Sustainable Reverse Logistics Network E-Book

Daoud Aït-Kadi

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 343

Veröffentlichungsjahr: 2012

Beschreibung

Traditional logistical chains have enabled us to respond efficiently to the needs of customers in terms of services and products. However, the returns, rejects and by-products of these activities have been eliminated or ignored. Reverse logistics aims at valuing these products using a value creation network integrating recovery, processing, recycling, distribution or clean removal processes. In the context of sustainable development, integrating economic, social and environmental factors, these activities raise questions concerning the design of products, processes and logistic networks. Taking these considerations into account involves significant changes that affect business models as well as consumer habits. New working methods and a long-term vision are the new bases for sustainable logistic networks. The objective of this book is to supply an educational tool for engineering schools, as well as a management tool for the efficient implementation of the reverse logistics function. It brings together the knowledge acquired by the scientific community. Even if reverse logistics has been the subject of several books over the past few years, very few theories have been developed and the subject is far from being exhausted. This book proposes generic concepts and processes that can be adapted to all businesses producing goods and services and which aim to integrate reverse logistics. These processes will enable us to shed light on their complexity and to take into account all the important variables. Contents 1. Logistics Challenge. 2. Reverse Logistics Engineering. 3. Ecodesign. 4. Value Loops.

Leseprobe

Table of Contents

Introduction

I.1. Bibliography

Chapter 1. Logistics Challenges

1.1. Introduction

1.2. Forward supply chain

1.3. Higher, further, bigger

1.4. Nothing is lost, nothing is created, everything goes somewhere

1.5. Nothing goes well anymore

1.6. Conclusion

1.7. Bibliography

Chapter 2. Reverse Logistics Engineering

2.1. Introduction

2.2. Definition

2.3. Types of returns

2.4. Generic process

2.5. Shipping or redistribution system

2.6. Information system

2.7. Coordinating

2.8. Performance measurement

2.9. Conclusion

2.10. Bibliography

Chapter 3. Ecodesign

3.1. Introduction

3.2. Sustainable development

3.3. Ecodesign

3.4. Ecodesign approach within companies

3.5. Conclusion

3.6. Bibliography

Chapter 4. Value Loops

4.1. Network design and management integrating reverse logistics

4.2. Definition of the value

4.3. Monitoring and control of the value on the life cycle

4.4. Partnership

4.5. Conclusion

4.6. Bibliography

Conclusion

Index

First published 2012 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address:

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© ISTE Ltd 2012

The rights of Daoud Aït-Kadi, Marc Chouinard, Suzanne Marcotte, Diane Riopel to be identified as the author of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

Library of Congress Cataloging-in-Publication Data

Recycling and inverse manufacturing / Diane Riopel … [et al.].

p. cm.

Includes bibliographical references and index.

ISBN 978-1-84821-310-4

1. Production management--Environmental aspects. 2. Business logistics--Environmental aspects. 3. Recycling (Waste, etc.) 4. Reverse engineering. I. Riopel, Diane.

TS155.7.R429 2012

363.72′82--dc23

2011045765

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library

ISBN: 978-1-84821-310-4

Introduction

Reverse logistics is booming. This expression is not even 20 years old yet! As a teenager, reverse logistics is still being defined and is still maturing. Ongoing research into this subject brings out appropriate methods to be implemented. Much remains to be said, much remains to be suggested.

In this introduction, we will look back at the changes in the design and management methods of production systems of goods and services. This historical perspective will provide us with a better understanding of where the preoccupation about logistics aspects comes from. Changes in the make-up of our society have brought us to notice that reverse logistics answer current concerns and that businesses cannot really avoid it. This brief review of the events that had a great impact on business design and management throughout the last few decades are examined in this book which also gives the author’s point of view and positioning of perspectives.

The core mission of any business producing goods and services is focused on profitability. Profitability can be achieved in two ways: increasing the profit margin or reducing costs. Increasing the profit margin can be successful in monopoly situations, but not within a competitive market. The first industrial engineering tools (1940–1946) [HAM 71], such as operation process charts, flow process charts, and assembly charts, can be analyzed with the help of the interrogation technique (who, what, how, where, and why). These tools were mainly developed in order to reduce costs. Simplifying methods, organizing the workload, stopping wasting human, material and financial resources, and choosing the most productive processes were the first contributions of industrial engineering. The value analysis technique that was developed by Miles in 1945 [LAC 80] is another example. Miles worked on how to focus only on the product or service functions that are expected by consumers and on the value that consumers attach to the solutions suggested answering their needs.

