally, Walls (2006) states that in the United Kingdom, the EPR concept was adopted in the Since then more regulations have been passed that afford packaging and producer responsibility. More particularly, producers need to recover and recycle a percentage of their packaging waste, which is rising over time. Moreover, different targets are set for different materials and the ultimate aim is to meet the EU packaging requirements. As mentioned by Walls (2006), four categories of producer responsibility exist in the UK s law, which are: manufacturer, converter, packer/filler, and seller. Rest of the world Sachs (2006) states that in comparison to the EU, the United States legislation focuses on industrial sources of pollution and it is not product-oriented. Particularly, product take-back legislation is not widely enforced and there is no comprehensive product policy, which creates a gap in the US environmental law. As a result, the environmental impacts of products upon disposal are often not considered during design, production and consumption decisions. Furthermore, according to Mckerlie et al. (2006), the Canadian legislation forces the parties that are involved in designing, producing, selling or using a product, to be responsible for minimizing the environmental impacts of the product over its life cycle. International Organization of Standards (ISO) In addition, environmental management series are set by the International Organization for Standards (ISO), in order to help organizations operate in an environmentally friendly way (Beamon, 1999). The ISO series are provided in table 2. Table 2: The ISO Series, Source: Beamon (1999) Economics De Brito et al. (2002), state that a driving force for CLSCm is direct or indirect economic benefits, that stem from recovery actions and impact marketing competition and firms strategy. Furthermore, Jan Wu et al. (1995) argue that the implementation of CLSCm can make companies save costs by conserving energy, reducing resources, and recycling usable materials. Particularly, returned products can be used in the production process as input resources either in the original form or as components and modules after disassembly 13

14 (Parlikad et al., 2003). Parlikad et al. (2003) further state that increased profits can also be made by reselling returned products in secondary markets. In addition, Krikke et al. (2003), mention that a well managed reverse logistics program can provide important cost savings in procurement, disposal, inventory holding and transportation. Moreover, Jan Wu et al. (1995) declare that through total quality management programs, scraps and defects in the transformation process can be reduced, thus offering to firms the chance to minimize cost. Srivastava (2007) further adds that CLSC is not only about environmental compliance, but also about making higher profits. Srivastava (2007) also mentions that companies have to realize the hidden value of reverse logistics (RL) Barriers of CLSC At this point it is necessary to mention some barriers that are crucial to be overcome in order for the recovery options to add both economic and environmental value for the firms. Guide et al. (2009) support that bottlenecks must be removed in the CLSC, so that the potential value from the recovery will exceed the cost of recovery operations. Prahinski et al. (2006), mention some barriers for reverse supply chain management (RSCM) which if they will be solved, companies may improve their revenues and may reduce their costs. These are: delayed returns especially for technological and time sensitive products, variation in quantity of product returns, severity and breadth of product defects and unknown product quality due to the lack of information at the consumer or retail level. Moreover Guide et al. (2003) add more characteristics of reverse supply chain activities that complicate management and planning of supply chain functions and these include: the need to balance demands with returns, the need to disassemble the returned products, the requirement for a reverse logistics network, the complication of material matching restrictions and the problems of stochastic routings for materials for repair and remanufacturing operations and highly variable processing times. In addition, more complexity may be added as products and their closed-loop supply chains often differ with respect to a number of critical dimensions including: product acquisition, returns volume, return timing and quality, test, sort and grade, reconditioning, and distribution and selling (Guide et al., 2003). As a result, in order for recovery operations to be economically attractive, it is necessary to have adequate quantities of used products of the right quality and price, at the right time, as well as a market for the recovered products (Guide et al., 2009). This is also supported by Krikke et al (2003), who mention that reverse chains need to be adapted to product and market characteristics, as each return type requires different type of reverse supply chain. 14

15 2.2. Types of value creation Four values of CLSC are addressed in the literature, which are economic, environmental, customer loyalty and information. However, due to the limited scope of this paper, only the economic and environmental are examined. According to Zhu et al. (2008), GrSCM has caused organizations to consider closing the supply chain loop, in order to achieve environmentally friendly manufacturing, competitive advantage and higher profits. What is more, Guide et al. (2009), mention that through CLSC companies may develop economically and environmentally sustainable industrial systems. Jayaraman et al. (1999), argue that the recoverable product environment, that GrSCM is creating, is a closed loop system incorporating traditional logistics forward flows with logistics channels reversed. The same authors further support that remanufacturing, which is the heart of the recoverable manufacturing system, is able to reduce waste and is both profitable and environmentally conscious. According to Krikke et al. (2003), the additional value recovery affords not only cost saving, but also customer satisfaction and environmental goals. Economic value According to Guide et al. (2003), companies have started to realize the necessity of CLSCm and particularly of return operations, as they are losing much value there. Furthermore, the same authors state that profit margins in global markets are decreasing, while returns are increased. This may lead to losses if there is not a business process that will be able to handle the growing returns through a life-cycle approach to products (Guide et al., 2003). Guide et al. (2009) state that in closed loop supply chains, companies may retrieve the value from products that are being taken back from customers, by reusing the entire product or some of its modules, components and parts. Srivastava (2007) also declares that with the implementation of product recovery options, companies can retrieve the material content of used and non-functioning products, thus reclaiming the latter s value at the end of their useful life. As an example, Krikke (2009) mentions, that during reuse, up to 90 percent of the total original costs can be recaptured. As mentioned by Guide et al. (2009), the estimate of commercial returns annual cost exceeds $100 billion and currently very little value is recovered by the manufacturer, which shows the economic potentials of CLSC. Furthermore, according to Guide et al. (2000), recoverable manufacturing operations account for total sales in excess of $53 billion per year and as a result many companies are engaged in such operations. The same writers report that many of these have successfully implemented recoverable manufacturing operations and indicatively mention that Xerox managed to achieve cost savings over $20 million per year. In addition, Wu et al. (1995) argue that environmental logistics are necessary to companies because of the opportunities that are opened in the green markets and that through CLSC companies can cope with the 15

16 increased consumer demand for green products, offering products with high quality and lower environmental impact. This can affect the customer perception about the company (Wu et al., 1995). Krikke (2009) state that, market potential of reverse logistics only in America will grow to over $73 billion by What is more, according to the same author, Europe and the rest of the world account for $51 and $64 billion respectively, while the global market in 2010 represents a potential turnover of $188 billion per year. Furthermore, Wu et al. (1995) mention that as resources, energy and materials are being conserved through CLSCm operations, companies may reduce costs and make profits. Environmental value Wu et al. (1995) state, that CLSC is able to achieve source reduction and substitution through product reuse and recycling. The outcome is that the total waste in the system is minimized, as environmentally friendly materials are substituting the regular ones that end up as pollutants and as the same items are used multiple times so that little are discarded (Wu et al., 1995). Indicatively, Rogers et al. (2001) state that rebuilding and remanufacturing in the automotive industry, may save million gallons of crude oil, steel and other materials. Furthermore, the same authors, support that according to the Automotive parts Rebuilders Association (APRA), remanufacturing could save as much raw materials as it would fill 155,000 railroads annually, a train over 1,100 miles long. Adding to that, Giuntini et al. (2003) mention that a remanufactured product, consumes about 15 percent the energy that is required for the construction of a new one and further mention that worldwide energy savings of current remanufacturing are 400 trillion BTUs of energy and about 28 million tons of CO₂ annually for building new products. Kerr et al. (2001) provide as an example, the savings in resource consumption that Xerox achieved through the remanufacturing of photocopiers as it is presented table 3. Table 3: The savings achieved by remanufacturing Xerox 5100 photocopiers According to Guide et al. (2003), legislation has a major role in that, not only because of the guidelines that are given to the companies to become sustainable, but also because sometimes it is the only solution that can make sustainable businesses profitable. 16

