Rethinking Sustainability in Light of the EU’s New Circular Economy Policy

Harvard Business Review  online

2018-07-03

With the EU’s passage of the Circular Economy Package in April, many European companies are now facing mandates to reuse the products they create for as long as possible. The EU is not alone in seeking ways to convince firms to recycle. The U.S. Chamber of Commerce supports companies in developing circular economies (CEs), and China — like Europe — has developed policies and legislation around CEs. It’s easy to see what countries think they have to gain in these efforts: The Ellen MacArthur Foundation, McKinsey, and Accenture believe that enabling CEs will lead to trillions of dollars in savings and is a particularly significant step in protecting the environment.

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Faculty, Staff Honored at Annual Luncheon

Georgia Institute of Technology News Center  online

2018-04-16

The following members of the Tech community were honored at the 2018 Faculty and Staff Honors Luncheon on Wednesday, April 11. See more photos at flickr.com/georgiatech.

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Bridging Surplus with Need: Improving Healthcare in the Developing World

HuffPost  online

2017-11-15

The onslaught of news about natural disasters has been inescapable of late. As we write this, we think of the inhabitants of Puerto Rico, many still without water or electricity weeks after devastation from Hurricane Maria in September. We think, too, of recovery efforts in Sierra Leone after hundreds died in mudslides following torrential rains in August. We think of lives lost and impacted by Hurricanes Harvey and Irma, as well as by earthquakes in Central Mexico. All of these natural disasters occurring within a six-week timeframe.

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Ellen MacArthur Foundation: 9 ways to design the circular economy

GreenBiz  online

2017-11-03

In recent years, the concept of circular economy has entered mainstream discussion, with large businesses, startups, designers, academics, students and policymakers embracing this positive framework for change.

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4 Obstacles on the Way to a Circular Economy

HuffPost  online

2017-07-16

The concept of circular economy is a grand, sweeping vision, which we hope will lead to better business models and environmental outcomes. Following promising reports by the Ellen MacArthur Foundation (EMF) and the adoption of an EU Action Plan for the Circular Economy, the topic has moved front and center of the sustainability dialogue.

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Leasing, Modularity, and the Circular Economy

Vishal Agrawal, Atalay Atasu, Sezer Ulku

2018 The circular economy movement suggests that combining circular business models with circular product design strategies can improve firm profits and lower environmental impact. We study this premise by investigating the economic and environmental implications of jointly implementing leasing and modularity, two prominent circular economy strategies, and their interaction. We develop a durable goods model to obtain insights for firms considering the use of these strategies. We first analyze the effect of adopting leasing on a firm's product architecture choice. We find that a modular product architecture is more attractive under leasing only if off-lease products depreciate to a greater extent. We next analyze the effect of adopting a modular product architecture on the firm's business model choice. We find that adopting a modular architecture can cause a leasing firm to switch to selling, but will not lead a selling firm to switch to leasing. Building on these results, we show that leasing a modular product is preferred by the firm only under limited conditions, i.e., when production costs are low, off-lease products are in relatively better condition, and when there is a large difference between depreciation levels of different modules. Finally, we show that jointly implementing leasing and modularity can also lead to higher environmental impact than only adopting leasing or modularity in isolation.

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OM Forum—New Opportunities for Operations Management Research in Sustainability

Vishal V Agrawal, Atalay Atasu, Luk N Van Wassenhove

2018 Operations management (OM) research has made several important contributions to environmental sustainability over the last two decades. In this article, we point to a new opportunity on the horizon—the circular economy movement, which is gaining significant traction in practice. We introduce the concept and highlight the building blocks behind it. We also explain why this trend in practice can provide an opportunity for the OM community. To do so, we describe four companies that have been positioned as prime examples of implementing the circular economy concept and discuss the operational challenges faced by them. We draw on them to identify several promising and open questions for OM research and explain why an operations perspective is critical in this context.

