Optimizing Dairy Product Returns Reduces Total Costs by 9.5%

Why It Matters

This research demonstrates the financial benefits of proactively managing product returns and integrating them back into the production cycle. For design practitioners, it highlights the importance of considering the entire product lifecycle, including end-of-life and return logistics, to achieve greater economic and environmental efficiency.

Key Finding

By using a specialized model to manage product returns, the dairy company was able to cut its overall supply chain expenses by nearly 10%.

Key Findings

• A 9.5% decrease in total supply chain costs was achieved compared to the current operational status.
• The model effectively managed uncertainty in product return rates for products like yogurt.
• The optimized model provided insights for decisions on material sourcing, production, distribution, and recovery.

Research Evidence

Aim: To develop and implement a model for optimizing a multi-product, multi-period closed-loop supply chain for a dairy company, specifically addressing uncertainty in product return rates to minimize total costs.

Method: Mathematical Modelling (Linear Programming with Chance Constraints)

Procedure: A linear programming model was developed to represent the dairy company's supply chain, incorporating raw material suppliers, manufacturers, distributors, and a recycling center. The model considered uncertain product return rates and aimed to optimize decisions regarding material provision, production, distribution, and product recovery. The model was then implemented using Lingo software with real company data.

Context: Dairy industry supply chain management

Design Principle

Design for Circularity: Incorporate mechanisms for product return, refurbishment, and material recovery to minimize waste and maximize resource value throughout the product lifecycle.

How to Apply

When designing new products or optimizing existing supply chains, develop models that account for potential product returns and explore strategies for their reintegration into the production or recovery process.

Limitations

The model's effectiveness is dependent on the accuracy of the data used and the assumptions made regarding return rates and product shelf life. The study focused on a single company, so generalizability to other dairy companies or industries may vary.

Student Guide (IB Design Technology)

Simple Explanation: This study shows that if a dairy company plans better for products that get returned (like yogurt that's about to expire), they can save a lot of money.

Why This Matters: Understanding how to manage product returns and reduce waste is crucial for creating sustainable and economically viable designs.

Critical Thinking: How might the 'uncertainty' in return rates be further quantified or reduced through design interventions or consumer engagement strategies?

IA-Ready Paragraph: This research highlights the significant cost-saving potential of implementing closed-loop supply chain models, demonstrating a 9.5% reduction in total costs through optimized product return management. This underscores the importance of considering the entire product lifecycle, including end-of-life and return logistics, for economic and environmental efficiency in design practice.

Project Tips

• Consider the end-of-life or return phase of your product as part of the design process.
• Investigate how materials or components can be reused or recycled to reduce waste and cost.

How to Use in IA

• Reference this study when discussing the importance of lifecycle assessment and sustainable design practices in your design project.

Examiner Tips

• Demonstrate an understanding of how product lifecycle impacts cost and sustainability.
• Show how your design choices can facilitate product returns or material recovery.

Independent Variable: Product return rate (uncertainty)

Dependent Variable: Total supply chain cost

Controlled Variables: Number of products, time periods, supply chain network structure (suppliers, manufacturers, distributors, recycle center)

Strengths

• Addresses a practical problem with significant economic implications.
• Uses a quantitative modelling approach to provide specific results.
• Includes a case study for real-world application.

Critical Questions

• What are the ethical considerations of encouraging product returns, especially for perishable goods?
• How does the cost of implementing a closed-loop system compare to the savings achieved?

Extended Essay Application

• Investigate the feasibility and economic impact of a closed-loop system for a specific product or material within a chosen context.

Source

Optimization of multi-product, multi-period closed loop supply chain under uncertainty in product return rate: case study in Kalleh dairy company · Journal of industrial and systems engineering. · 2015