Reverse logistics in a pharmaceutical company: a case study
Schering spends considerable effort to undertake product recovery activities in pharmaceutical production. The two main recovery activities are by-product recycling and solvent reuse. The main driver for engaging in these activities is economical. Recovery leads to annual savings of approximately DM 25 million, which is about 8.5 % of the total production cost. This figure does not include additional savings due to reduced disposal quantities and additional costs due to investments in recovery equipment, of which we do not have reliable estimates. Furthermore, being engaged in recovery activities has additional benefits for Schering that are related to the reduced waste stream: production is in accordance with environmental legislation, the company builds an environmentally friendly image, and there is less strain on the environment. The downside of the recovery activities is that they complicate production and inventory planning. Especially the added complexity of production planning, resulting from cycles in the production structure, is a disadvantage.A simple MRP approach, as commonly used in practice, is no longer applicable but has to be replaced by a more sophisticated planning procedure. Schering has developed an advanced decision support system which integrates a MIP procedure. Thus it turns out that reverse logistics also is a field which creates challenges for developing advanced planning systems in order to support practical decision making.