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The Implications of Recycling Technology Choice and Facility Ownership on Collective Recycling

Luyi Gui, Morvarid Rahmani, Atalay Atasu

2018 We study the implications of recycling technology choice and facility ownership on an environmental benefit comparison between collective and individual recycling systems. Collective recycling is criticized for allowing free-riding between producers, and muting incentives for design-for-recycling and environmental benefits from recycling. Inspired by the Japanese Household Appliance Recycling Law (HARL), we revisit this assertion by studying how the complementarity between product design for recycling and recycling technology choices affects environmental benefits from a collective recycling system. We develop game-theoretic models of individual and collective recycling systems with endogenous product design and recycling technology choices given contracted or producer-owned recycling facilities. We characterize and compare the equilibrium outcomes in these models. We show that collective systems imply higher incentives for recycling technology improvements, and can lead to higher environmental benefits from recycling than individual systems. This particularly happens when a contracted recycling facility is shared by producers with similar recycling volumes. However, when a producer-owned recycling facility is shared, a certain degree of recycling volume heterogeneity between producers can lead to higher environmental benefits. We further show that, even when sharing a producer-owned recycling facility leads to higher environmental benefits than sharing a contracted one, a producer’s benefit from owning a shared recycling facility may not justify the cost of such ownership. Accordingly, we show that policy provisions that provide incentives for producer’s recycling facility ownership can be justified especially if there exists high volume heterogeneity in the collective system. Producers and policy makers need to evaluate collective recycling systems with respect to the incentives they provide for not only product design for recycling but also recycling technology choices, and configure collective system implementations accordingly.

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Salesforce Incentives and Remanufacturing

Jeremy J Kovach, Atalay Atasu, Sumitro Banerjee

2017 We analyze how salesforce incentives influence a firm's remanufacturing strategy and profitability. We first consider a salesforce incentive model based on the practice of a North American consumer products firm, which offers commissions based on the total revenue generated from new and remanufactured product sales. We then consider a model with differentiated linear commissions for new and remanufactured products. We show that the incentives offered to a salesforce to induce effort can create conditions where a firm should not sell remanufactured products, even if the cost of remanufacturing is negligible. We demonstrate that this result holds for the compensation plan observed in practice of the focal firm as well as with differentiated linear commissions. We further find that linear sales commissions for remanufactured products should generally be lower than those for new products under both compensation models. However, commissions based on the total sales revenue generated by a salesperson, which do not differentiate between the sales of the two products, are not well suited for remanufacturing. This is because incentives based on total sales revenue result in unit sales commissions that are proportional to product prices, which always induce lower than optimal remanufactured product sales due to their lower prices. We show that by offering differentiated commissions for new and remanufactured products, firms can expand the conditions favoring remanufacturing and substantially improve profits.

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Lot Sizing for Optimal Collection and Use of Remanufacturable Returns over a Finite Life‐Cycle

Atasu A., S. Cetinkaya

2009 Reverse supply chains process used product returns to recover value by re‐processing them via remanufacturing operations. When remanufacturing is feasible, the longer the return flows are delayed during the active (primary) market demand period of the product, the lower the value that can be recovered through these operations. In fact, in order to recover the highest value from remanufactured products, the collection rates, return timings, and reusability rates should be matched with the active market demand and supply. With these motivations, this paper is aimed at developing analytical models for the efficient use of returns in making production, inventory, and remanufacturing decisions during the active market. More specifically, we consider a stylistic setting where a collector collects used product returns and ships them to the manufacturer who, in turn, recovers value by remanufacturing and supplies products during the active market demand. Naturally, the manufacturer's production, inventory and remanufacturing decisions and costs are influenced by the timing and quantity of the collector's shipments of used product returns. Hence, we investigate the impact of the timing of returns on the profitability of the manufacturer‐collector pair by developing system‐wide cost optimization models. Analyzing the properties of the optimal shipment frequency, we observe that the fastest reverse supply chain may not always be the most efficient one.

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