During each economic crisis, new techniques are proposed to systematically hunt down waste. Therefore, some variants are emerging, but all of them are based on work simplification techniques. Some will tell you that they are not the same, but it is tempting to say, for example, that value-added production advocates the same philosophy as an updated value analysis. Productivity gains of a few percentages become significant in times of crisis and for some this is often a matter of survival.

These methods have been suggested and used to optimize production systems with an economic perspective and by an optimization-based analytical approach. This is called an insular approach, i.e. when businesses try to optimize their processes, they reduce their costs and indirectly their production lead time. This approach is focused on the business, on its entity.

In the 1990s [BRE 99], some quality-based approaches appeared. The Total quality, 5S method, Six sigma quality, activity-based costing (ABC), and Quality costs have brought new dimensions. Some concepts, such as total quality, have shown that a business is a link in a chain. A business offers a product or a service to another business and so on until it reaches the end consumer. If we take the example of a simple pencil, the number of “actors” taking part in its production is quite impressive, including a mining business to extract graphite, a forest enterprise to get wood, and a retail store to sell pencils. This example underlines the extent of the supply chain. The ISO 9000 certification was very popular in the 1990s, which fits with this approach, because it suggests a corporate image, which is synonymous with process control. This is supposed to be a guarantee, going beyond the good functioning of the products at the time of purchase and beyond the compliance with specifications. This is a guarantee to ensure a promising partnership with the various supply chain actors. In parallel, business computerization was spreading and accessibility to information technologies offered new possibilities and practices.

The emergence of the Internet has enabled businesses, which were geographically isolated, to become known worldwide. Distances are not obstacles anymore. Marketing budgets do not have to be excessive anymore to ensure the marketing of its range of products. Market globalization has arrived. Information technologies help in the integration of various stakeholders. We can now dream of high-level partnerships with the exchange of information reducing again the reaction and delivery times expected by customers.

The Web has led to electronic commerce. It comprises four stages: brochureware, e-commerce, e-business, and e-enterprise. Figure I.1 shows the relationship between those four stages of electronic commerce. The brochureware and e-commerce stages are widespread, and there are more and more successful implementations of the other two stages, even if they are not yet generalized. Table I.1 presents the characteristics of electronic commerce.

Figure I.1.Relationships between the electronic commerce stages [MAR 05]

Table I.1.Description of the four stages [VAL 05]

Brochureware.

At this stage, visitors can access via the website a static display of information that could be of interest to them, including contacts, information on products, and the description of the business.

E-commerce.

At this stage, customers can buy the products sold by businesses online. Most of the time, this stage is applicable for retail businesses.

E-business.

This stage consists of exchanging data between businesses. They can also make transactions among themselves.

E-enterprise.

The integration of their business processes with the processes of the three other stages.

First, the emergence of the Internet has transformed the commercial relationships between businesses and customers, and second, the business relationships between partners (stage 3 of electronic commerce). Distance is not limiting the possibilities of relationships anymore, nor is it restricting the choice to local businesses with a good reputation. With globalization, customers have access to a larger supply of products and services and to an increased number of potential suppliers. In this context, businesses must differentiate themselves with a better customer service. We thought that the ISO 9000:1994 standard would allow us to distinguish the businesses on which we should focus, but this norm showed many loopholes. We have quickly noticed that it was not enough for a business to demonstrate its mastering of its processes to ensure the required quality. Indeed, one thing was forgotten in this version, one of the main raison d’être of the businesses (if not the main reason): customers and their expectations. The ISO 9000:2000 version puts customers and their requirements back at the center of the standard.

