Reverse Logistics for Recycling Challenges Facing the Carpet Industry

7

Reverse Logistics for Recycling: Challenges Facing the Carpet Industry

Marilyn M. Helms1 and Aref A. Hervani2

1Sesquicentennial Endowed Chair and Professor of Management, Division of Business Administration, Dalton State College, 213 N. College Drive, Dalton, GA 30720,

mhelms@https://www.sodocs.net/doc/f413972340.html,

2Chicago State University, Dept. of Geography, Anthropology, Sociology, & Economics

SCI-321, 9501 S. King Dr. Chicago, IL 60626-2186, ahervani@https://www.sodocs.net/doc/f413972340.html,

In this chapter we explore the issues of reverse logistics for recycling within the carpet industry, including an economic analysis of the success of carpet recycling. In particular, we look at:

x Carpet recycling (Section 7.2);

x The future of reverse logistics for the carpet industry (Section 7.3);

x A framework for understanding recycling (Section 7.4);

x Policy options and implications (Section 7.5); and

x Areas for future research (Section 7.6).

First, in Section 7.1, we present a general discussion of reverse logistics.

7.1 Reverse Logistics for Recycling

Manufacturers spend much of their time and energy coordinating their complex supply chains from raw material suppliers to producers, wholesalers, distributors, retailers and customer. With all the attention to the forward action of the supply chain, few manufacturers have considered how this supply chain can or should work in reverse to reclaim products at the end of their life-cycle and return them through the supply chain for decomposition, disposal or re-use of key components. Believing that once products are delivered the firm’s responsibilities end is one of the deadly sins of logistics (Stock 2001). Taking a life-cycle approach to product distribution is vital, along with implementing educational programmes for customers, suppliers, vendors and others in the supply chain.

Strategic factors to consider in reverse logistics include costs, overall quality, customer service, environmental concerns and legislative concerns. On the operational side, factors to consider are cost–benefit analysis, transportation, warehousing, supply management, remanufacturing and recycling, and packaging. According to Dowlatshahi (2000), insights about these factors form the state-of-

118 M. Helms and A. Hervani

the-art knowledge on the keys to the successful design and use of reverse logistics systems. Other issues to consider in reverse logistics are the desires of the customers. For example, do customers feel a responsibility to recycle and return used products and do they demand recycled content in their new products? Often, incentive systems or no-cost return systems must be in place to make reverse logistics work without external governmental regulation. Because the quality of inputs for re-use is important in many situations, clean, safe return methods must be in place as well. All supply channel members must be committed to the process, and it needs to be financially attractive to participate in the process. Economies of scale must be sufficient to make environmental reverse logistics viable (Blumberg 1999).

The recycling of old materials requires collection, sorting and processing, and the profitability is influenced by the efficiency achieved through co-ordination and integration. The profits made at each stage are determined by the state of the competition and the nature of markets. The implementation of internal reverse logistics programmes often involves significant allocations of capital and/or resources for the construction of reclamation and/or redistribution facilities and the purchasing of recycling equipment. Sustainable economic growth is achieved when firms choose the production technology process that will reduce the amount of pollution by-products and allow the final product to be used or reprocessed in further production operations. The usability and reprocessing characteristics of products requires initial planning and product design to allow future re-usability.

A firm’s incentive to design a more usable product will depend on whether such a change will require costly production technology (Nagel 2001). Sustainable economic growth and reverse logistics merge when both emphasise the need for changing production technologies to reduce the by-products of a final good. Reverse logistics for recycling is growing, for two reasons: (1) to reclaim value through returned products that are further re-used for recycling and (2) the environmental concerns arising from a lack of future landfill availability for disposal options.

7.2 Carpet Recycling

The Carpet and Rug Institute (CRI) based in Dalton, GA, a proactive advocacy organisation for the carpet industry, signed the voluntary National Carpet Recycling Agreement in 2002, with various carpet and fibre manufacturers, state governments, non-governmental organisations (NGOs), and the US Environmental Protection Agency (EPA), with the goal of reducing the amount of carpet and carpet fibre going to landfill by 40%, to conserve oil and to reduce greenhouse gas emissions. The carpet industry is relying on this initial informal agreement to encourage product stewardship because voluntary environmental agreements (VEAs) do not yet exist (Whaley 2002).

