Developing the Closed-loop Supply Chain in the Asphalt Industry: A Case Study at BAM Wegen

Developing the Closed-loop Supply Chain in the Asphalt Industry: A Case Study at BAM Wegen

Swemmer, D.

Ludema, M.W. (mentor)
Van de Kaa, G. (mentor)
Frunt, M.H.T. (mentor)

Technology, Policy and Management

TLO

2011-06-17

BAM Wegen, a contractor specialized in road construction and maintenance and (partial) owner of eight asphalt factories in the Netherlands, indicated to have efficiency problems with their reverse logistics activities; all activities needed to reclaim used asphalt. This research therefore aimed at finding a method to better control the supply and demand of the asphalt that becomes available with road maintenance. A supply chain that includes reverse logistics activities is called a closed-loop supply chain in the literature. In the literature much can be found on closed-loop supply chains and reverse logistics activities, though the literature seems to be narrowed to the reuse of packaging, consumer goods and spare parts. Nothing in the literature has been written about the adoption of a closed-loop supply chain in the asphalt industry. The goal of this research has been twofold: The first part has been focused on finding out to what extend the theory on closed-loop supply chains is applicable on the asphalt industry, the situation in the asphalt industry has been compared with the theories available in the literature; The second part has been focused on finding practical solutions for the asphalt industry to optimize its reverse supply chain. The two main research questions that are answered in this report are: • Are concepts on closed-loop supply chains as can be found in the literature and used in other industries applicable for the asphalt industry? • How can the closed-loop supply chain in the asphalt industry be optimized to tackle the difficulties identified? To be able to obtain the goals and answer the research questions a literature study and a case study at BAM have been performed. An overview of the state of the art knowledge on closed-loop supply chains is presented as well as a full analysis of the asphalt industry in which BAM Wegen is active. Comparing the situation in the asphalt industry with the literature showed that there is a gap in the literature; the situation in the asphalt industry contradicts with general theories on closed-loop supply chains. In the asphalt industry the reclaimed asphalt is inspected and separated before transportation, a property that is not considered in the literature. This property seems to be the cause of the contradiction with general theories. Future research should therefore try to sort out if this property is unique for the asphalt industry and that the asphalt industry is therefore just an exception or that the theory on closed-loop supply chains should be expanded. In the current supply chain model used in the asphalt industry the contractor is responsible for the collection of the reclaimed asphalt. One of the main problems identified in this model is that the supply and demand of reclaimed asphalt cannot be controlled. Another main problem is that asphalt factories lack the capacity to keep multiple reclaimed asphalt types on their terrain. In this research report, with the use of the literature and the case study, three alternative supply chain models for the asphalt industry have been developed to solve the problems identified. To be able to score the models objectively a balanced scorecard has been developed and used. Comparing the results of the alternative models with the current model used by BAM shows improvements for the reverse logistics activities for the asphalt industry, though in some situations at the costs of the financial performance of BAM. However due to the unavailability of data, the financial performance of the models is to be expected better than presented. On short term it is recommended for BAM to start by changing the closed-loop supply chain from a retailer collecting model to a manufacturer collecting model. The responsibility of the collection of the reclaimed asphalt shifts from the contractor to the asphalt factories, giving the asphalt factories the ability to control the distribution of the reclaimed asphalt over the asphalt factories. An additional advantage of this change is that data required to predict the financial performance of the 3PL model will be easier to collect and therefore a more accurate and complete assessment of the financial consequences of a shift towards a third party collecting model can be made. On the long run it is recommended for BAM to change its closed-loop supply chain towards a third party collecting model. A third party need to be established that will be responsible for the collection and processing of reclaimed asphalt. Asphalt factories will no longer have to store large amounts of reclaimed asphalt, but instead can buy reclaimed asphalt just-in-time. The third party collecting model provides the best solution for BAM and the asphalt industry. By implementing the third party collecting model more transparency will be gained; the costs of the inspection, separation and collection of the asphalt will be distributed equally over all stakeholders in the price of the reclaimed asphalt. Furthermore asphalt factories will be more efficiently, because they no longer have to lobby for reclaimed asphalt. This research report has shown that there are alternative supply chain models for the asphalt industry to solve the problems that currently exist. On short term the manufacturer collecting model can already solve some difficulties, while a third party collecting model would ultimately provide the most benefits for BAM and other contractors in the asphalt industry.

Asphalt Industry
Closed-loop Supply Chain
Reverse Logistics

http://resolver.tudelft.nl/uuid:ee4542a4-0f84-49d9-ad27-f05b405da318

2011-06-17

Campus only

Student theses

master thesis

(c) 2011 Swemmer, D.