Market globalization has also been materialized by the implementation of free-trade agreements between countries. World associations (World Trade Organization and World Bank) and free-trade agreements (NAFTA: Canada and the USA, which were joined in 1973 by Mexico and by the “Inner Six of Europe”, and now by the European Union with its 27 member states) have all contributed to accelerate the circulation of goods. All barriers are removed with these organizations and agreements and everyone seems to be favorable to collaboration. Global supply chains were thus facilitated. This process was stimulated by the emergence of the Web. The vertical integration of businesses has helped refocusing on business core competencies. After having reduced costs, controlled processes, reduced delays, ensured the quality, and reduced waste of any kind, supply chains are in an era of global optimization. The chain implementation enables a specialization of the business core competencies; each business being a link of the chain. Insular optimization is outdated.

Since the 1990s, it is understood that businesses differentiate themselves not only with the price, but by quality, and delivery times of their products. A fourth aspect should be taken into account: customer service (technical support and maintenance). Customers need to be guaranteed the proper operation of the product. Online technical support has appeared with electronic commerce. With customer service spreading, business practices have changed.

The pressure of competition is strong in the context of globalization. The right product must reach the right customer’s (taking into account the fact that products are more and more customized), in the right place, and at the right time. Supply is considered complete when the product is installed and is operational at the customer location or point of use. The supply chain design and monitoring have, therefore, become key elements to reach profitability objectives.

The supply chain must create value for the business. Each step of the value creation process must contribute to reach the customer’s expectations. Businesses interrogate themselves on their products, while trying to anticipate customer expectations in line with technological developments. On the other hand, with the accelerated emergence of China and India, the beginning of the 2000s has led to an explosion in the prices of raw materials because of their scarcity. Sustainable development has awakened people to the importance of consuming without jeopardizing the capacity of the future generations to meet their own requirements, while meeting current needs [WCE 87]. The collective awareness of the fragility of our planet has increased with the Kyoto Summit of 1997.

With the concept of sustainable development, a regulatory framework was born to minimize the environmental impacts of business activities. The European Commission has passed and implemented a law giving a sense of responsibility to businesses. One of the directives is about Waste Electrical and Electronic Equipment. This waste is constantly increasing because of the new applications and technological developments that are tremendously facilitating the daily tasks of modern life.

Sustainable development increases the need to systematically implement reverse logistics, even though this logistic function has been present within a few businesses for longer than we would expect. Up until very recently, only catalog sales shopping service businesses were struggling with this problem. Retail shops were accepting returns, but very often there was no policy to take care of these returns. Products were simply destroyed. Pricing was consequently set. Nowadays, there are more and more returned products, because the return policies of competitors are very liberal, to satisfy customers fully.

As mentioned above, the customer service activity is now omnipresent in businesses. Their core mission is no longer only focused on satisfying customers. We are quite removed from the simple concept of warranty return that manufacturers must provide. This redefines their mission and the concept of responsible business is emerging. It must answer to customer expectations, while customers are nowadays demanding from businesses an environmental and social awareness. Paradoxically, consumers are nowadays little inclined to carry out the necessary changes in their consumption habits. And yet, we need to contribute towards the development of new methods and tools, which will materialize these new responsibilities. Customers have more and more expectations from the products and services supplied by all the actors of the supply chain. The time when businesses were “running the show” is over.

The future has always belonged to the businesses outstripping regulations and modifying their processes to offer customers a little extra in comparison to their competitors. Proactive versus reactive approaches have often won strategically. Reverse logistics can be useful for businesses to differentiate themselves from others that have not already integrated it. However, many questions have not yet been answered, such as:

– How can we make the reverse logistics of all the currently offered products profitable?

– How can we make the reverse logistics of older products profitable?

– How can we ensure the traceability of products while respecting the customer’s private life?

– How can we control unknown costs?

– How can we be sure when we start up these operations that costs will be significant?

– How can we justify this investment and identify its opportunities?

Such interesting challenges!

The book is organized as follows. Chapter 1 presents the forward logistics progression about the flows from suppliers to end consumers. It tackles cash, material and information flows, actors, as well as the main activities of the forward supply chain. Then, it shows how chains are evolving in more complex structures that become networks, where the link customer–supplier is no longer as clearly defined and where the game leader is changing. Moreover, customers are not only scattered throughout the world, but also have increasingly varying tastes and characteristics for each specific region. This leads to a multiplication of flows and thus to more complex transport networks, as well as to a widespread use of natural resources. The chapter highlights the impact of this massive consumption and tackles some insights that will be developed in the following chapters.