17 Where does the value lie At this point it is necessary to make clear where the value lies in the loop. Krikke (2009) states that the value is created in the forward chain and during the recovery process much of this value, which is locked up in the product, including labor, material and energy costs, is recaptured. According to Krikke (2009) the recapturing of the resources is taking place in the forward chain. This procedure is described by the same author as the substitution effect. In that sense, Krikke (2009) claims that reverse chain is functioning as a supplier of the forward supply chain The transformation of SCM to a green one and relation with CLSC The aforementioned drivers demand a redefinition of the basic structure of the supply chain in order to achieve waste and resource use minimization (Beamon, 1999). Beamon (1999), states that traditional supply chains are extended so that they include environmental considerations from the extraction of raw materials, to the use of goods produced, to the final disposal of those goods. The same author mentions that fully integrated, extended supply chains extend the one-way chain to a closed loop which includes recycling, reuse and remanufacturing operations (Beamon, 1999). Figure 2 depicts the extended supply chain. Fig. 2: The extended supply chain, Source: Beamon (1999) Jan Wu et al. (1995), also argue that integrative environmental management in the supply chain demands that every element in the value chain is involved in minimization of the firm s total environmental impact from start to finish of the supply chain and also from beginning to end of the product life cycle. Logistics decisions that have an impact in the environment are shown in figure 3. 17

18 Fig. 3:Logistics decisions that affect the environment, Source: Jan Wu et al. (1995) As a result, according to Darnall et al. (2008), CLSCm requires measures to be taken from all members of the chain (suppliers, transporters, warehouses, retailers and customers), for ensuring environmental quality of their products and for evaluating the cost of the waste during their operations. That way companies may improve their business performance, create value for their customers, exploit new emerging technologies and reduce costs of the design and development of products (Darnall et al., 2008) CLSC and PLCm As this paper s focus is on the product life cycle management (PLCm) and its effect on CLSC, it is necessary to show the connection between these two concepts. Zhu et al. (2008), state that the design stage of the product has the most environmental influence of any product or material, as it is at this stage that product environmental performance is determined. The same writers also support that this is called eco-design or design for environment (DfE) and it is an important GrSCM practice that may improve firms CLSC. This is because eco-design aims in facilitating reuse, recycling and recovery through smart design, so that it will be easier to disassemble products when they are being recovered (Zhu et al., 2008). As it is further mentioned from the same authors this makes product design a critical characteristic for CLSC management. In support of that Srivastava (2007) mention that product design, which is an important operation of GrSCM, includes design issues related to environmental safety and health over the full product life cycle during new production and process development. According to the same author, green operations follow product design and contain product manufacture/remanufacture, usage, handling, logistics and waste management. Environmentally conscious design and life-cycle assessment are important tools for green design (Srivastava, 2007). The writer also argues that the above operation should facilitate material and product recovery. In addition, Srivastava (2007) mentions that green manufacturing and remanufacturing, which are CLSC 18

19 operations, aim at minimizing energy and resource consumption for flow systems so that less virgin materials are used Product life cycle management (PLCm) This section provides information about the central concept of this paper, which is product life cycle management (PLCm). Particularly, tools to implement PLCm are discussed, how it can create value for companies, how it can transform the manufacturing procedure into a green one and the trade off decisions that need to be taken between cost and environmental compliance for the implementation of PLCm. Mazhar et al. (2007), support that an environmentally friendly production process should consider products through their whole life cycle including design, manufacture, sale, use and end-of-life. As a result the same authors also support that manufacturers should reuse parts, components, subassemblies or even the entire product in order to build an economically competitive and sustainable strategy. More particularly, companies can reduce manufacturing cost through the use of fewer materials in the production process and save energy without sacrificing quality (Mazhar et al., 2007). In support of that, Gungor et al. (1999), mention that environmental conscious manufacturing (ECM) involves producing products such that their overall negative environmental effects are minimized and that this includes the understanding of product life-cycle and its environmental impacts and product design and manufacturing decisions, in order to keep the environmental attributes at a desired level. This is under the scope of PLCm, as according to the definition that has already been given, PLCm are the processes that aim in optimizing service, cost and environmental performance of a product over its full life cycle (Krikke et al., 2003) Key issues and methodologies of PLCm Figure 4 depicts the key issues of PLCm, which are going to be further explained. Fig. 4: Product life cycle management, Source: Krikke et al. (2003) 19

20 Product design for X (DfX) According to Sundin (2004), Design for X (DfX) is both a philosophy and a methodology that can help companies to change the way that they manage product development and become more competitive. In this type of design the company may enhance products according to an aspect or property X, where X may stand for environment, recycling, assembly, disassembly, manufacturing, remanufacturing etc. Product design s importance is illustrated by Sundin (2004), who supports that better control over product design is necessary for manufacturers in order for them to cope with the uncertainties in the quality and number of the returned products. Moreover, Fixson (2004) states that due to the increasing competition between firms, the latter have highlighted manufacturing concerns during product design, because the latter is able to affect the organization s performance. Adding to that, Sundin (2004), states that recovery activities may become environmentally and economically beneficial with the right product design and adds that it is necessary for products to be easy to be upgraded with new technology in order to avoid the latter s obsolescence. Fixson (2004) defines product architecture as the scheme by which the function of a product is allocated to physical components and also adds, that it involves information of the number of components to be used, the way the latter work together, how they are built, assembled and disassembled. Furthermore, Fixson (2004) states that the decisions of product architecture are important, as they are being influenced by the product characteristics, the number and complexity of components, components commonality and product modularity. That is also supported by Kimura (2001), according to whom product design should be adjusted to the particular product s usage mode or life cycle scenario. The same author illustrates modularization as the procedure during which functional components of a product are identified and then they are merged step-by-step into modules. Kimura (2001) further mentions that modularization of product structure is important for coping with product s specific requirements. This is a complicated issue and can influence the functionality, the performance and the cost of each part of the product (Kimura, 2001). Krikke et al. (2003), further explain that modular design is necessary so that there is compatibility of components during the configuration of the various product types. The same authors illustrate the idea of modularization by stating that individual components should form decomposable sub-functions, which make up the final product. Specification of the interface is another critical issue during design stressed by Krikke et al. (2003), in order to ensure that the above sub-functions act coherently and they add a number of principles, which are the following: components should be reusable, cross generation compatibility is required in order to create secondary demand, value separation must be achieved by containing parts in different modules. 20

21 Re-engineering Krikke et al. (2003) state that, re-engineering involves the improvement of product quality and reducing the use of material and labor resources in the forward chain by learning from returns. According to Girczyc et al. (1993), companies are motivated to implement reuse designs, as the increasing market competitiveness demands for design quality, productivity and predictability. Particularly, according to the same authors, this is necessary in order for companies to reduce costs of fixing, to avoid losing valuable time and protect their reputation, to decrease design time and get their products faster to the market, to plan product introduction and to evaluate product opportunities (Girczyc et al. 1993). Krikke et al. (2003), also state that major cost savings and reduced design flows may be achieved, through the development of new products based on selectively upgraded components. What is more, Girczyc et al. (1993) mention that design reuse allows designers to exploit performance characteristics of previously designed components, thus eliminating unexpected surprises and improving performance, correctness and predictability of products. However, research and design cost a lot of money and time (Krikke et al., 2003). In addition, Girczyc et al. (1993) support that major considerations over engineering affords the performance, cost and quality of parts, which are parameters necessary to make design reuse successful. In order to encounter these barriers, Girczyc et al. (1993), claim that product design should be programmable, so that engineers can use each design for different applications and thus facilitating product upgrades, allowing customization and flexibility according to the different applications and reducing costs, design time and cost of training people for designing the different parts. Fixson (2004), who also stresses the importance of engineering during products manufacturing, mentions that the decisions of product architecture are being influenced by the product characteristics, the number and complexity of components, components commonality and product modularity. According to Krikke et al. (2003) advanced CAD/CAM systems are tools that can facilitate design reuse. Product data management Parlikad et al. (2003), stress the necessity for the different actors (e.g., logistics providers, recyclers) in the value chain to have available information of the product across its full life cycle. This according to the aforementioned authors follows the product design stage and the DfX policy and EOL strategy that are selected by companies. This is because according to Sudarasan et al. (2005), PLCm may be successful if data standards and design architectures are addressed in a way that the fragmented information can be spread to the different actors in a format they can use. However, Parlikad et al. (2003), state that a major barrier is that this information is often lost after the point of sale and as a result little information exists about the product s identity, constituent components or its current state in the end of its life. This is partly happening, because of the lack of information systems 21