The CRI’s Sustainability Report (2003) outlines the industry’s progress in lessening the environmental impact of carpet, including the reduction of water use by 46% since 1991, the reduction of energy consumption per unit by 70% and the recycling of 6.4 billion pounds of waste per year. A third-party organisation, the

Carpeting Reverse Logistics 119 Carpet American Recovery Effort (CARE)1 has established a collection network for used carpet. In addition, the industry is reviewing advances in logistics management for recycling that have found success in Europe.

Carpet can rarely be refurbished. Although some manufacturers can reapply dye to extend the life of carpets or replace or clean carpet tiles in high-traffic areas, remanufacturing has not been an important activity for the industry. Product design at the early stages is essential in the success of the recycling of old materials into the manufacture of new products after reclamation and recovery. The technology must exist in order to accelerate the recycling of used carpet back into raw materials in a closed-loop recycling system. This would lead to efficient use of the product throughout its entire life-cycle. Mills for recycling carpet are and will continue to be the largest firms operating the largest production facilities in a vertically integrated process.

7.2.1 Carpet Recycling Success Factors

For reverse carpet logistics to operate successfully a number of factors need to be present. It requires:

x Initiatives by government and private industry to launch such programmes x Changes to the firm’s structure

x Capital and long-term commitment for product redesign and resource recovery

x Collection infrastructures developed by the industry or integrated with those of independent collectors or public collection agencies x Markets for old carpet

x Relatively high prices help to recover the collection cost and provide an incentive for resource reclamation

x Integration with the existing collection agents in the private and public sectors

x The development of new collection infrastructures

x Use of special coding to identify the product, its manufacturer and its components to ease sorting

x Development of collection centres to collect old carpets, with specified coding or markings on the back

x Changes to product design, to ease reprocessing

The industry must undertake efforts to make recycling less costly and more efficient. One way to achieve this goal could be for industry to engage in activities such as:

x Giving producers access to quantities of secondary fibre

x Providing incentives to users to dispose of old carpets appropriately

x Devising a means of collecting the used carpets to provide the producers with recovered material that is not contaminated or damaged

1Note: this should not be confused with the CARE project (Computer Aided Resource Efficiency Accounting for Medium-Sized Enterprises), described in Chapter 20.

120 M. Helms and A. Hervani

x Establishing drop-off centres or the necessary transportation to pick up the used, dry carpet and fibres

In some regions, collection agencies collect old carpets for a fee. This fee may not provide an incentive to households to recycle, since lower or no-cost disposal fees may divert the material from recycling bins to landfill. This consumer fee does not affect the producers and thus will not provide the producer with an incentive to manufacture new products that can more easily be recycled. Some state regulations hamper carpet recycling efforts and create obstacles to the success of recycling.

The collection process for used carpet involves the final consumers or end-user, collectors, the carpet retailers and the carpet installer. The reclaimed value of old carpets and recycling is distributed among these agents. The integration of these agents can increase the efficiency of collection efforts and lead to lower costs of reclamation and to profitability in recycling. An alternative strategy for carpet collection would be for producers to take the initiative to develop a collection infrastructure to reclaim carpets. A co-ordinated collection process would ensure production lines have adequate and accessible raw materials without relying on carpet collectors for the distribution of the raw materials and supplies.

Carpet manufacturers produce in-plant carpet waste; such pre-consumer carpet waste can be easily managed through internal channels whereas the reclamation of post-consumer carpet waste is a more challenging objective. Reverse logistics operations in an economical sense take into account the opportunity cost of resources that are not reclaimed as well as a reliable (and possibly cheaper) source of secondary fibre in the manufacture of products with recycled content. A successful reverse logistic and reclamation operation in the carpet industry will require a national infrastructure capable of collecting used carpet, recycling that carpet into an alternative product and the production of carpets with a greater recycled content.

