Closed Loop Supply Chain Management (CLSCM)

Closed loop supply chain is a part of the sustainable supply chain, where all the consumer
products are created, used, and recycled or disposed of in the form of a closed loop method.
A closed-loop supply chain essentially combines the traditional supply chain (forward logistics)
with reverse logistics, considering the item after it’s served its original purpose. Once the item
has been manufactured, shipped, and distributed through a reseller, the manufacturer works to
encourage the item’s return once it’s no longer functional or needed. Reverse logistics then kick
in, and the items can either be repaired and resold, or they can be broken down for reuse in
future products. The “closed-loop” term refers to the fact that the chain is intended to maintain
and recover value from unused products, while helping to create as little waste as possible.

The working of a closed loop supply chain can be understood by the flow chart mentioned below.

The Closed Loop supply chain management concept is comprised of the following elements:

 Green design
 Green Production
 Green distribution
 Waste management
The characteristics of these elements are as mentioned in the table below
Difference between CLSCM and Traditional Supply chain

The CLSCM focuses on changes in the following five aspects compared to traditional types of
supply chain:
 1. The Goal: The traditional supply chain aims to lower the cost and improve the efficiency
of supply chain enterprise so as to maximize the economic benefits. CLSCM also seek to
maximize economic benefits, to decrease the consumption of resources and energy and
to reduce the emissions of pollutants – all in an effort to create a socially responsible
enterprise, and to balance the economic benefits, social effects and environmental
effects.

2. Management structure of supply chain: For CLSCM, environmental performance is

included in the enterprise’s internal and external management, which is lacking in
traditional supply chains.

3. Business model: CLSCM means a more complete business model. Elements including low
carbon and environmental protection must be included in the entire logistics and supply
chain to realize a complete green and low carbon supply chain system through the whole
life cycle, from raw material sourcing and industrial design to production and delivery.

4. Business process: The traditional supply chain starts with suppliers and ends with users,
and the products flow is one way and irreversible, known as “Cradle-to-Grave”. The
CLSCM changes this management mode and hopefully realizes “Cradle-to-Reincarnation”.
In CLSCM thinking, product flow is circular and reversible and all products must be
managed throughout the entire life cycle, and beyond so that “waste” finds a second life
or becomes raw material available for new production or other purposes.

5. Consumption pattern: The consumption pattern of the traditional supply chains is a

voluntary initiative governed by consumer interests and business activities. CLSCM can be
promoted through green government procurement, corporate social responsibility, and
sustainable consumption education and practices.

Benefits of a closed loop supply chain

1. Reduced Waste: Efficiencies save money on every operation. Redesigning packaging to

reduce the amount of packaging material used for each product can save money, and, if
the overall weight is reduced, can also help save on fuel costs. If the redesign makes
packaging easier to recycle, some material costs can be recouped as well.
 2. Customer Perception: The wider public is concerned about the environment and
becoming increasingly so every day. Consumers are willing to pay more for
environmentally friendly products. In fact, the public’s perception of the effort to go green
is one of the most immediate benefits of working towards a closed loop supply chain and
can boost sales, helping to offset many of the costs of initiating recycling and reusability
initiatives.

3. Customer Loyalty: Sincere ongoing efforts to improve recyclability and material

reusability can result in loyalty to a brand. This can be reinforced by refill initiatives in
which consumers refill reusable packaging instead of discarding it after a single use. A
truly closed loop supply chain for consumer package products resembles a product-as-a-
service (PaaS) model, similar to digital marketplaces, in which customers are tied to a
certain operating system and its ecosystem of applications.

4. Shaping Regulation: Companies that work towards a closed loop supply chain ahead of
any regulatory mandate that they do so pioneer the methodologies that will be used in
the future. This gives them an advantage in that they can work with regulators to help
shape future regulations and can provide their services to help other companies with
compliance when regulations are enacted.

The concept of CLSCM in Food sector

The food industry is internally very diverse. Among the products of this branch can be
distinguished products with long shelf life (e.g. coffee, tea, baking powder, oil) and short one (e.g.
yogurts, meat, bread, vegetables, fruit). Element which binds together products in this industry
is the use of organic materials in the production process, and the organic nature of the final
product. Among the features of the food industry are mentioned:

 relatively short product life cycles.

 market fragmentation (close to perfect competition) or oligopoly (depending on the
considered sub-industry).
 growing customer requirements.
 growing competition.
 capital concentration.
This industry has a significant impact on environmental pollution. 1/5 of the greenhouse gases
are produced as a result of manufacturing and distribution of food. Agricultural production
(including livestock farming) in Europe contributes significantly to environment pollution,
including responsibility for 90% ammonia compounds emission, 50-80% nitrogen loads
discharged into freshwater and 10% greenhouse gas emissions (including 80% of methane
emissions).

Returns in supply chains can be divided into two groups: returns of products and of packaging.
Both the first and the other can take place between partners in supply chain or between
consumers and other participants in the supply chain. Also the manufacturing remains flow can
be joined to them (by-products and material remains) as mentioned in the table below:

Difficulties associated with the management of closed loop supply chain in the food industry are
mainly connected with the formation of large quantities of organic waste (bio-waste), diversified
physically and chemically. In the classical approach to closed-loop waste and used products are
subject of the re-circulation. They are seen as a source of additional value. Products that have
been thrown or received from the user may be, for example disassembled and recycled.
However, in the case of the food industry this is often not possible due to the composition of
certain products, for example yogurts and fresh vegetables. In some cases, they can be recycled
and remanufactured, which results in a different product than the original one.

The table below shows examples of reuse of production remains in food industry:
There are many areas to explore in more detail in the context of CLSCM. One issue worth
examining is to investigate the flow of information within the framework of such a system
compared to the traditional system and to show not only the differences, but also new challenges
and new solutions related to this area. In addition, each of subsectors in the food industry has its
own specificity that must be taken into account. Thus it is important to carry out a number of
studies related to the various sub-branches of the industry. A separate area of research can also
be transportation services in the context of CLSCM and the role of the 3PL and 4PL (orchestrators
of supply chains) to handle return flows. On these issues, important aspects include legal
requirements, route optimization (also associated with IT support), choice of transport mode,
minimizing empty runs, processing of returns and many others. It is a proof that the concept of
CLSCM is an interesting and wide area of research that may lead to the development of a number
of new logistics concepts.
References:
1. https://www.business2community.com/product-management/introduction-creating-closed-
loop-supply-chain-01764268
2. https://igps.net/blog/2019/09/06/what-are-the-benefits-of-a-closed-loop-supply-
chain/#:~:text=The%20most%20important%20benefit%20of,can%20involve%20a%20significant
%20cost.
3. https://www.researchgate.net/publication/313895849_Specifics_of_Closed_Loop_Supp
ly_Chain_Management_in_the_food_sector.
4. https://www.ripublication.com/irph/ijert_spl/ijertv6n4spl_07.pdf