22 infrastructure, the huge variety of products and the complexities in the EOL management of these products (Parlikad et al., 2003). In support of that, Parlikad et al. (2007) mention that today s computer-based support systems for product development and product lifecycle management often consider issues related to product EOL management insufficiently. Figure 5 depicts the loss of information during a product s lifecycle. Fig. 5:Schematic plot of product information content loss, Source: Parlikad et al. (2003) The above situation brings up the necessity for the development of suitable infrastructure that will emphasize on reuse and minimum disposal, in order to cope with excessive costs and lack of information and to achieve more efficient and sustainable recovery operations (Parlikad et al., 2003). As stated by Krikke et al. (2003), product data management (PDM) may be used to maintain accurate data on complex products (many parts, variants, alternatives), record maintenance changes on a product during its lifecycle and disseminate product data at an intra-organizational or inter-organizational level. According to the same authors, PDM may be applied through applications that can provide access to different kinds of information like detection of technical failures, fuel consumption, tracking and tracing of products and packages and estimation of product parameters. Krikke et al. (2003), also mention some tools that companies are using, like chips, GIS, GPS and X-rays. Other existing systems described by Parlikad et al. (2003) are design/disassembly data sharing systems and lifecycle information systems. New technologies that aim in creating a product data repository that will have information concerning the current, past and future state of products, are using tools like electronic product code and mark-up language to describe product features (Parlikad et al., 2003). 22

23 Installed base support Krikke et al. (2003), define the installed base support as the total number of placed units of a particular product in the entire primary market or a product segment. The same authors support that installed base management is a source of information and of supplies, so that returns can be controlled and organized in a better way. Finally, through the installed base support, companies may ensure their customers about the function and quality of the products. Supporting techniques: LCA, LCC Sundin (2004) states that life cycle assessment (LCA) is a tool that can be used to calculate environmental impacts of products and processes, and as a result it contributes in making products greener. Furthermore, Krikke et al. (2003) mention that LCA may be used to calculate environmental impacts like energy use, waste volumes and toxicity, but they also support that LCA should be studied on a case by case basis. In addition, Asiedu et al. (1998) claim, that LCA focuses on the entire life cycle of a product from raw material acquisition to final product disposal of environmental emission. However, Sundin (2004) mentions that LCA may be time and cost consuming and that its software tools are often not connected to product data management (PDM) or other tools. In support of that, Asiedu et al. (1998), also state that there are scarce data for material and processes which complicate LCA and also adds that there is lack of consensus on the evaluation and the assessment of dissimilar impacts. According to Krikke et al. (2003), life cycle costing is another PLCm tool that aims in improving companies economic result, by calculating the cost of product realization, operation and recovery. Particularly, Asiedu et al. (1998) also state that LCC is a means to calculate the incremental cost of developing, producing, using and retiring a product. They further support that if LCC is considered early in the product s design phase costs can be minimized, as it is often at this stage that most of the total life cycle cost of a product is committed (Asiedu et al., 1998). What is more, Krikke et al. (2003), mention that opportunities for efficiency improvements can be identified by LCC. Customer satisfaction is another benefit that firms may rip, because LCC can aid in the production of products in the least time, at the least cost and with a minimum expenditure of support resources. Nevertheless, Asiedu et al. (1998), state that operation and support costs are difficult to predict even though they are the most significant portion of LCC Value creation through PLCm Kumar et al. (2007), state that product design is critical as it affects the performance and environmental impact of the recovery strategy that a firm may follow. Adding to that, Krikke et al. (2001) mention that designing recoverable products, allows companies to extend 23

24 service and function of products, thus improving the latter s eco-efficiency and reusability. What is more, Kumar et al. (2007) support that product design may determine the product s value of parts or components, according to the time and cost that the design requires. With the aim of engineering in PLCm, Fiksel (2003) mentions that companies may avoid delays and unnecessary costs during product development. Jayaraman et al. (1999), also claims that many firms are becoming aware that clean products and processes produce less waste for disposal and this reduces direct costs, as well as potential liability costs. Customer satisfaction is also depended on PLCm, because product attributes are decided during the design level (Krikke et al, 2001). Furthermore, Krikke et al. (2001) argue that companies can identify opportunities for improvement through the implementation of PLCm tools like LCA and LCC, as that way they can minimize costs while remaining environmentally friendly. Fiksel (2003) further states that life cycle methods (like LCC and LCA) indicate different alternatives for products human and ecological impacts, thus supporting business decisions and contributing to value creation. Table 4 pictures the benefits for companies from reverse chains. In that case PLCm is a critical facilitator as it has already been described above. Table 4: Summary of business benefits of circular supply chains, Source: Krikke et al. (2003) Trade off between cost and green A description of some of the trade-offs that companies need to make is provided by Fiksel (2003), who states that a sustainable system must consider the implications and expectations of all the participating stakeholders. For example employees may expect a safe and easy operating system, shareholders may expect an improved return on investment, and customers may expect efficacy, convenience and environmental and social benefits (Fiksel, 2003). Another issue which is more directly related to PLCm and that requires trade-offs, is the fact that products have different costs and environmental impact according to their modular structures and the recovery activities that they require (Krikke et al. 2003). However, according to Kleindorfer et al. (2005), the view that there should be a trade-off between sustainability and economic competitiveness is challenged and further state that this conflict is a false dichotomy. Adding to that, Fiksel (2003), mentions that despite the common belief that "profits need to be balanced against environmental and 24

25 social benefits, these aspects may act synergistically to the firm s value. Nevertheless, in order for companies to implement successfully a sustainable and economically beneficial system, the former need to understand the aforementioned implications and consider them from the design product phase. Propositions 1. Drivers will determine the extensity and range of the CLSC recovery operations 2. Economic and environmental values are not necessarily mutually excluded 3. Value creation is moderated by PLCm 25

26 Chapter 3 Research Methodology This paper is an explanatory research that follows a deductive approach. Particularly, theory is developed through the existing literature and is tested through a cross-sectional case study. The research tries to investigate the relationships between CLSCm, product life cycle management and value creation. These relationships are going to be explained and tested in two companies. The case study approach was chosen as many of the data needed are qualitative and non-economic. Furthermore, the target of the research is to examine the implementation of PLCm in a real life case and what kind of results this may have on the profitability and the environmental metrics of a company. As regards the literature used for theory development, it was researched through online data bases like and Tilburg s university web library. The references of the papers that were related to the topic of the research were used to find more source of information. Moreover, key words were used in search engines in order to find relative papers in the field examined. The data were collected from two companies in the Netherlands, both of which are manufacturers. One is active in the printer industry, while the second in the semi conductor equipment industry. Both industries are having high rates of products recovery, thus they were more likely to implement the operations under research. Furthermore, the comparison between the two industries could exhibit their differences. This feature makes them interesting in exploring the proposed framework and testing the formulated propositions. A case study approach was used to research how PLCm is affecting value creation in CLSC as presented above. The whole procedure of data collection and data analysis was conducted based on the theory proposed by Saunders et al. (1997) and Gibbs (2007). The data were collected through interviews (primary data) and document analysis of the annual and sustainability reports (secondary data) of the two companies. All data are coming from the companies and thus all of them are internal. One interview was conducted in each company with participants that hold the position of program and department manager in one case and asset recovery and manufacturing manager in the other. Both of them lasted about one hour and were conducted by the author. The interviews were semi-structured and were consisted of three sections that were covering aspects of CLSC, PLCm, and Economic- Environmental value. Some example questions are: Which values are involved in your recovery operations and which ones do you consider the most important?, What kind of recovery options do you implement?, Do your products have reusable parts? If yes, do they have modular design so that reusable materials can be exploited again? and Did you 26