The cost of carpet recycling can include the cost of:

x Obtaining the carpet from customers

x Transportation to a storage area

x Sorting and identification of carpet waste

x The reprocessing of carpet waste

x The design and implementation of policies to address environmental issues x The promotion of environmental awareness and concerns

x Consumer incentives (monetary incentives or an ethical awareness of recycling) and a ‘greening’ of the environment

Environmental concerns regarding carpet disposal relate to land degradation (in the form of landfill sites) and soil degradation (because of the nature of the materials and chemicals utilised in carpet manufacturing). The best alternative for old carpets is recycling, to divert the carpet from landfill and provide the industry with easy access to secondary fibre sources. The cost of recycling can be reduced by greater co-operation among fibre and carpet mills in the collection, sorting and transportation of carpet and fibre. An example of a reverse logistics operation in a closed-loop system for recycling old carpet is presented in Figure 7.1. This figure suggests a possible infrastructure for successful recycling. The revenue obtained

Carpeting Reverse Logistics 121

Figure 7.1. Reverse logistic operation in a closed loop system for recycling old carpets from recycling is the value of the material sold at different stages of its life-cycle, and the cost includes the sum of collection, sorting and reprocessing costs.

The demand for old carpets as a source of secondary fibre among the carpet industry (and its use in alternative ways) has been limited. The lagging demand for and excess levels of supply of recovered carpet combined with the lack of landfill space and rising tipping fees makes recycling the best possible disposal option.

7.2.2 Re-use and Reprocessing

The re-use and reprocessing of used carpets depends on the available technologies and the promotion of recycling activities. The number of US patents aimed at the reprocessing and re-use of old carpet is increasing (see Table 7.1). The reprocessing of old carpet will allow reclamation of carpet fibres such as nylon 6, nylon 6-6, and polyester as substitutes for raw material.

122 M. Helms and A. Hervani

7.2.3 Current state of Reverse Logistics and Recycling

There are over 292 carpet manufacturing plants in the USA, and the top 25 companies in the industry produce 98% of the total carpet produced (the top 10 producing 69%). According to the CRI, the South, and the state of Georgia in particular, holds the largest concentration of mills, accounting for 70% of the total number of manufacturing mills in the industry.

The fibre consumed in manufacturing includes nylon (66% of the total fibres used), polypropylene (23.5%), polyester (10%) and wool (0.5%). The types of carpets produced differ among mills, but the two major types are broadloom carpet and tufted broadloom carpet. The carpet is consumed in residential markets (61.4%

of the total market) and in the contract market (government, institutional, educational; the remaining 38.6% of the market). The export market makes up 9%

of the total carpet produced and has become more competitive in recent years. Industry leaders in reverse logistics in the carpet industry include firms that recycle the fibre as well as firms that manufacture carpet with recycled content. Fiber producers have been working on carpet sustainability since the early 1990s (Helm, 2005). Honeywell, Inc. (https://www.sodocs.net/doc/f413972340.html,), for example, has been working on green technologies since the 1990’s when the firm patented the industry’s first closed loop recycling system. All their Zeftron yarns have recycled content and their facility in Amprior, Ontario is the only depolymerization plant in North America. They have diverted some 200 million pounds of carpet from landfills. Solutia, Inc. (https://www.sodocs.net/doc/f413972340.html,) uses the face fibre of the carpet (which is 60% nylon) and recycles it to nylon or use it in the production of new carpets; alternatively, they use the fibre in the production of other products or in waste-to-energy generation. Their latest process is a patented dissolution technique to dissolve the carpet into a solvent and extract from it a nylon solution that can be re-extruded into new nylon. They are searching for partners to assist with the used carpet reclamation. Invista’s Antron Reclamation Program processes some 15 million pounds of used carpet a year. More than 80% is recycled into a product

and the remaining 20% is used as fuel. The company has also doubled its outlets for collecting used carpet. Their facility in Calhoun, Georgia has been operational since 1991 (Helm, 2005).