Chapter 2 presents reverse logistics, as well as the various types of products that can be returned. The organization of reverse logistics is shown in the form of processes that businesses can use. The generic process we have chosen to present is widely known and well established. Each stage is detailed. The objective is to increase practitioner awareness to challenges they will have to face during the deployment of this logistic function within the business. Strategic, tactical, and operational stakes are reviewed, without forgetting potential income sources and the invested costs. We also list which decisions should be taken to implement reverse logistics within a business. We will attach much importance to the potential processing of the returned products. Businesses do not have to implement all these processes, because they generally depend on the nature of the products, on the salvaged quantities, and on the age of the products when they are returned. We have tried to establish an exhaustive inventory of processes to provide a strategic plan within a reasonable time frame. The implementation of the processes could be spread out over time and some of these processes could be removed one day, if the concepts mentioned in Chapter 3 are implemented.

Chapter 3 presents the context in which reverse logistics in businesses is carried out, i.e. the increasing interest toward sustainable development in their logistic networks. Sustainable development leads businesses to include “triple bottomline” in their decision-making process, which leads to new economic, environmental, and social considerations. Taking into account these considerations raises some questions about the engineering and management of products, processes, and logistic networks. Businesses have various motivations to take them into account. They are usually tackled in a voluntary approach or under outside pressures. Various solutions are available depending on motivations. Several concepts, methods, and tools are available to tackle specific aspects of sustainable development. These are the basics for a smart and responsible usage of the resources at the disposal of logistic networks.

Chapter 4 is about the main changes to be tackled in preparation for the suitable integration of reverse logistics into a supply chain in a sustainable development context. The resulting network is represented in the form of a value loop. The concept of a loop is used to underline the impact of the decisions that can occur throughout the life cycle of the activities, products, and services. The value is the valve perceived by the various stakeholders involved, i.e. businesses and their business partners, consumers, and society. It represents the economic, environmental, and social opportunities resulting from it. First, the chapter presents various engineering and management decisions. It then sheds light on the definition of this value, on the mechanisms to be implemented in order to monitor and control it, and finally on the necessary collaboration between stakeholders to ensure this value in everybody’s eyes. It presents ideas of solution for the deployment of sustainable networks.

We wanted throughout the book to provide examples, actual cases of application and questioning to illustrate our subject. They are found in the text in boxes. Each box summarizes a specific idea from the current section. We have made them short and concise to help the reader understand the stakes and challenges. Some of them are inspired from our research projects and others from our own experience as consumers.

The objective of this book is to supply an educational tool for engineering schools and a management tool for an efficient implementation of the reverse logistics function. It brings together the knowledge acquired by the scientific community. Even if reverse logistics has been the subject of several books in the past 15 years, very few theories have been developed and the subject is far from being exhausted.

This book proposes generic concepts and processes that can be adapted to all businesses producing goods and services and which aim to integrate reverse logistics. These processes will enable us to shed light on their complexity and to take into account all the important variables.

I.1. Bibliography

[BRE 99] BREYFOGLE III F.W., Six Sigma Overview and Implementation, Wiley-Interscience, Hoboken, 1999.

[HAM 71] HAMMOND R.W., “The history and development of industrial engineering”, in MAYNARD H.B. (ed.), Industrial Engineering Handbook, 3rd edition, McGraw-Hill, Columbus, pp. 1.3–1.17, 1–11, 1971.

[LAC 80] LACHNITT J., L’analyse de la valeur, Presses Universitaires de France (Collection Que sais-je), Paris, 1980.

[MAR 05] MARCOUX N., RIOPEL D., LANGEVIN A., “Re-engineering of logistics activities for electronic commerce”, in CHAN C.-K., LEE J.H.W. (eds), Successful Strategy in Supply Chain Management, Idea Group Inc., pp. 194–221, 2005.

[VAL 05] VALLÉE P., RIOPEL D., “La première phase: le Brochureware”, Journal industriel du Québec, vol. 21, no. 5, pp. 16–17, 2005.

[WCE 87] WCED, Our common future, Report for the World Commission on Environment and Development, United Nations, 1987.

