Organic Production Systems: An Emerging Operations Strategy?

40 Pages Posted: 17 Oct 2007 Last revised: 14 Jun 2008

See all articles by Lieven Demeester

Lieven Demeester

Independent

Mei Qi

National University of Singapore (NUS) - Department of Decision Sciences

Luk N. Van Wassenhove

INSEAD

Date Written: June 2007

Abstract

We use a modified optimal market area model to show how supply chains are shaped by complementarities between material recycling, low-cost flexible process technologies, and plants taking advantage of local adaptation and customer proximity. Material recycling can generate substantial savings in material and disposal costs, but creates the need for reverse logistics. The latter are less costly when recycling plants serve smaller market areas and are integrated with production plants. Hence, recycling is more beneficial when combined with small-market-area strategies such as low-cost flexible process technologies, and localization. We examine these complementarities in propositions and demonstrate that, in a realistic example for an engineering plastic in Western Europe, an understanding of these complementarities can make the difference between the continuation of a supply chain without recycling and the emergence of a closed-loop supply chain with recycling, localization, and market areas less than one third their original sizes. Our analysis shows that this combination of features, labeled "organic production", qualifies as a supply-chain-level operations strategy, forms a model for emerging closed-loop supply chains, and, can have important implications for product, operations and supply chain strategies.

Keywords: recycling, flexibility, localization, mini-mills, operations strategy, production systems, optimal market area

Suggested Citation

Demeester, Lieven and Qi, Mei and Van Wassenhove, Luk N., Organic Production Systems: An Emerging Operations Strategy? (June 2007). INSEAD Business School Research Paper No. 2007/39/TOM, Available at SSRN: https://ssrn.com/abstract=1022050 or http://dx.doi.org/10.2139/ssrn.1022050

Mei Qi

National University of Singapore (NUS) - Department of Decision Sciences ( email )

NUS Business School
BIZ 1 Building, #02-01, 1 Business Link
117592
Singapore

Luk N. Van Wassenhove

INSEAD ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France
(33) (0)1 60 72 42 66 (Phone)
(33) (0)1 60 72 40 49 (Fax)

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