Carpet Manufacturers including Interface, Inc. (https://www.sodocs.net/doc/f413972340.html,), Milliken (https://www.sodocs.net/doc/f413972340.html,), Collins & Aikman Floorcoverings, Inc. (https://www.sodocs.net/doc/f413972340.html,), Mohawk Industries, Inc. (https://www.sodocs.net/doc/f413972340.html,) Mannington Mills, Beaulieu of America, J&J Industries, and Shaw Industries Inc. (https://www.sodocs.net/doc/f413972340.html,) use the backing and filler to produce recycled backing and carpets. C&A Floorcoverings even earned the Recycling Works Recognition Award from the National Recycling Coalition in recognition of its closed-loop recycling of old carpet (Floor Focus 2002). Honeywell had developed a collection and recovery infrastructure through co-operation and integration with retailers, dealers, waste haulers and recyclers prior to suspending its operations because of lack of demand and prohibitive costs (See the 2001 Green Seal Report at https://www.sodocs.net/doc/f413972340.html,/cgrs/Carpet_CGR.pdf).

Carpeting Reverse Logistics 123

Table 7.1. Technology and U.S. patents aimed at the reprocessing and re-use of used carpet Year Type of Technology Number of US patents granted

1996 depolymerisation

shredding

separation

recycling process

total 4 2 1 3 10

1997 depolymerisation

shredding

separation

recycling process

total 2 1 2 2 7

1998 depolymerisation

shredding

separation

recycling process

total 5 2 1 1 9

1999 depolymerisation

shredding

separation

recycling process

other

total 5 1 1 4 1 12

2000 depolymerisation

shredding

separation

recycling process

other

total

1

1

2

5

2

11

2001 depolymerisation

shredding

separation

recycling process

other

total 1 0 1 0 4 6

Source: https://www.sodocs.net/doc/f413972340.html,/ US Patent Office.

Interface Inc.’s goal is to have a 100% sustainable product line by 2020. Interface Flooring has been working with LaGrange, GA where they are headquartered to cap the landfill and use the methane from the landfill as a fuel source in the plant to replace natural gas. Shaw Industries has reduced its waste production by 75% recently and their new Siemens gasification plants will reduce that waste to zero. C & A Floorcovering has been an environmental leader since the early 1990s and they recycle about 15 million pounds of carpet per year and as the cost of oil have risen, their product ER3, developed in 1998 to use recycled content is now cheaper than virgin products. At Milliken, 27 of their 46 domestic facilities produce no landfill waste and they offer commercial customers their “NO

124 M. Helms and A. Hervani

Carpet to Landfill” reclamation programs. Mohawk Industries reclaims three billion plastic (PET) bottles turning them into 160 million pounds of polyester fiber for carpets. Beaulieu has a new carpet tile backing with an 85% post consumer recycled called Nexterra also made from PET bottles. Finally J&J Industries has developed several products with recycled content and offers a no-landfill guarantee on their Encore SD Ultima products (Helm, 2005).

Finally backing producers are also using recycled content and bio-based materials to produce backings for the carpet industry, many at the same cost as virgin materials but with improved performance. Still other sustainable flooring substitutes are hardwood flooring, eucalyptus flooring (which grows five times faster than other hardwood species), wool carpet, cork, bamboo, rubber, and Ceres recycled rubber flooring made from recycled tires (Helm, 2005).

Most of the carpets that are recycled contain nylon fibre. Carpets with polyester and polypropylene are not currently recycled because of the low cost of virgin fibres. Carpet can be recycled for its face fibre to produce secondary fibres such as nylon 6 and nylon 6-6, which in turn are used as fibres in the production of new carpet. Carpet tiles and padding can be recycled to produce recycled-content backing used in the manufacture of new carpet and carpet padding.