27 manage to achieve savings on purchasing?. Follow-up questions were asked when necessary to go deeper into the subject. The interview questions are presented in Appendix 6. The interviews were recorded and transcribed and the data were put into a coding matrix, which is categorized according to the central elements of the study. The same procedure was repeated twice for each interview to verify that all the information was under the right category and subcategory. These categories are CLSC, values and PLCm and are further divided into subcategories as it can be seen in appendix 5. After the analysis of the primary data, careful analysis was also carried out for the secondary data, in order to make comparisons and confirm the information obtained through the interviews. Notes and summaries were made for all relevant chunks of secondary data that could fit to the research. The above information was eventually used to find out similarities and differences between the two cases, as well as to test the theoretical framework. In turn they were sent to the interviewees, in order to check the accuracy of the data. 27

28 Chapter 4 Results This part is providing the findings from the two companies. More particularly, the primary data are combined with the secondary ones and in turn these are connected to the theoretical part, following as a structure the labels of the coding scheme that is provided in appendix 5. Case Oce Oce is a multinational company founded in Its headquarters are situated in Venlo, The Netherlands, it is active in approximately 100 countries and employs some 22,000 people worldwide. Oce is one of the world s leading providers of document management and printing for professionals. The broad Oce offering includes office printing and copying systems, high speed digital production printers and wide format printing systems for both technical documentation and color display graphics. Furthermore it is a foremost supplier of document management outsourcing. Oce is active in the entire value chain of printing systems: from development via manufacturing, sales and service to the provision of business services and financing, while specialized distributors provide part of the product range where Oce does not have a sufficiently large presence. Through its own Research & Development department, Oce develops its own basic technologies and the majority of its product concepts. Case ASML ASML was founded in the Netherlands in 1984 and its headquarters is in Veldhoven, the Netherlands. The company s manufacturing sites and R&D facilities are located in Wilton, Connecticut and Richmond, California in the United States and in Veldhoven, the Netherlands. Technology development centers and training facilities are located in Japan, Korea, the Netherlands, Taiwan and the United States. Additionally, ASML provides optimal service to its customers via over 60 sales and service organizations in 15 countries. ASML is a world leader in the manufacture of advanced technology systems for the semiconductor industry. The company offers an integrated portfolio for manufacturing complex integrated circuits (also called ICs or chips). ASML designs, develops, integrates, markets and services advanced systems used by customers the major global semiconductor manufacturers to create chips that power a wide array of electronic, communication and information technology products. 28

29 4.1. CLSC Operations Krikke et al. (2003) and Parlikad et al. (2003) illustrate the recovery operations in a multiloop product life cycle which are reuse, repair, refurbishing, remanufacturing, cannibalization, recycling and disposal. Furthermore, Krikke et al. (2003) describe the recovery activities that can be implemented in reverse logistics. These include collection, inspection/separation, re-processing, disposal and re-distribution. Most of the above operations are implemented in the studied organizations. Oce The interviewee supported that Oce is implementing remanufacturing, refurbishing, upgrades, reuse, repair, recycling and disposal. That is supported in Oce s sustainability report, which mentions that the company is trying to reduce the impacts of manufacturing activities on the environment by implementing asset recovery and reuse. Through its asset recovery facilities, Oce can create a constant stream of parts and units suitable for reuse as service parts and in new machines. According to the interviewee, parts are first repaired and then they are being put back in the system. Moreover, the responder added that the company implements a complete package of remanufacturing and refurbishing, where machines are processed and then are delivered back to the customers. Finally, parts that can be recycled are being dismantled, according to the legal requirements and with a focus on high value. Adding to that, the report states that when remanufacturing is no longer feasible from a quality or economic point of view, machines are completely disassembled and waste material is carefully sorted and offered for recycling to Oce s certified waste processing partners. These waste materials can be used to produce high-quality products again. As regards the activities that take place in the company, these according to the responder, are collection, inspection/separation and re-processing. The process begins with the collection and in turn machines and parts are inspected by experts in order to find out whether they are worth recovering. Finally, the products and parts that will continue in the processes are being put back in the manufacturing process and after the final repairs, tests and adjustments, they are functioning at the same quality as new. ASML The responder mentioned that ASML implements mostly refurbishments by working on a certain project and its specifications. More specifically, refurbishment involves the replacement of modules or parts that are broken or do not conform to the right specifications, while the rest of the parts remain on the product. Furthermore, it implements remanufacturing but less frequently than in the past. The interviewee mentioned that during remanufacturing the item is dismantled and is rebuilt completely through a rework process 29

30 on modular level, according to the latest specifications. Other recovery operations that take place in ASML are upgrades, scrap, direct shipments from one customer directly to another and field refurbishment, which differs from simple refurbishment, as the product will not come back to the factory and will be covered by customer support in the field. The above are also supported from the sustainability report of the company, according to which, ASML upgrades, rebuilds and refurbishes systems. The latter will in turn be sold in good condition with modified specifications. The financial report further mentions, that in a typical year ASML rebuilds or refurbishes 30 to 50 machines via both factory and field refurbishment projects (23 systems were refurbished during the downturn year of 2009). Indicatively, ASML moves each year more than 100 machines (approximately three percent of the installed base) at customers request. That means that an unchanged system is moved either at a customer s site, between customer sites, or between customers. The above processes have different levels and include several inspection checks. More particularly, the operations begin with level zero inspection, looking at the availability and data for the items and continue with data analysis to find out the possibilities for the inspected items. In turn, checks at the previous customer are taking place, while the last inspections are carried out when the system is returned, during which experts make quality checks on parts and modules. The report adds that ASML s manufacturing activities comprise the subassembly and testing of certain modules and the final assembly and fine tuning / testing of a finished system from components and modules that are manufactured to its specifications by third parties and by ASML Drivers Environment, Economics Beamon (1999) supports that consumers, are becoming more environmentally aware, thus driving supply chains to greener ones. In addition to that, Jan wu et al. (1995), state that CLSC can help companies reduce the cost of resources, while de Brito et al. (2002) argue that recovery operations impact competition. Oce According to the interviewee, there is a demand for green products which is slowly evolving. Oce customers often ask questions about sustainability issues, like reuse and recycle percentages as they are getting more aware. Greenpeace is indicatively among the customers in Belgium. Furthermore, besides the environmental reasons for getting involved with product recovery, there are also economic reasons. More particularly, Oce is able to retrieve cheaper parts than new, thus having an alternative source of materials. That way, the company can manage not to be completely dependent on suppliers and to ensure that 30

31 customers can be served in case of unexpected events. Finally, through product recovery Oce can consider end of life issues. ASML According to the responder, the strongest motivation for ASML to involve into recovery operations is the economic one. More specifically, the company is able to retrieve parts from its installed base, which is cheaper than buying new parts, thus lowering its costs, while the quality and specifications can be at the same level. In addition, there is some demand for recovered products, as there are customers that ask for them. As stated in the sustainability report, many mainstream manufacturers prefer to buy used systems when they need to add capacity for their more mature technology products. In addition, it is mentioned that the company also provides customers with factory refurbished machines that are customized for their application with full warranty but are more cost-effective and more resource-friendly. Moreover, as regards the spare parts that are used by the installed base, ASML has a repair exchange program that enables recycling of used parts, thus saving costs and reducing scrap. ASML is technically driven company and is focused on providing the most profitable latest high end technology. Because of that focus, environmental value is not in the center of the above operations. However, ASML takes into account environmental considerations, when this is feasible. Legislation According to Jan Wu et al. (1995), legislation affects companies sustainability policies through regulations and guidelines. Moreover, funding programs can be provided by governments (Darnall et al., 2008). However, Hall (2008) points out the drawbacks of legislation which can hinder environmental policies. Oce The responder stressed the importance of legislation in the closed loop supply chain, the role of which can be vital but also contradicting in some cases. Particularly, there are laws like REACH, RoHS and WEEE which are forcing companies to comply with specific standards. As mentioned in its sustainability report, Oce is trying to reduce the emissions and carbon footprint of its products and it complies with the above regulations and guidelines on sustainability. In addition, Oce is responsible for the take back of their products, although more parties can be involved depending on the market and location. Furthermore, some subsidies are provided for the development of environmental projects. One example is presented in the sustainability report, according to which, Oce was granted with over 20 million over two years for leading a consortium regarding the development of new printing platforms based on advanced inkjet technology for fields as varied as displays, solar cells, packaging and security tags. 31

