Tire Closed-Loop Supply Chain Network Design under Uncertainty
Supervisor: Dr. Ahmad Makui
Overview
Tires are one of the most environmentally problematic end-of-life products: non-biodegradable, difficult to dispose of safely, and highly energy-intensive to manufacture. Closed-loop supply chain (CLSC) design — incorporating collection, remanufacturing, recycling, and disposal alongside forward production and distribution — is both an operational necessity and a sustainability imperative for tire manufacturers.
This working paper, developed at Iran University of Science and Technology, formulates a Tier Closed-Loop Supply Chain (TCLSC) network design model that jointly optimizes economic and environmental objectives under multiple sources of uncertainty.
Network Structure
The TCLSC encompasses the full product lifecycle:
Forward flow: Suppliers → Manufacturing Centers → Distribution Centers → Retailers (customers)
Reverse flow: Customers → Collection Centers → Remanufacturing Centers (Retread 1) → Distribution Centers → (second use) → Collection → Remanufacturing Centers (Retread 2) → Recycling Centers → Disposal
A distinctive feature of the tire industry is that retreading is possible twice before a tire reaches end-of-life recycling. Each retreading cycle restores functionality (at decreasing value: Retread 1 > Retread 2) and generates additional revenue while deferring environmental disposal costs.
Objectives
The model simultaneously minimizes two conflicting objectives:
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Total cost: fixed costs for establishing manufacturing, distribution, collection, remanufacturing, and recycling centers; variable production, collection, remanufacturing, and recycling costs; transportation costs; shortage penalties; minus revenue from retreaded tire sales and recycling.
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Total environmental impact: CO₂ emissions from manufacturing, remanufacturing, recycling, transportation, and disposal operations. Disposal (incineration) carries the highest per-unit environmental cost.
Key Decisions
- Which suppliers to source raw materials from
- Where to locate and at what capacity to open manufacturing and distribution centers (existing and new)
- Where to locate collection, remanufacturing (Retread 1 and 2), and recycling centers
- How much to flow across each network arc in each period
Hybrid Uncertainty Approach
Real-world tire CLSCs face fundamentally different types of uncertainty that call for different mathematical treatments:
| Uncertainty Type | Mathematical Treatment |
|---|---|
| Market demand | Stochastic — modelled across multiple discrete scenarios with associated probabilities |
| Return rates and return quality | Fuzzy — modelled with triangular membership functions capturing imprecise expert knowledge |
| Raw material and production costs | Fuzzy — triangular distributions capturing price volatility |
| Worst-case disruptions | Robust — budgeted uncertainty set protecting against adversarial parameter realizations |
Combining these into a single tractable model is the technical contribution of the paper. Fuzzy parameters are de-fuzzified via expected value operators; stochastic demand is handled via scenario-based programming; and the robust counterpart immunizes the model against the remaining uncertainty budget.
Solution
The multi-objective problem is solved using the ε-constraint method for exact Pareto frontiers on small instances and NSGA-II for larger, industrially relevant scales. Sensitivity analysis on key parameters provides managerial guidance for supply chain designers operating under changing uncertainty levels.