System dynamics study of the Japanese automotive industry closed loop supply chain

Purpose - A major challenge the car industry currently faces worldwide is how to implement an effective reverse (also called closed loop) supply chain design while manufacturing environmental friendly cars from limited available resources. The purpose of this paper is to examine relationships between reduce, reuse and disposal in the Japanese car market with base scenario analysis using the car consumption data and forecast. Design/methodology/approach - The system dynamics (SD) modeling analyzes the closed loop supply chain design for the Japanese car industry. Relationships between reduce, reuse, recycle and disposal are explored with base scenario analysis using the car consumption data and forecast. The SD model is subjected to extreme conditions test for structural validity. Dynamic analysis of different market scenarios for the Japanese car industry's reverse supply chain is conducted. Findings - Japanese ELV regulation will trigger the growth of used car export rate to emerging countries. Without additional tax on used car export, manufacturers in Japan tend to export used cars. Imposing tax on used car export will place some control on such export and improve economic opportunities for remanufacturers, recyclers, government, manufacturers and consumers in Japan. Practical implications - The used car export option in Japanese reverse supply chain may cause the emerging countries (importing used cars) not able to sustain this activity. The Japanese government and manufacturers should take initiative to create or support the reverse logistics facilities in export countries. Issues pertaining to how product components can be recycled, reused, or remanufactured should be factored in the product design phase to reduce the cost of products and raw materials. Originality/value - The dynamic model of the Japanese car market provides an experimental simulation tool, which can be used to forecast the relationship between reduce, reuse, recycle, disposal and how various logistics elements will be impacted by government regulations on a long-term basis.