32 However, the interviewee stated that legislation can sometimes be contradicting. Indicatively, it was mentioned that reuse can be blocked by legislation, as the government does not allow reuse from an old system which is not RoHS compliant. As a result, new parts have to be used, which can be double the CO2. Except for legislation, the responder mentioned some labels which are given by organizations for products that comply with environmental standards. Indicatively, Oce introduced the Premia class printer which has an eco-label. Moreover, the sustainability report refers that Oce was also certified for quality (ISO 9001), environmental (ISO 14001) and occupational health and safety (OHSAS 18001) management, as well as with the German Blue Angel program. ASML The sustainability report mentions that ASML follows the SEMI guidelines for its systems and is actively involved in SEMI regulations, while it voluntarily works on implementing the RoHS and REACH restrictions for materials. In addition, ASML applies for subsidy payments in connection with specific development projects under programs sponsored by the governments where it operates. Moreover, according to the report ASML has been certified with ISO 14001, which covers all worldwide activities and locations, including marketing, design, sales, installation, product support and manufacturing of wafer steppers, scanners, optics and customized lithographic equipment Barriers Some of the barriers of CLSC that Guide et al. (2003) mention are the need to balance demands with returns, the need to disassemble the returned products and the complication of material matching restrictions. Furthermore, Prahinski et al. (2006) mention that lack of information about the products at the consumer or retail level is another problem that companies have to encounter. Oce As stated by the interviewee, interference of the government which provides support in developing environmental awareness and legislation is important, as there are many customers and they cannot know who has bought what. It is difficult to have the means to get items back and as mentioned by the interviewee you can be totally lost without the aid of the government (like for example creation of collection points). Another difficulty that the company has to deal with, concerns the upgrades of systems up to the standards of new ones, when the latter have new features which are not necessarily compatible with the first one. For example information about repairable parts can be difficult, as the company may get different kinds of parts which require different repair operations. In some cases, changes 32

33 cannot even be implemented if the change in the frame of the system is significant and therefore interface with R&D in an early phase of the design is essential. Finally, information about returns can never be accurate and as a result this information is also based on expectations about returns. ASML According to the interviewee, getting the information from the market on time is a first barrier. What is more, recovery operations require more capacity and inventory, while the company tries to have the lowest inventory possible. In other words, there is a need to balance the inventory according to the refurbishment needs Values Economic value Srivastava (2007) supports, that companies can retrieve the material content of used products and reclaim their value at their end of life through the implementation of recovery operations. That way according to Wu et al. (1995), companies can reduce costs as they reserve resources, energy and materials. The same authors argue that green markets that are created through CLSC are opening opportunities for companies. This is supported by Guide et al. (2000), who state that recoverable manufacturing operations account for total sales in excess of $53 billion per year. Oce Oce has realized the economic value of CLSC and is perceived as the most important one. To begin with, the responder stated that since customers are becoming more aware of environmental issues, there is an evolving demand for these products and the margins of used equipment are at least in line with new products because of the low cost prices. Particularly, according to the responder, the cost price of recovered systems can be significantly cheaper than the new ones. Furthermore, besides the low cost price, recovered products are competitive because of the quality guarantee that Oce provides. Another economic benefit that the company can rip through its recovery operations is that it can have a second sourcing, which gives Oce the chance, to get cheaper parts and save costs on purchasing, to exploit end of life opportunities and to have a second supplier in cases of unexpected events and of suppliers unwillingness to deliver. The interviewee presented the example, that in case of machine brake down it can take a longer time to purchase the defective part, whereas Oce can deliver it in a few days. Moreover, according to the respondent, the investment for sustainability can pay off rapidly if it is implemented gradually, as economic and environmental value go hand in hand. 33

34 ASML ASML uses recovery operations as a supportive process and not as a core one. However, the company has realized the economic value that is hidden in these operations and that there are profits in it. More particularly, the responder mentioned that the recovery operations impact on the timing to create a product, on the cost of materials, on the whole production plan and eventually on the profits of the company. Moreover, used systems are cheaper and their margins are according to the company s targets. Adding to that, customers can be satisfied when they can get refurbished systems with the same quality and specification of new ones with faster time delivery. According to the annual report there is a market demand for capacity, expressed by customers, which drives ASML to repurchase systems that it has manufactured and sold. After the implementation of factory-rebuild or refurbishment, it resells these systems to other customers. Another important economic benefit that was mentioned by the responder is that through its recovery operations, ASML can use its own installed base as a supplier of cheap parts, thus offering flexibility and lowering purchasing costs for the company. This could be indicated in the report, which states that in 2009, approximately 26% of the aggregate cost of sales was purchased from ASML s sole external supplier of main optical systems and one of the suppliers of other components, which was lower than the percent of the previous years (2008: 32%; 2007: 40%). Furthermore, the cost of inventory was decreased, while the raw materials were increased. In addition, the cost of system sales which comprise direct product costs such as materials, labor, cost of warranty, depreciation, shipping and handling costs and related overhead costs was decreased in comparison to the previous years. The above data are presented in Appendix 4. Finally, according to the interviewee, the investment for recovery operations has paid off Environmental value According to Wu et al. (1995) the total waste on the system can be minimized as recovery operations result in the reduction of sources used by companies, while Rogers et al. (2001) support that the above activities can save great amount of raw materials. In addition, Guintini et al. (2003), argue that remanufacturing can reduce significantly the energy consumption and emissions that are produced during the operations. Oce Environmental value is important for Oce. More specifically, the interviewee stated that the reused systems may emit half of the CO2 of a new system and require fewer materials. This is also mentioned in the sustainability report according to which during remanufacturing approximately 85% of the weight of the machine is reused, while the CO2 footprint is almost half of that of a newly-produced system. Moreover, it is mentioned that Oce implements remanufacturing on machines, units and parts in order to decrease the need for virgin 34

35 materials and the energy used in the production. As shown in the report, the company has set as a target for reused parts to be more than 20% in the Oce s developed products by This target was achieved ahead of schedule, as the company s use of materials for products amounted to 4.5 kilotons, 22% of which consisted of reused materials (16% in 2008). Moreover, Oce refurbished approximately 12,000 service parts (150 tons). The increase is a result of optimizing Oce s remanufacturing activities. Furthermore, the interviewee supported that the company manages to reduce its energy requirements, its waste and the consumption of paper which is significant in the case of printers. These data are further supported in the sustainability report, according to which Oce has managed to make significant improvements on that field. More particularly, the sourced volume of recycled paper was decreased by 3%. Furthermore, Oce is improving the way it uses packaging and has managed to pack 15% more items onto each shipping pallet, thus reducing the number of pallets and shipments. In addition, the company has marketed a paper which is produced carbon neutrally in order to reduce the CO2 emissions, while Oce s R&D department in Germany managed to reduce the consumption of paper up to 650 tons in 2009 through an active saving program, which represents a 30% saving in total paper consumption for the department. As regards the energy consumption, the report mentions that 7% of the total amount of energy consumed by Oce was derived from sustainable sources (renewable electricity, heat/cold storage, etc). In 2009, the total amount of electricity purchased for the Oce manufacturing sites totaled 60 GWh (106 kwh), 12% of which was sourced from renewable sources. The report further mentions that the company is trying to reduce the total energy costs of printing through the use of remanufactured parts, modules or completely remanufactured systems which further reduces energy consumption in the production process. In addition, printers which are not in continuous use and have low energy consumption have been produced, like the Oce Radiant Fusing technology which requires no warm-up time and immediately after finishing a job, the printer automatically goes into a low energy mode. Oce has also launched a series of smart products, which are energy efficient. As regards the total amount of hazardous and nonhazardous waste, that was also decreased reaching the amount of 10.8 kilotons in Finally, in 2009 the scope 1 (direct) emissions totaled 43.7 kilotons CO2e and the scope 2 (indirect) emissions totaled 44.5 kilotons CO2e. The above information is shown in appendix 1 in comparison to the previous years. ASML ASML also realizes the environmental value in its recovery operations, although this is not the main driver for the implementation of the above operations due to the nature of the company. Nevertheless, according to the interviewee, ASML takes into account environmental considerations and tries to reduce the toxicity and the use of heavy metals. Furthermore, the company is collaborating with suppliers of parts and modules that have 35