Carpet recycling initiatives in the USA have not been driven by state or federal laws but have been implemented for profitability, marketing, to meet the increased demand for recycled-content parts from alternative uses of old carpets or to avoid possible future legislation. Face fibre is the most valuable component of carpet and is used to produce recycled fibre; selvedge and trim can be recycled and used in carpet padding. Various carpet wastes (beam waste yarn) can be utilised in the manufacture of products such as stuffing and soft textiles or can be palletised for use as an injection-moulding compound to make hard plastic parts for automobiles. Backed carpet scrap is utilised to manufacture fibre pad—the layer under installed residential carpets. (For a summary of uses of carpet waste, see Table 7.2)

Table 7.2. End uses of carpet waste

option

Type End-use

Selvedge and trim Carpet padding

Wool waste Fibre reclamation

Beam waste yarn Stuffing for pillows and toys

Soft textiles

Backed carpet scrap Fibre pad

Various carpet waste Fan housing

Fast-food trays

Flower pots

Plastic bags

Parking-lot bumpers

Face fibre Fibre reclamation

Several companies have included reverse logistic operations in their management plans and have implemented take-back programmes on a voluntarily basis at different points in the supply chain. DuPont is the largest producer of nylon fibre and, through its existing collection infrastructure, takes back its old carpet to

Carpeting Reverse Logistics 125 recycle for further use in carpet manufacture and for other uses. Honeywell (formerly AlliedSignal) is the second-largest producer of nylon. It has developed its collection network for used carpet through integration with retailers, waste haulers and various recyclers. The primary motive for these firms to recycle old fibre has been economic, as the market for recycled fibre is on the rise. BASF also takes back its old carpets, recycling it back to fibre, which is used in the production of new carpets (Gavin 2001).

Interface Inc., through its closed loop, takes back old carpet to be used in the production of new carpets and separates the used carpets into their components to make products of lesser value (https://www.sodocs.net/doc/f413972340.html,/). Milliken refurbishes reclaimed carpets and sells it back to customers, therefore reclaiming value. C&A Floorcoverings recycles face fibre and backing into new carpet backing (https://www.sodocs.net/doc/f413972340.html,/sustain01.html). Shaw Industries Inc. has developed the collection infrastructure that allows it to take back any used carpets from customers who buy a new Shaw product and have their old carpet recycled (https://www.sodocs.net/doc/f413972340.html,/uc/recycling.htm). Not all the fibre producers or carpet manufacturers are engaged in reverse logistic operation and the recycling of old carpets and, despite their efforts, the recycling rate for carpets is very low. Realff et al. (1999, 2000) and Louwers et al. (1999) analysed shipping costs and location for carpet waste collection and found the main barriers to recycling are the high costs of collection, transportation, sorting and recycling compared with the cost of virgin fibre.

7.2.4 After-market Value

The value of items at the end of their life depends on a number of factors, including the price paid for the new recycled content products. The prices of recycled-content product depend on the quality perception of buyers for recycled-content carpet compared with virgin carpet product. The recycled carpets made through the reprocessing of old carpets can compete with recycled carpets made from other sources of reprocessed fibres such as carpet made from plastic bottles (from polyethylene terephthate [PET]). The increase in demand for products with recycled content can lead to greater prices paid for these products. The greater demand can come from a focus on the environment and increased regulation requiring recycled-content carpet in federal and state buildings.

Carpet mills recycle approximately 6.4 million pounds (weight) of carpet waste per year, or about 1% of the total carpet discarded. Carpets produced with reclaimed fibres and carpet pad and carpet backings are being produced with a 50% recycled content. In most carpet manufacturing, the average is about 20%–25% recycled material in carpet fibre and carpet production. Many carpet manufacturers are also working to reduce other types of waste within their production facilities, including office waste, containers and creels used to hold yarn, and water and energy in the manufacturing and dyeing process. Most are environmentally aware, responsible and continue to research viable uses and options that are profitable for their waste, with an emphasis on economically sound initiatives (Whaley 2002).

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7.2.5 Production Methods and Recycling Challenges

Carpet is manufactured by tufting a face fibre into a primary backing and then using latex to bind this subassembly to a final or secondary backing for shape and stability. The latex holding the fibres in place is made from calcium carbonate. Both nylon and polypropylene are the most common materials used for face fibre and backing material.

Carpet waste comes from many sources, including construction and demolition, residential used carpet, government and military remodelling, and commercial and industrial used carpet. It can be returned to reclamation centres in rolls, baled, in squares, chipped, or unbundled and loose. Carpet must be sorted by type of fibre to determine whether the nylon fibres are recyclable into other carpet and/or other products.