Chapter 1

Logistics Challenges

1.1. Introduction

The historical perspective previously presented tackles various problems that logisticians have to face. Many challenges still have to be taken on. However, to better understand the extent of these challenges, it is necessary to know the basics of logistics and its evolution in the last decades.

First of all, this chapter presents the forward logistics process and discusses the flows going from suppliers to end customers. It tackles the “actors”, the material, information and financial (money) flows, as well as the main activities of the forward supply chain. Henceforth, in this chapter, any reference to the term “supply chain” will imply the “forward supply chain”.

We then present how chains are evolving into complex structures and becoming networks. The customer–supplier relationship is no longer clearly defined and the game leader is changing. Indeed, supply sources are multiplying. Moreover, businesses have subsidiaries all around the world. Their customers, who have a wide variety of tastes that can be specific to each region, are also scattered around the world. This leads, amongst other things, to a multiplication of flows and transport networks that are also becoming more complex.

Manufacturing of all these products requires non-renewable natural resources that will not go back unaffected into the environment. Our society is only starting to realize the impact of massive consumption. This questions logistics design and management.

The conclusion of this chapter summarizes the most important problems and limits of actual supply chains. It also provides some ideas of solutions, which are then developed in the next chapters.

1.2. Forward supply chain

This section summarizes the main concepts of the logistic process, which will be used as a basis to understand the reverse logistics challenges presented in Chapters 2, 3 and 4. This does not intend to be an exhaustive compiling of what logistics is, but rather refers the reader toward more specialized books [BLA 07, SIM 08, STO 01].

1.2.1. Structure and actors

To summarize, logistics is defined as a set of activities involved in the flows between suppliers and customers. Supplier must be understood here in the broad sense of the word. Indeed, it can stand for raw material suppliers as well as for finished goods or service suppliers, such as a mechanical maintenance service for the vehicles of a public urban carrier. Customers can be business units as well as end customers. We can then, respectively, speak of business-to-business (B2B) commerce and business-to-customer (B2C) commerce. More specifically, the actors are suppliers of raw materials, components or modules, subcontractors, manufacturers, assemblers, distribution and sale centers, wholesalers, carriers, retailers, and end customers.

Supply chain activities can be described in three main functions. These functions are illustrated in Figure 1.1 [LEE 93]:

– supply of raw material;

– transformation of raw materials into intermediate products and finished goods;

– distribution of finished goods to end customers.

Supply includes activities whose purpose is to receive the right materials and components at the right time, in the right quantities, and at the right place. Complying with business quality standards, it includes the choice and the type of relationships with suppliers, decisions on quantities and on formats to be ordered, and when orders should be placed. Moreover, decisions on the activities carried out by the businesses or those that are subcontracted are intimately linked to the supply function. These activities also concern the choice of transportation mode (air, marine, rail, road, and multimodal), the type of carrier (private, public, and own account), and the means of transport (pickup truck, semi-trailer, etc.) that we will use to transport orders to the businesses.

Figure 1.1.Forward supply chain [CHO 07]

Materials and components are then received by manufacturers or assemblers. They are processed or assembled according to the required transformation operation. The quantity to be produced for each time period, the production and transfer batch size, and the resources to be used are all parts of the decisions that should be taken for the transformation operation.

Finished goods are distributed to retailers or directly to end customers. There are several distribution channels to dispatch products and services between manufacturers and end customers. Indeed, more and more businesses offer their products via websites, where consumers can choose the desired products. This leads to different combinations of conventional transportation modes, types, and means. The most frequently used distribution channel consisted of transporting products from manufacturers to distributors, who were transporting these products to retailers; all of that in large batch sizes to favor an economy of scale. However, online purchases by consumers involves transporting small packages directly to private individuals instead of full pallet loads transported to retailers.

Products, components, and materials are sometimes in transit in cross-docking centers. The cross-docking activity occurs during the supply, as well as during the distribution of goods. This consists of transferring the goods directly from one means of transportation to another, without any warehousing in-between. It can also be done, among other things, during a change in the transportation mode (e.g. from rail to road) or during the freight consolidation. A very tight synchronization is thus needed between acceptances and dispatching.

