Design for the Environment: Life‐Cycle Approach Using a Newsvendor Model

Abstract

Introducing environmental innovations in product and process design can affect the product's cost and demand, as well as the environmental impact in different stages of its life cycle (such as manufacturing and use stages). In this article, we advance understanding on where such design changes can be most effective economically to the firm and examine their corresponding environmental consequences. We consider a profit maximizing firm (newsvendor) deciding on the production quantity as well as its environmentally focused design efforts. We focus our results along the two dimensions of demand characteristics and life‐cycle environmental impact levels, specifically functional vs. innovative products, and higher manufacturing stage environmental impact vs. higher use stage environmental impact. We also discuss the environmental impact of overproduction and how it relates to the different types of products and their salvage options. We find that although the environmental impact per unit always improves when firms use eco‐efficient or demand‐enhancing innovations, the total environmental impact can either increase or decrease due to increased production quantities. We identify the conditions for such cases by looking at the environmentally focused design efforts needed to compensate for the increase in production. We also show that the environmental impact of overproduction plays an important role in the overall environmental impact of the firm. We conclude by applying our model to different product categories.

Sustainable Operations Management: An Enduring Stream, or Passing Fancy?

“…Raz et al (2013) study firm investments to improve environmental performance in the manufacturing and in the use phases of a product's lifecycle. They show that firms should invest more in improving the environmental efficiency of manufacturing for functional products, but should invest more in improving the environmental efficiency of product use for innovative products.…”

Impact of China’s Recycling Subsidy Policy in the Product Life Cycle

“…We set the variable for the innovation cost as de 2 following Raz et al [6]. A large d indicates high innovation difficulty, and the initial value is set as 100.…”

“…In this subsystem, a key indicator in the production design stage, the innovation design effort [6], is introduced to represent the manufacturer's effort to reduce resource consumption and waste production. The high degree of the innovation design offers several benefits across the whole product life cycle.…”

“…(2) New product's unit production cost and sale price Based on the work of Raz et al [6], we set the function of the new product's unit production cost as c " c 0 p1`γeq, which means innovation incurs an additional cost.…”

OM Forum—Sustainable Operations Management: An Enduring Stream or a Passing Fancy?

“…Agrawal and Ülkü (2013) integrate product design, engineering, and OM perspectives and relate their results to specific product categories, which helps connect their findings to managerial practice. Raz et al (2013) study firm investments to improve environmental performance in the manufacturing and use phases of a product's life cycle. They show that firms should invest more in improving the environmental efficiency of manufacturing for functional products, but should invest more in improving the environmental efficiency of product use for innovative products.…”