36 specific environmental targets, thus ensuring the minimization of hazardous materials and energy requirements. Adding to that, the sustainability report mentions that the key suppliers of ASML have an Environmental Management System that includes a documented environmental policy, waste disposal policy leading to maximum recycling and environmentally responsible disposal, an active policy for achieving energy savings and periodic internal environmental audits. In addition, through the reuse of parts, fewer materials are used in the system. Furthermore, according to the company s report, ASML has set targets for the future regarding the CO2 emissions, the use of renewable energy resources, waste reduction, recycling of non-hazardous waste and recycling of products and modules (recyclable/renewable materials, tracking of systems, refurbishment/recycling process). More specifically, it is mentioned that smaller resolution (shrink) chips are produced that use less energy and resources, while more efficient scanners are introduced with improvements that are also retrofitted in older models. Indicatively, improvements in the existing architecture of products has resulted in a reduction of energy use, which can be up to 15% for the KrF and ArF product families us it can be seen in the graphs in appendix 3. Further reductions in energy consumption were achieved in the productions sites, as fuel decreased by 12.8%. However, the total energy consumption remained at the same level in 2009 compared with 2008, due to expansion in production facilities. That is also the reason for the increase in CO2 emissions by 4%. However, ASML decreased the NOx emissions in Veldhoven about 14.1%, from 54 x 103 kg to 45 x 103 kg. Moreover, ASML plans to recycle 90% of non-hazardous waste by 2015 (2009: 52%) by introducing improved recycling systems and redesigned packaging, while in 2009 the company recycled 79% of hazardous waste, and the target is to recycle 80% by More specifically, non-hazardous waste materials decreased by 29% in 2009 compared to 2008 and hazardous waste also decreased by 21%, while ASML s total waste disposal decreased by 27.9% in The above information can be found in appendix Product life cycle management Product design for X (DfX) Sundin (2004) mentions, that careful product design can influence the environmental and economical performance of recovery activities. Kimura (2001) adds that product design should be adjusted to the particular product s usage mode or life cycle scenario, while modularization is important in order to cope with product s specific requirements. According to the same author, modularization is the process during which components are merged into modules and this influences the product s functionality, performance and cost. Furthermore, Krikke et al. (2003) stress the importance of modularization in order for components to be compatible during the configuration of different product types. In addition, they argue that specification is vital so that sub-functions can act coherently and state that the principles 36

37 that should be followed are: components should be reusable, cross generation compatibility is required and value separation must be achieved by containing parts in different modules. Oce Oce seems to follow the above principles. More particularly, the company is implementing product life cycle management beginning with careful consideration of the product from its design phase. The company perceives product design to be very important, as it is at this phase that it can have an impact on the reuse for the coming ten years. As stated by the interviewee, if you do not do anything in the design phase you can only recover maximum 15-20% of the opportunities within the product and that can be luck, whereas if there is a careful consideration from the beginning, the company can gain a lot more added value in the future. Oce designs its products in a way that they can be fully reused or recycled and that can reduce their environmental impact (like for example savings on the use of paper and energy consumption). Particularly, the company follows a platform approach in the design of its systems, using different modules that make up the final products. These modules are considered from the beginning of the life cycle in order to be compatible not only with the same type of products but also with different ones. In other words, Oce also looks into the compatibility of different modules and into product specification. Moreover, as a next step the company is oriented towards reducing the number of platforms to create more opportunities in the future. The Oce Premia Class is perceived by the company to be the best example of design-forreuse. According to the sustainability report, the premia class products are fully remanufactured from end-of-life products to give them a new lifecycle and reduce waste. Its production process is described as follows: Every Oce Premia Class system is built to order and undergoes a rigorous multi-point certification process, at the component and system level, by engineers and technicians. Each system is individually inspected, measured, calibrated and checked for compliance with original specifications. This process guarantees the same quality as a newly-manufactured Oce product. ASML The responder stated that the products of ASML have modular design and are consisted of parts that can be used again according to the right specifications. Furthermore, there is compatibility between these modules especially within the same platform. Indicatively, about 20% of the parts can be replaced. ASML s sustainability report mentions that product development strategy focuses on the development of product families based on a modular, upgradeable design. It is characteristic that the systems are based largely on two product platforms that permit incremental, modular upgrades. The report further states, that the modular design facilitates the recovery operations, as key modules can be removed from the 37

38 system and be sent for rework. After refurbishment has taken place, the modules are reinstalled on the system. In addition, systems can also be converted or rebuilt into a new model. The responder added that due to the modular design, processes can be more efficient which can in turn affect the price of the product Re-engineering According to Krikke et al. (2003) re-engineering involves the improvement of product quality and reducing the use of material and labor resources in the forward chain by learning from returns. Girczyc et al. (1993) further mention that engineering includes considerations over the performance, the cost and the quality of parts in order to make design for reuse successful. The same authors also add that this can result in the reduction of fixing costs, avoidance of losing valuable time, protection of reputation, decrease in design time and evaluation of product opportunities. Furthermore, Girczyc et al. (1993) support that through design for reuse, companies can exploit performance characteristics of previously designed components, thus eliminating unexpected surprises and improving performance, correctness and predictability of products. Oce Oce has an R&D department which is in charge of creating the products according to the right specifications and environmental considerations, as well as an asset recovery department which is responsible for creating maximum reuse of returned assets. The quality and service of the recovered products is guaranteed to be at the same level with the new ones after the necessary modification have taken place. According to the interviewee there are technical standards for R&D, which are restrictions and guidelines for product development, for the design of life cycle management and for the recovery activities. In support of these, the report mentions that sustainability considerations are at the core of Oce s approach to R&D involving work to reduce energy consumption, unnecessary prints and emissions. Furthermore, it is mentioned that current R&D strategy also involves creating innovative products based on existing technologies, both those developed within Oce as well as by strategic partners, by maintaining close cooperation with the latter. This approach not only avoids reinventing the wheel but is also providing access to areas where existing technology can be used in completely new applications. The interviewee presented the example of one printer that in order to make a copy the machine should be heated up twice. As a result in order to reduce the energy consumption, a new machine was made which needs to be heated up only once to make a copy. ASML ASML has production and development engineers that are responsible for the refurbishment process. More particularly, the interviewee mentioned that these engineers are in charge of the development and refurbishment of products in order for the latter to meet the 38

39 necessary specifications, to have the highest quality and reduce the time to the market. In support of that, the sustainability report states that research and development programs aim in the timely completion of product development, design and introduction of new and enhanced systems. Indicatively, it is mentioned that in 2009 R&D efforts drove further development of the several versions of the TWINSCAN platform, which was driven by customers for cost reductions. This led ASML to increase significantly the commonality of components across different TWINSCAN platform versions and to an improved version of TWINSCAN platform called NXT, which provides improved imaging and overlay performance Product data management Parlikad et al. (2003), mention that after the point of sale little information exist about the product s identity, components or current state. However, according to Krikke et al. (2003), product data management can help companies maintain accurate data on complex products (many parts, variants, alternatives), record maintenance changes on a product during its lifecycle and disseminate product data at an intra-organizational or interorganizational level. Oce According to the responder, the company has its own knowledge management system, in order to acquire information for the recovered products. More specifically, Oce keeps track of its inventory, which is an important source when they want to have systems back for reuse. In addition, through its information system Oce can have good information about the expected returns of machines, the expected systems to be refurbished or remanufactured and the expected machines to be put back in the market. Furthermore, the complete return flow of parts is managed by the company s system, where repairable parts are identified and after they are being exchanged, returned orders are made automatically and finally the parts are sent back. That way, the company is able to know information such as which parts are returned, rejected or accepted. However, information about repairable parts can be difficult, as the company may get different kinds of parts which require different repair operations. ASML The recovery operations of ASML are facilitated by its information systems. More specifically, there is a business system with data bases that store information like technical and cost data. Furthermore, according to the responder, there are checklists that contain the necessary specifications and courses of action. 39

