The road toward a circular economy: The role of modular product designs in supply chains

Abstract

Product modularity has become a well-established concept for new product design that leads to accelerated product development and increases a company’s abilities for mass customization. Recently, product modularity also starts receiving attention as a promising mechanism for circular economy because it is expected to mitigate negative product-related environmental effects. While effects of product modularity are well investigated in forward supply chains, little attention has been paid to implications of modular designs for reverse logistics operations. This study explores the links between anticipatory and reactive supply chain strategies, consumer preferences, as well as a company’s optimal product design decision by considering reverse logistics operations. These relationships are explored by comparing two optimization problems: one for a company following a reactive and one for a company following an anticipatory strategy. Based on the numerical analysis of the mathematical models, the paper provides recommendations for policy-makers trying to encourage manufacturers to pursue the path toward a circular economy. The recommendations highlight the important role that consumer behavior plays and also show possible trade-offs between different sustainability goals.