Open- and Closed-Loop Supply Chain Dynamics: Specification and Exploration of an Agent-based Model

Abstract

We develop an inter-firm shipping pallet supply chain model and explore the geographic features of market structures that can evolve within it, focusing on the common resource nature of pallet durability. While exploring the model's parameter space we find regions in which the outcomes do not put the model's assumptions in doubt. The insights reveal modeling considerations for an "open-loop" structure, where the shipping pallets received by retailers pass through third parties before returning to manufacturers. Our approach to validation is at the level of "stylized facts," accepting model parameters that produce outcomes matching characteristics of firms' geographic location. Eastern Economic Journal (2011Journal ( ) 37, 85-109. doi:10.1057Journal ( /eej.2010 Keywords: agent-based modeling; validation; supply chain; shipping pallet; common resource JEL: C63; L14; L23; L73; L81 INTRODUCTIONEnvironmental concerns are important drivers of innovation today, and such issues are pervasively linked to the supply chain of every good we produce and consume [Thomas and Griffin 1996]. The supply chain itself has impacts that are difficult to model [Mabert and Venkataramanan 1998]. We study an important component of delivering goods from producer to retailer: the shipping pallet.Shipping pallets are used at every stage of production, including distributing material within the firm. For simplicity, we focus on the final step of shipment to the retailer, a significant component of total pallet use [Freedonia 2008]. This final step is particularly important because the pallet is moving between economic actors. While a pallet stays within a firm, the firm's incentives to manage its private resources align well with the optimal social outcome, but as the pallet moves between firms, natural externalities may cause the firm's optimal choice to diverge from social welfare.This investigation is part of a larger effort to include the effects of private incentives -market interactions -in environmental policy considerations, particularly when performing a life cycle analysis (LCA) on a system of interest. We are not the first to use agent-based modeling in a supply chain context [see, e.g., Swaminathan et al. 1998;Choi et al. 2001;Gosling 2003;Hensher and Puckett 2005;Chaturvedi et al. 2006;Gosling et al. 2006]. Our innovation is to link this analysis with policy making. To date the LCA policy tool does too little to recognize the interaction between policy and markets [Fischhoff and Small 2000] and also does not address durable goods issues well [Cooper 2005]. Our approach to melding policy interests and markets is through agent-based modeling of the market Eastern Economic Journal, 2011, 37, (85-109) r 2011 EEA 0094-5056/11 www.palgrave-journals.com/eej/ itself. This will allow the policy maker to observe and interact with the model as it demonstrates the consequences of changed market incentives.In this paper we describe our model's structure and the results from validating at the level of a "stylized fact." In particular, we de...

The boomerang returns? Accounting for the impact of uncertainties on the dynamics of remanufacturing systems

“…As a result of this search, we identified 29 articles in the time interval 1994-2017 (November). These were the following (in chronological, and then alphabetical, order): Kumar, Vrat, and Sushil (1994), Tang and Naim (2004), Zanoni, Ferretti, and Tang (2006), Zhou and Disney (2006), , Pati, Vrat, and Kumar (2010), Ruebeck and Pfaffmann (2011), Adenso-Díaz et al (2012), Das and Dutta (2013), Jing et al (2013), Lehr, Thun, and Milling (2013), Li (2013), Turrisi, Bruccoleri, and Cannella (2013), Corum, Vayvay, and Bayraktar (2014), , , Shi, Sheng, and Xu (2015), Yuan and Zhang (2015), Cannella, Bruccoleri, and Framinan (2016), He, Yuan, and Zhang (2016), Liu et al (2016), Wei and Yuan (2016), Zhang and Yuan (2016), Dev, Shankar, and Choudhary (2017), Harris and Natarajarathinam (2017), Salviano and Andres (2017), Wang et al (2017), Zhang, Li, and Zhang (2017), and Zhou, Naim, and Disney (2017).…”

“…Second, we considered articles that do not provide any specific insight on closed-loop supply chain dynamics in the way we defined this concept in Section 1.1. This led in the deselection of a further seven articles to a reduced new 'clean' sample of 18: Kumar, Vrat, and Sushil (1994), Ruebeck and Pfaffmann (2011), Lehr, Thun, and Milling (2013), Li (2013), Shi, Sheng, and Xu (2015), Harris and Natarajarathinam (2017), Salviano and Andres (2017), and Wang et al (2017). These articles explored the dynamic response of closed-loop supply chains from other perspectives (see footnote 2).…”

Management and Logistics of Returnable Transport Items: A Review Analysis on the Pallet Supply Chain

“…Of the 85 articles selected, 25 consider the perspective of the holistic supply chain instead of focusing on a single actor, most of them dealing with logistics problems. Three works focus on the design and analysis of pallet systems: [68] tries to analyze the complex dynamics of a pallet supply chain through an agent-based simulation model, investigating the relationship between pallet demand from users (retailers and manufacturers of goods) and the characteristics of the pallet repair market (number and capacity of repairers). The authors of [69] propose a pallet bank model describing its architecture and the management information system based on RFID.…”