40 Supporting techniques: LCA, LCC LCA According to Krikke et al. (2003), LCA is a tool used to calculate environmental impacts like energy use, waste volumes and toxicity and as stated by Asiedu et al. (1998) it can focus on the entire life cycle of a product. Oce Oce implements life cycle analysis for the new products, in order to calculate the environmental impact of them and of the processes. The company measures environmental indicators like energy use, waste volumes and paper consumption of machines. However, the interviewee does not consider LCA to be the right analysis, as it normally focuses on the first life cycle and not on the whole life cycle of the product. ASML ASML does not implement life cycle analysis to measure the environmental impact of the products. However, there is a separate process and specific department that is involved with environmental matters. LCC Asiedu et al. (1998) describe LCC as the tool used to calculate the incremental cost of developing, producing, using and retiring a product and further state that it can minimize costs if it is considered early in the design phase of a product. Moreover, Krikke et al. (2003) support that through LCC companies can identify opportunities for efficiency improvement. Oce Oce implements life cycle costing for the new products, in order to calculate indicators like cost of ownership and percentage of used materials. The responder mentioned that the consideration of that kind of analysis is also focusing only on the first life cycle of the product. However, the company is now trying to achieve better consideration on technical and cost aspects of the product from its design phase until its next 3 or 4 life cycles, in order to have a broader view on total life cycle of the cost of components and to identify new opportunities. ASML Life cycle costing is also not implemented in ASML. Instead, the company uses its business system to calculate costs like cost of parts, hour rate and final costs. Furthermore, some cost analysis is implemented and opportunities are assessed at some point in the life cycle depending on the case. 40

41 Chapter 5 Discussion and Conclusion 5.1. Discussion This section is discussing the findings of the above results and tests them with the theory. Moreover, the propositions are tested whether they are confirmed. The researched companies seem to have some differences and similarities in the way they implement the recovery operations, their perception about value extraction and the importance of PLCm in this procedure. Proposition 1: Drivers will determine the extensity and range of the CLSC recovery operations Both companies implement most of the recovery operations, although there are differences in the perception of their importance and in the way of implementing them. More particularly, Oce seems to consider them as a significant part of the company s operations, while ASML uses them as supportive to the core ones, although it recognizes their importance. Furthermore, Oce implements a broader range of recovery operations than ASML which focuses mostly on refurbishments. However, both of them are following all the steps that are required for each operation. Furthermore, both companies seem to be motivated from similar drivers in order to involve in the above operations. The most important one is the economic reason as stated by both interviewees. More specifically, both companies argued that recovery operations offer a cheap alternative source of materials and a way to lower their costs. Furthermore, in the case of Oce, the margins of used products are at least in line with the new ones. Moreover, both organizations perceive recovery operations as a way to expand customer satisfaction, since there is a growing demand for green products, while this demand is greater for Oce. Another motivation for CLSC is related to environmental considerations. In the case of Oce, there are environmental reasons for indulging into recovery operations, as customers ask questions about environmental issues and because the company has realized that the environmental burden of their products can be decreased through these operations. ASML is also considering environmental issues, but it is not of the same importance due to the different nature of its products and its market. However, the company is active in trying to minimize the environmental impacts of its operations. Another key driver for CLSC is the legislation, as mentioned by both companies. In essence, legislation can affect the way a company operates, by setting regulations and guidelines, which must be followed. Oce has to deal with a broader range of regulations due to the nature of its products. 41

42 The above prove that in accordance with the literature review there are different reasons why to involve into recovery operations, with the most important being the economic one. Both companies realize that there can be economic benefits and this makes it their first motivator. The environmental value is also important, driven by pressures for environmental concern and the slowly evolving environmental awareness. Finally, the role of government can be vital as it can have direct influence (both positive and negative) in the way companies organize their operations. The above information confirm proposition 1 as from the two studied cases, it seems that Oce has more reasons to involve into the recovery operations and thus it considers them as more important and implements a broader range of operations than ASML, which perceives them as supportive operations to the core ones. This is logical because Oce has a more expanded green market, it is more concerned with the environmental issues and has more regulations to follow, which eventually motivate the company to organize a more extensive and broader range of recovery operations. Some barriers exist in the CLSC of both companies. More particularly, Oce has to encounter the complication of material matching restrictions and the difficulty in acquiring accurate information about returns. As regards ASML, the company has to deal with the problem of getting information on time and finding the right balance for the inventory that is necessary for its operations. The differences between the two companies can be attributed to the way they organize their operations and the different needs and difficulties that their products contain. Proposition 2: Economic and environmental value are not necessarily mutually excluded Both companies seem to realize the values that are laid in CLSC. The economic value is the most significant one for both of them. More particularly, both responders mentioned that through recovery operations their companies can have a second sourcing for cheaper parts, thus lowering their costs on purchasing, having more flexibility and exploiting new opportunities. Furthermore, in both cases there is a demand for used products and in the case of Oce the margins of these products are at least in line with the new ones. This makes them competitive considering the fact that their quality can be at the same level with the new products. All in all, both Oce and ASML seem to realize that through CLSC they can achieve profits and lower their costs. The above information is in accordance with the literature review and proves the potentials that CLSC endorse. In the above cases, the companies have realized that a life cycle approach can help them retrieve the value from products that are taken back by implementing recovery operations. They also seem to be able to recapture a percentage of the total original cost if we consider the above cost savings that they have both achieved. 42

43 Eventually, the economic benefit seems to be the main driver for CLSC and the main result that companies are pursuing through it and as stated by both interviewees the investment for sustainability is one that pays off. The second value that both companies discern in the CLSC is the environmental one. More specifically, they are both taking actions to decrease the total waste in the system and to use less virgin materials. Moreover, they are trying to reduce the CO2 and energy requirements and to increase the number of reused parts and modules. In both cases this is happening either on a company level or at the product level. As regards the latter case, Oce is trying to ensure the environmental performance of its products from the design phase until they are fully recovered. This further, lowers the energy cost and consumption in the whole process. Indicatively, as mentioned in Oce s sustainability report, during remanufacturing approximately 85% of the weight of the machine is reused, while the CO2 footprint is almost half of that of a newly-produced system. On the other hand, ASML is achieving that mostly by collaborating with suppliers of parts and modules that have specific environmental targets but also through improvements in product design, thus ensuring the minimization of hazardous materials and energy requirements. The above prove that both companies are aware of the environmental value even though the main driver for CLSC is the economic one. In other words, both of them understand that recovery operations give many opportunities to operate in a more environmental way and that this is related to the economic results. The fact that they both set targets and seek new opportunities proves that environmental considerations are always an important topic. The above information confirms proposition 2, as the studied organizations have realized both the economic and environmental value. This in accordance with the view presented in the theory according to which, a trade-off between the economic and the environmental value is not a necessity. Furthermore, their investments on sustainability have been paid off and they have already seen positive economic and environmental results. This proves that economic and environmental values are not necessarily mutually excluded. Proposition 3: Value creation is moderated by PLCm Product life cycle management is implemented by both companies and it is an important part of their CLSC. More specifically, both Oce and ASML follow modular design for their products, using reusable modules and parts which make up the final product. These modules and parts are compatible not only within the same type of products, but also with different ones, thus facilitating the recovery operations. Except for the compatibility of different modules, both organizations look into the compliance of their products with the right specifications. The above companies perceive design phase to be vital, as it is at this phase where they can affect the reuse and price of products. Oce further believes that 43

