Integrating closed-loop supply chains and spare-parts management at IBM.

Interfaces, November, 2003 by Moritz Fleischmann

IBM is among the pioneers recognizing the benefits of closed-loop supply chains that integrate product returns into business operations. We worked on a project exploiting product returns as a source of spare parts. Key decisions concern what recovery opportunities to use, the channel design, and coordinating alternative supply sources. Our analytic inventory-control model and a simulation model showed that procurement-cost savings largely outweigh reverse logistics costs and that information management is essential. These findings provide a basis for significantly expanding the usage of the novel parts supply source, thereby cutting procurement costs.

(Industries: computer, electronic. Inventory, production: policies.)

**********

The traditional...