The use of post-consumer carpet in other products is limited by the undeveloped infrastructure for reclamation. Industrial and institutional customers generate larger volumes of waste carpet, but a reverse supply chain logistics network must still be developed to efficiently and effectively recover the carpet in a clean and dry condition suitable for further reprocessing. Future legislation banning kerbside disposal of carpet in all US cities (including New York and Chicago, where it is currently legal) may help in the recovery process from individual homes and smaller users. DuPont leads the reclamation programme initiatives, with 80active collection sites for consolidation, receiving and sorting some 20 million pounds (weight) of used carpet and installation scraps each year (https://www.sodocs.net/doc/f413972340.html,/used_carpet_recycling.htm).

Polk et al. (1994) estimated that one billion pounds (weight) of fibre from used carpet might currently be finding its way into landfill in the USA. The carpet waste can be recycled in a number of ways:

x Depolymerisation of the nylon or face fibre

x Manufacture of recyclable single-material polyester carpets

x Chipping the carpet and combining the hard waste through extrusion and production into carpet tiles

x Use of the shredded carpet waste as a fuel source and/or additive for concrete or aggregate reinforcement

Because most of the face fibres and backing materials used in carpet production are by-products of the petroleum industry, re-use of waste carpet creates a secondary source of resource supply and conserves natural resources.

Some used carpeting has found new life in roadway construction to control soil erosion. Since many carpet manufacturers in the USA are selling their products through ‘big-box’ retail stores such as Home Depot, Lowes, Menards and others, it seems that reclamation at these locations might be a viable alternative.

The transportation mode used primarily to ship carpet is via lorries by road, and since the value of carpet per pound (weight, or by its value density) is low, recyclers must determine carefully where reclaimed carpets should be stocked geographically and how they should be shipped to recycling centres or processors. If the costs of fuel or transportation exceed the value of the recycled product, it is not economical to recycle and doing so would further deplete natural resources

Carpeting Reverse Logistics 127 resulting in a negative economic added benefit. A study by Louwers et al. (1999) as well as Realff et al. (1999) developed facility location models for the collection, pre-processing and redistribution of carpet waste to support the design of the logistic structure of re-use networks for Europe and the USA.

7.3 The Future of Reverse Logistics for Carpet

Figure 7.2 shows the disposition of used carpet and how it can be broken down into various components; this involves a number of complex paths, largely because of the composition of the carpet itself. Because the designs and components vary widely, it is necessary to know the chemical composition of the face fibre to determine its ease of and applicability to recycling.

7.3.1 Accounting Standards for Valuing Waste

A cost–benefit analysis for carpet recovery and recycling has not made its way to generally accepted accounting practices or to the balance sheet and income statement. Several life-cycle costing models have been proposed to aid management in such costing analysis (Kumaran, Ong, Tan, and Nee 2001; Weitz, Smith, and Warren, 1994; and Williams, 1977). These models attempt to determine all the true costs of reclaiming the goods, including those involved in transportation, labour, storage, sorting and processing.

7.3.2 Financial Incentives and Benefits

Recycling is not simply a consideration when government regulation mandates firms and industries to include recycling in product design. Most countries in the European Union (Fishbein, 2000) have been faced with environmental regulation; however, in the USA federal mandates are not yet in place for industry. In these cases, recycling must have a positive financial impact for firms and must provide a competitive edge in the marketplace. Carpet recycling initiatives are growing but, as a whole, are still in the introductory stage of the life-cycle (Dunn 2002).

RCRD Inc. uses post-consumer carpet waste to make Camel Storm Bags? and Alligator Archery Bag? for target practice. These products use 100 percent recycled carpet fibres as filler. They also use recycled nylon 6 and a polypropylene/polyester cocktail in making carpet padding, with the addition of new (https://www.sodocs.net/doc/f413972340.html,/) nylon 6 fibres. Invista collects post-consumer carpet and sends it to its facilities in Calhoun, GA (Helm, 2005). There, they separate the carpets by face fibre type. They then use fibre to make pellets. Invista has over 100 active collection sites where waste carpet is collected, consolidated and sorted. Their reclamation programme is collecting and processing over 116 million pounds of carpet and has conserved close to half a million cubic yards of landfill space each year. Pike Companies plans to use post-consumer nylon 6-6 to produce tiles that can be used in high-moisture areas, such as marine environments (https://www.sodocs.net/doc/f413972340.html,/annual_report/04_CARE-annual-rpt.pdf).