To ensure the product quality, businesses offer a customer service. This service can comprise the maintenance of sold goods, such as cars or computers. It can also involve answering customer questions about the maintenance that should be done and, if necessary, of guiding them through the actions that need to be carried out. Customer questions are quite diverse: for example, where can they get spare parts or accessories, what to do if they want to return or exchange their products, how to use products in a specific context … These services take various forms: customer service at the outlet, at the point of use, phone customer service, and nowadays, online customer service.

1.2.2. Flows

The type of flow that usually first comes to mind is the finished good flow. However, flows between customers and suppliers are more diverse and comprise material, information, or financial flows, or often a combination of all of the above.

Material flows other than finished good flows are often neglected during the design and management of a supply chain or of one of its components. However, they have a major impact on the fluidity in the operations. For example, the design of a factory is mostly based on the production process [HER 08, SUL 09, TOM 03]. This process results from the connection necessary to the routing of products between work centers. These work centers’ inventories must be regularly replenished. However, the required flows are rarely taken into account during design. The same is true for spare parts, components, pallets, and unit loads. They can be handled in one specific place or transported between two different facilities.

Activities requiring information flows can be found on all levels of the supply chain. Information circulates as much between suppliers and manufacturers as between manufacturers and customers. Traditionally, information between business units was transmitted via paperwork and thus involved physical flows, via the post office or other mail services. Similarly, the transfer between work centers was also done through paperwork. However, the percentage of information circulating electronically has significantly increased over the past few years. This has significantly reduced times compared to the transmission of printed documents. This has also changed business processes between partners and has involved data exchange software.

As for financial flows, they have also changed by following the trend and by taking advantage of new technologies. Indeed, checks and bank drafts were, in the past, the only ways to transfer money between two businesses. Concerning private individuals, sending checks by mail and cash payments at the counter of a bank were the most common payment methods. In all these cases, movements were required, which then resulted in delays. Information technologies have revolutionized payment methods by enabling money transfer in a single click. They have unbelievably shortened delays in financial flows, since they are nowadays electronically transferred. Transactions are carried out on bank accounts by businesses and private individuals via secure websites. Credit notes, various taxes, tax relief, subsidies, and payments can all be transferred in a few seconds.

1.2.3. Design and management objectives

It is important to note that up until very recently, decisions were taken strictly from an economic point of view. Business objectives are mostly oriented toward profitability and competitiveness. After minimizing costs, businesses then understood that it was preferable to maximize profits, while aiming to improve the performances of each chain activity. This is still an economic performance. However, the competition between businesses gives more and more influence to customers, because it indirectly forces businesses to satisfy customer needs better than their competitors. The concept of referred service level corresponds to the customer satisfaction level. For example, for a retailer, this corresponds to the percentage of times when customers find the desired product in the shops. The service level is also measured in terms of delays. Section 1.3.2 is about the evolution of consumer needs.

It is recognized that globalization increases the product supply. This increase leads to a change in consumer behaviors. Not only do they seek cheaper products, but also good quality products that will be delivered in a shorter time and that are moreover customized! This increases the competition between businesses, which then must seek at any costs to reduce their expenses and must be ingenious in order to survive.

1.3. Higher, further, bigger …

This section presents various actors and their internationalization options. It discusses changes on the level of the relationships between businesses, customers, suppliers, and their business partners, as well as the consequences on transportation needs.

1.3.1. Suppliers throughout the world

The reduction of supply costs of all input forms is one of the most frequently used strategies by businesses. This strategy is used no matter what type of business it is (production, assembly, distribution, or retailing), even if the customer service is concerned. Supply can take several forms: purchasing, subcontracting, and outsourcing. Up until recently, they were carried out mainly locally or at least within a single country. However, the development of transport networks and the suppression of tariff gatekeeping facilitate the trade between countries and the access to new suppliers.

Therefore, manufacturers import raw materials from all over the world because of their availabilities and lesser costs. Let us take the example of paper manufacturers. Canada is one of the main wood fiber producers for paper. Tropical countries, such as Brazil, produce eucalyptus with a growing rate much higher than trees from Scandinavian forests [COS 06]. Therefore, Canadian businesses are nowadays less competitive in this industry. Manufacturers are also dealing with foreign subcontractors and suppliers for their parts. For example, for computer, phone, and game console manufacturers, electronic boards are manufactured in emerging countries, such as Mexico and China.