44 environmental impacts of products can also be determined in that phase, while ASML regards that processes can be more efficient due to the modular design. The above information supports the literature review, according to which modular design is necessary so that there can be compatibility of components and so that value separation of these modules can be easier, thus improving products eco-efficiency and reusability. In addition, specifications ensure that the sub-functions can act coherently. That way companies can reduce manufacturing cost through the use of fewer materials in the production process and save energy without sacrificing quality. All in all, the above two cases confirm the impact of product design on costs, environment, performance and recovery operations. Furthermore, both companies have a research and design department which is in charge of the development of products according to the right specifications. This ensures that the quality of these products will be at the same level with the new ones. R&D aims in the creation of new, innovative or enhanced products, which can be based on existing technologies, thus reducing the development time and the time to market. The above are in line with the theoretical framework, as re-engineering involves the improvement of product quality by learning from returns and by exploiting performance characteristics of previously designed components. Both companies give support to the belief that R&D helps to avoid losing valuable time and protect their reputation, to decrease design time and get their products faster to the market, to plan product introduction and to evaluate product opportunities. An important part of PLCm is product data management. Both companies have information systems in order to facilitate their recovery operations. Through these systems, they keep information regarding their products and their recovery, like for example cost, technical and inventory data. They can also have an insight on the expected returns, product specifications and courses of action. These are in line with the theoretical part according to which, a suitable infrastructure is necessary in order for companies to cope with the lack of information and to achieve more efficient and sustainable recovery operations. Product data management (PDM) may be used to maintain accurate data on complex products, record maintenance changes on a product during its lifecycle and provide access to different kinds of information like detection of technical failures and estimation of product parameters. This is observed in the studied companies. Life cycle analysis (LCA) and life cycle costing (LCC) are two supporting techniques for the PLCm. These two tools seem to be a missing for both companies, as Oce is implementing them but not widely, while ASML does not implement them at all. As regards Oce, it is calculating cost and environmental indicators mostly for new products, but the company does not consider it to be the proper analysis. This is because, according to the interviewee, these techniques are focusing on the first and not on the whole life cycle of the products. 44

45 Furthermore, Oce recognizes the importance of LCC in having a broader view on costs and in identifying new opportunities. On the other hand, as regards ASML, the calculation of products environmental impact is implemented out of the PLCm from a specific department that is involved with these matters. Costs are also calculated and opportunities are assessed at some point in the life cycle depending on the case. From the above we can conclude that both companies are motivated to calculate costs and environmental impacts of their products, but not through a system integrated in the PLCm. The theory agrees that there are difficulties in the implementation of LCA and LCC, however they should be part of PLCm so that companies can be benefited from it. More specifically, the consideration of these techniques from the beginning of the product design could probably reveal more opportunities for the companies, as they aid in making products greener, in the least time, at the least cost and with a minimum expenditure of support resources. Although the examined companies do not fully implement LCA and LCC techniques, it is proved that PLCm has a direct positive influence on their products eco-efficiency, cost and reusability. Therefore, proposition 3 is confirmed. Furthermore, the theory has shown that through PLCm companies are able to reduce their costs and environmental impacts and identify new opportunities for efficiency improvements. That was also confirmed from the two case studies, according to which both companies have moderated their value extraction in their CLSC, through the aim of PLCm. To conclude all three propositions of the paper were confirmed in this case study. The drivers of CLSC seem to directly affect the way companies organize their CLSC recovery operations with the economic driver being the most important one. The CLSC creates additional value, both economic and environmental, for organizations, values that as it has been proved, are not necessarily mutually excluded. Finally, it was confirmed that the implementation of PLCm helps companies achieve a more optimal value extraction and thus it is important for the success of CLSC. According to the author s opinion, CLSC is the future and the extension of the forward chains. It is a relatively new field but it is very promising and it encloses added value for companies as well as for society. Taking a broader perspective on the role of organizations, we have to recognize that companies are part of the society and as a result their economic wealth should be in line with their corporate responsibility. The drivers of CLSC motivate companies to change for greener operations. Legislation is influencing this change but its role can be contradicting sometimes, while different countries have different laws which can further complicate the situation. However, there are also economic and environmental drivers which lead to the respective values. The key in that case is that the economic (which is the main driver for indulging into recovery operations) and environmental values go hand in hand and this should be realized by companies. The PLCm is the means to extract the 45

46 maximum of these values by organizing better the CLSC and by considering the whole life cycle of a product from its design until it is recovered and being put back in the forward chain to extend its remaining value. The author believes that companies should not regard this as an extra cost. On the contrary, as declared by both studied companies the investment for sustainability pays off. Another important point is that the implementation of recovery operations could be adopted in the operations of every company. The two examined cases are a good example of this view, as in the case of ASML where recovery operations are supportive to the core operations, there are still benefits for implementing CLSC. This shows that there is always a way of improving organizational operations, regardless of the extensity and range of the implementation. A proper PLCm is able to help companies be proactive and show them the way to detect new opportunities, minimize costs and improve their ecoefficiency Limitations and future recommendations This study aims to reveal the importance of PLCm in facilitating value extraction in a CLSC. Theory was used to identify the drivers and barriers of CLSC, the values that can be discerned, the components of PLCm and their interrelationship. Two cases were chosen to test the theory which concern large size enterprises that are pioneers on that field and have already relative experience. This research presents the drivers that are described in existing literature and goes one step beyond to prove that these drivers can affect the way of organizing a CLSC. The present findings provide a guide for companies, as they can aim in a more in depth understanding of CLSC and PLCm. More particularly, it is proposed that companies should research the drivers for the implementation of their CLSC. That way they can determine the range and intensity of operation activities, considering how they are going to set up the investment and the whole procedure by satisfying all involving parties, from the managers up to the customers. This paper suggests that all companies can eventually implement recovery operations by closing the loop, regardless of the intensity. However, understanding the importance and role of CLSC and its drivers is vital, in order to determine and realize all management decisions, costs and environmental parameters that affect the implementation. A second implication concerns the realization of both the economic and the environmental values that are endorsed in recovery operations. The findings of this study support previous researches, which stress the existence of values in CLSC and it goes further by resolving the conflict of the trade-off between the economic and environmental value. More particularly, a failure to exploit the full potential of the recovered product may lead to inability to extract the optimal value which in that case will erode, or even lead to significant loss of profits. Finally this paper has shown the moderating role of PLCm in achieving optimal value creation and suggests that companies should follow its principles. Consequently, an implementation of all 46

47 key issues and tools of PLCm as described in the theory is vital for a successful CLSC. It is important to mention that LCA and LCC which seem to be a missing in the examined cases of this paper must be taken into account as they can affect both the economic and environmental performance of products. Due to the limited number of cases and respondents, the results of the study do not allow generalization and consequently they should be carefully interpreted. In addition, the triangulation of the data is not particularly strong due to the limited number of interviews that were conducted. What is more, it should be noted that a number of management decisions as well as economic situations like the recent economic crisis may affect the implementation and the success of PLCm and CLSC which are not examined in this paper. Furthermore, the study is cross sectional, which means that the above findings depict a picture of the two companies at one point in time and not necessarily a permanent situation. As a result a more in depth research is required in order to draw safer conclusions regarding the specific industries and size of companies. Perhaps a longitudinal research design could reveal valuable information concerning the different stages of the whole implementation of the examined processes. This further creates new questions regarding the application of these findings in different industries and in companies with less experience on that field, where returns can encounter more barriers and require a different approach. In addition, the application of the above processes in small and medium enterprises is another interesting topic to be studied. Finally, more in depth research should be accomplished on the LCA and LCC tools of PLCm, which are almost absent in the studied companies. The difficulties that accompany their implementation should be further addressed and encountered so that they can make PLCm more effective and aim in higher value extraction for the companies. 47

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52 Appendices 1. Environmental indicators Oce 52

53 53

54 54

55 55

56 56

57 57

58 An estimate has been made of the total quantity of materials used at the Océ manufacturing sites in Europe and North America for the production of printers, copiers and consumables. Printers and copiers are made primarily from metals and plastics, while chemicals and solvents are used for the production of photoconductors, toners, silicone products, process drums and inks. In 2009, the use of metals and plastics amounted to 4.5 kilotons, 22% of which consisted of reused parts. The total use of chemicals and solvents amounted to 2.6 kilotons. The significant decrease in materials usage is explained by the decrease in production volume due to the global economic crisis. 58

59 2. Economic Indicators Oce The cost of all goods, materials and services purchased in 2009 can be estimated by adding the cost price of Oce s products, the company s selling and marketing expenses, R&D expenses, general and administrative expenses and other income, and then deducting total payroll expenses. In 2009, this sum totaled 1,450 million (2008: 1,597 million). 59

60 3. Environmental indicators ASML 60

61 61