128 M. Helms and A. Hervani

Source: Carpet & Rug Institute, 2001

Figure 7.2. Disposition of carpet

7.3.4 Future Uses

Patent searches on products and processes for recycling carpet reveal many additional ideas for products are available, as shown in the patent search data (see Table 7.1). Other potential uses of carpet are listed below. It can be used:

x

As insulation in homes or automobiles x

Inside automobile door panels and trunk voids to buffer and insulate x

As products moulded from PET x

In guardrails and guardrail stops or bumpers, park benches and swings, and pylons x As a soil substitute to grow grass or turf that can be rolled up after use for use in indoor competitions and athletic events POLYPROPYLENE BACKING MATERIAL DIRT

& LATEX

COMPOUND

POLYMER RECOVERY,

DEPOLYMERIZATION NEW NYLON

COMPOUNDED

RESINS NYLON

SORTED

NYLON

CARPET

DE-MFG

PROCESS

USED CARPET

COLLECTION

POINT SORTING & PROCESSING CENTER

NON-NYLON

CONTAINING

CARPET FIBERS &

SHODDY

Carpeting Reverse Logistics 129 x As an additive to improve soil quality and function

x As an additive in cement kilns

x As fuel (for burning) in manufacturing

These potential product ideas and uses are interesting, but the actuality of producing the goods costs too much and puts the items at a competitive and strategic disadvantage compared with virgin materials and existing substitute products. To develop the ideas requires a large amount of capital and investors, and venture capitalists are needed to invest in the most viable alternatives and to provide seed capital financing.

7.4 Framework for Understanding Recycling: The Present Business Model

The economic analysis of carpet recycling should include separate cost–benefit analysis for the four major recycling players: consumers, collectors, processors and recyclers. The interconnection of these four players makes up the recycling infrastructure. The incentives for recycling programmes lie within the constituents of and the payoffs to each player along the spectrum. For a successful recycling programme the incentives to recycle should be present for all involved and revenues must outweigh the costs at each step of the operation in order to promote continuous collection, recovery and recycling efforts. A lack of incentive in one segment will have an impact on the overall success of the recycling programme because of the strong links that exist between these segments. There is a need to develop markets for the various components of the recovered carpet in order to raise the economic incentives.

7.4.1 Incentives for Collectors

Collectors transport carpet waste and pay for the cost of transportation. The economic incentive for collection efforts is the revenue generated from the sale of waste carpet delivered to a drop-off location or to the retailer’s store. In addition, collectors may also be able to charge for carpet collection (in amounts less than the landfill tipping fee) for delivery to incineration sites for energy-generation purposes. The cost of fuel, along with inflation, increases the cost of real transportation costs and will have an impact on how far the collectors will travel to collect carpet waste and the minimum price they are willing to accept.

7.4.2 Incentives for Retailers

The retailer may receive the old carpet or carpet pads that are removed by the installer and returned to the store. The economic incentive for recycling carpet resides with the retailer, who can reduce the tipping fees currently paid to dispose of the carpet. The retailer usually sells the carpet pads to the recycling processor for a face value and disposes of the rest of the waste carpet. The success of a recycling programme will depend on the retailer, who must provide an incentive to

130 M. Helms and A. Hervani

the installers to return the carpet to the store to enable the installer to cover the cost of collection and delivery.