The same phenomenon can be observed for independent retailers. They had already started gathering together to increase their purchasing power. For example, in Canada, Rona is a retailer selling hardware, gardening, and refurbishment products. It was created in 1939 [RON 10]. Groupings of retailers have enabled them to make profit on merchandise bulk buying, and this, well before globalization. The strong competition between businesses involves finding products at the best price and ensuring that retailers do their purchasing in emerging and developing countries. In those countries, some goods are available at a lesser cost, because of the low cost of labor among other things.

The odyssey of a suit

Suits are associated with important brands. However, nowadays, suits made in India or Ecuador are now found in the shops of these major brands. With globalization, suits cover sometimes more than 100,000 kilometers and are dealt with by about six different countries. They are designed, cut, sewed, assembled and pressed by employees with different cultural backgrounds. The journey without borders of this piece of clothing is fascinating: from the fleece collected on an Australian farm to the hanger of a large North American shop, via the shoulder pad manufactured in China and buttons manufactured in Canada. These elements coming from different countries will be transported to Russia, where they will be assembled and then sent to customers [PUC 99].

Customer services are also influenced by this wave of subcontracting and outsourcing. When consumers called a business to obtain information on the products they just bought or on the received service, customer service phone calls were local. New technologies, such as cable telephony and satellite multiplication, have broken down the obstacles. These technologies facilitate communications between continents in a completely transparent way. Customer services that do not require any physical contact with customers can easily be relocated in countries where the workforce is cheaper. It is nowadays quite common that North American customers interact with telephone operators in Asia, who are working for a European business.

Businesses also delegate product maintenance to customer service providers when their in-house resources cannot take care of it. This situation can notably be seen for airliners, the electrical goods industry, and manufacturing equipment. These products are quite complex and their maintenance requires expertise and specialized equipment, which would not easily be made profitable by a business acquiring it.

Suppliers come from countries, regions, and businesses with their own business culture and environment. Unionization, the political system, and the level of education of the employees are some of the aspects that need to be taken into consideration.

1.3.2. International customers

Because businesses deal with international suppliers, these “supplying” businesses have international customers. These customers are not only businesses, but also end customers. Indeed, another form of purchase abroad is developing phenomenally thanks to websites: consumers can buy goods in the comfort of their home by browsing through online catalogs. Some businesses even offer a selection of options enabling consumers to order customized products. Electronic commerce provides businesses a costless window in order to make known their products in real time to global consumers. Nowadays, borders are crumbling. The Internet enables us to reach an area of population that we could not have imagined reaching a few years ago. However, some language, tariff, and monetary (traded currency or not) barriers remain, and, therefore, they slow down this form of trade.

It is very important to take into account customer cultural specificities, as well as the norms and standards varying from one continent to another, from one country to another, and even from a region to another. Let us just think of the simple example of plugs in North America and Europe. Standards, regarding languages, are specific to the countries and regions where the products are sold. The same toy is sold with a different packaging and a multilingual instruction booklet according to the laws and rules of the country of export. We need to ensure that the needs and expectations of the customers are well mastered.

A matter of color

Several businesses have made serious mistakes in terms of export policies. Let us quote John Deer who tried to sell green tractors to Indian farmers. The color green in India symbolizes bad luck. Indian culture is very much influenced by “mystical and religious” values and no farmer wanted to cultivate their lands with green tractors.

The unique taste

Coca-Cola is promoting its “unique taste” and the fact that their Coke products have the same taste anywhere in the world. However, exporting toward the furthest points of the planet has significantly increased transportation costs of full homogeneously manufactured bottles. Profitability was then jeopardized and alternative solutions were imagined, such as sending a concentrate of the product, to which case, bottles could be manufactured and filled on the premises. However, sources of drinking water throughout the world contain variable quantities of minerals. The water used with the concentrate then has a slightly different taste, which does not guarantee anymore the “unique taste”. The business had to sacrifice its slogan for profitability reasons.

1.3.3. More complex businesses

As mentioned previously, retailer groupings are often more and more inevitable to face competitors. Another form of grouping is the merger of businesses or the purchase of small- and medium-sized businesses by international market leaders. When the involved businesses produce the same goods or at least similar goods and when they aim at expanding their market, it is called horizontal integration. This also enables them to answer to more and more varied and more and more customized customer needs. The integration is vertical when there are businesses with customer–supplier relationships. This facilitates the confidentiality and quality aspects of the products between the various actors of the chain.

