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Sustainable sourcing of strategic raw materials by integrating recycled materials

Author

Listed:
  • Patricia Rogetzer

    (WU (Vienna University of Economics and Business))

  • Lena Silbermayr

    (WU (Vienna University of Economics and Business))

  • Werner Jammernegg

    (WU (Vienna University of Economics and Business))

Abstract

In this paper we investigate a manufacturer’s sustainable sourcing strategy that includes recycled materials. To produce a short life-cycle electronic good, strategic raw materials can be bought from virgin material suppliers in advance of the season and via emergency shipments, as well as from a recycler. Hence, we take into account virgin and recycled materials from different sources simultaneously. Recycling makes it possible to integrate raw materials out of steadily increasing waste streams back into production processes. Considering stochastic prices for recycled materials, stochastic supply quantities from the recycler and stochastic demand as well as their potential dependencies, we develop a single-period inventory model to derive the order quantities for virgin and recycled raw materials to determine the related costs and to evaluate the effectiveness of the sourcing strategy. We provide managerial insights into the benefits of such a green sourcing approach with recycling and compare this strategy to standard sourcing without recycling. We conduct a full factorial design and a detailed numerical sensitivity analysis on the key input parameters to evaluate the cost savings potential. Furthermore, we consider the effects of correlations between the stochastic parameters. Green sourcing is especially beneficial in terms of cost savings for high demand variability, high prices of virgin raw material and low expected recycling prices as well as for increasing standard deviation of the recycling price. Besides these advantages it also contributes to environmental sustainability as, compared to sourcing without recycling, it reduces the total quantity ordered and, hence, emissions are reduced.

Suggested Citation

  • Patricia Rogetzer & Lena Silbermayr & Werner Jammernegg, 2018. "Sustainable sourcing of strategic raw materials by integrating recycled materials," Flexible Services and Manufacturing Journal, Springer, vol. 30(3), pages 421-451, September.
    • Handle: RePEc:spr:flsman:v:30:y:2018:i:3:d:10.1007_s10696-017-9288-4
    DOI: 10.1007/s10696-017-9288-4
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    2. Iyer, Ananth V. & Vedantam, Aditya & Lacourbe, Paul, 2023. "Recycled content claims under demand benefit and supply uncertainty: Multi-period model and application to glasswool insulation," European Journal of Operational Research, Elsevier, vol. 309(2), pages 745-761.
    3. Rogetzer, Patricia & Silbermayr, Lena & Jammernegg, Werner, 2019. "Sustainable sourcing including capacity reservation for recycled materials: A newsvendor framework with price and demand correlations," International Journal of Production Economics, Elsevier, vol. 214(C), pages 206-219.

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