These groupings are sometimes permanent. In other cases, as for consortiums, they try to establish a collaboration with a common and specific objective in a given time frame. Knowledge, resources, and expertise are then shared for the innovation, design, and production of a good. This type of sharing is sought after by businesses looking into just-in-time and lean production. They seek to reduce the number of suppliers and to have business relationships, such as partnerships. However, we should be cautious when giving our trust to business partners. Indeed, the information must be well controlled, the business processes must be officially identified, and partnership agreements must be clear and detailed. If these rules are not scrupulously followed, it can lead to tragic consequences.

The odyssey of a suit and management complexity

To have an information system compatible with that of the parent enterprise is not the only difficult aspect. Let us take again the example of the suits. The business Utex is dealing with a farmer who then has to send their fleece to a textile manufacturer. However, Utex is certainly not the only customer of this farmer. The farmer thus has other customers, who probably have a different management system than his and Utex. It is also quite probable that the textile manufacturer does not have only the farmer as supplier and that it provides textile to other businesses. It is not easy to submit all business partners to a single management system. Therefore, it is important, even though difficult, to create bridges, in order to facilitate the communication and exchanges between management systems.

Mergers, acquisitions, partnerships, or outsourcing lead to data exchange problems. Business processes and information systems within businesses are heterogeneous and sometimes incompatible. This makes communications and exchanges difficult. It is then very complex to standardize or at least make compatible management systems of facilities, which initially belong to various businesses. The necessary efforts for this standardization are profitable when relationships between businesses are considered long term. However, in the case of partnerships or outsourcing, this relationship can only be taken short or mid term. The time necessary to standardize systems can be equivalent or even longer than the duration of the partnership between the businesses. When this is about managing facilities that belong to the same “big” business, it would seem easier that these facilities follow the example of the parent enterprise. However, in some cases, this consists of business groupings, whose structure enables a certain form of operational independence. Businesses often prefer to continue with their own operating system rather than adapting to that of the parent enterprise. Bridges must be built.

The more facilities and larger business volume businesses have, the more they gather the production of similar products in the same place. This enables them to specialize facility operations and significantly increase their performances. The development of specialization brings businesses to focus on their core competency and on their expertise. They use outsourcing to seek specialists. And then again we face the same heterogeneity problem of the used computer systems and the management complexity. For example, while some customers want to order via emails, some suppliers are not even equipped with fax machines. This technological discrepancy is harmful to trade.

Some businesses even subcontract all their activities. Therefore, all the functions usually carried out by a department of the business are then carried out by businesses specialized in this specific field. For example, marketing, consumer needs studies, and even advertising campaigns are outsourced. The same thing goes for material transportation and delivery throughout the supply chain. When a business uses so much outsourcing, it can be described as a virtual organization [POU 94].

Knowingly choosing outsourcing on a small or large scale requires an in-depth analysis of the selection criteria that have a significant impact on the quality of the outsourced operations. As mentioned previously, language can be a source of bad communication of customer specifications and requirements. Delays resulting from transport must be taken into account while planning operations. Will components and modules be there on time? There are many risks during transport. The quality of the products can be affected by vibrations and bumps.

As seen in this section, it is more and more difficult to identify the “country” of origin of consumer goods and the “business” in charge of the product quality. Who will provide parts for a defective product, if we wish to replace them? How will we be able to identify the necessary parts? If there are several suppliers for a single part and if there are quality problems with this part, will we be able to trace it back to the right supplier? Will product traceability imply an identification of each part, even if they all come from different businesses? This traceability is indeed more difficult, because products transit through several businesses. Will we massively apply the new radio frequency identification (RFID) technologies that help identify products, their origin, as well as many other useful pieces of information? Where will traceability needs stop? With all these businesses blooming, merging, disappearing, or just changing owners, how can we ensure the long-term reliability of a product? Evidently, our current consumer society has simplified this problem for a long time: it is often less expensive to throw away defective products than to buy new ones!

1.3.4. Transportation networks

The subsections 1.3.1 to 1.3.3