7.4.3 Incentives for Installers

Installers are independent contractors and remove a significant volume of carpet from customer locations. The installer usually takes the waste carpet to the retailers for disposal or removes the carpet and delivers it for sale at face value. The economic incentive for the installers to deliver the old pads to the retailer is influenced by the prices paid by the retailer and whether these prices cover the cost of collection and delivery. Installers have several options when removing the carpet pads from the waste-generation source. They may:

x Have haulers deliver the old, used carpet and padding to the retailers

x Locate dumpsters for carpet waste at a designated drop-off location and possibly pay for the recycled carpet

x Sort carpet waste on-site and then deliver it to a drop-off location

x Take the waste carpet to a sorting centre to remove the pads for resale

Sorters have their own processing location for sorting carpets. If they are also performing a function as collectors then they will take the waste carpet to their own facility for sorting or they may also have contracts with other haulers to receive waste carpet for sorting. The installer may have an incentive to deliver the waste carpet to an incinerator, depending on fees received. The economic incentive for installers to return old carpet to the retailer for recycling purposes lies in the prices paid by the retailer, and these prices should reflect the highest value use for old carpets in order to attract a high level of recovery.

7.4.4 Incentives for Processors

A recycling processor with an established facility provides a drop-off location for waste carpet from stores, installers, other collectors and haulers. The recycling processor sorts and bales the carpet and disposes of the residue. The processor delivers the pre-sorted and baled old carpets to a carpet recycler. The cost of operation for the recycling processor is primarily the fixed cost of the facility and the variable costs, including labour, transportation and other operating expenses. The recycling processor must pay a fee to the suppliers of the old carpet for delivered materials in order to gain access to a reliable and continuous source of material. Landfill tipping fees may have a significant impact on prices paid for old carpet and may impose a price mechanism for the recovered material. The recycling processor reviewing the landfill tipping fees may use this information as a price mechanism to offer a relatively lower price to its suppliers. The opportunity cost of not selling old carpets is the cost of the tipping fees that suppliers of old carpets incur to avoid storage costs. The recycling processor generates revenue from the prices paid for sorted materials, such as for face fibre, carpet pads, and trims and sledges.

Carpeting Reverse Logistics 131 7.4.5 Incentives for Recyclers

The recyclers receive the old carpet materials from the processors and, using various technologies, process the old carpet into a secondary fibre or into end-products. The carpet recyclers accept and process pre-sorted post-consumer carpets into various components for reclamation. In general, the recycler will liberate face fibre from carpet backing; reclaim high-value fibre into recycled resin and process low-value fibre into marketable materials for the manufacture of other fibres. In some cases, recyclers are vertically integrated and undertake all three functions and thus benefit from the economies of scale. Non-integrated recyclers fall into three separate market segments: the resin manufacturer, the fibre producer and the carpet manufacturer. The resin manufacturer purchases nylon 6 and processes it into carpet resins and sells it to the fibre producers, who form carpet fibres. The fibre producer sells the carpet fibre to the carpet manufacturer for the creation of end-products. The economic incentive for non-integrated mills to produce resins is dependent on the price paid for the old carpet and the prices they will receive for the manufactured resins. Demand for resin is a derived demand, being dependent on the demand for the final product. Recyclers receive demand for their products (resins) mainly from (carpet) fibre producers and from other users of resins, such as the automobile industry, which uses nylon resins for the manufacture of automobile parts. The processed resin, as an input, faces competition from other inputs, such as plastic bottles (PET), that can replace resins, and demand will also depend on the prices that fibre producers or manufacturers of alternative products (such as the automobile industry) have to pay for virgin resins. The economic incentives for the carpet fibre producer is influenced by the market prices paid for the recycled resin, the recycled carpet fibre, the available substitutes for resin and the virgin fibre. The economic incentive for the carpet manufacturer lies in the price of the virgin fibre, recycled fibre and the demand for recycled-content carpets. The lower prices of recycled fibre compared with virgin fibre should make recycling profitable when the necessary infrastructure for collection and recovery of used carpets are in place.

7.4.6 Value Added from Recycling

Recycling of used carpet is less detrimental to the environment than other options largely because carpet is bulky and is not, as a rule, biodegradable, particularly when considering nylon based fibers; also, the recycling of old carpet reduces the demand on existing landfill space and poses less of a threat to future land use for landfills. The recycling of old carpet creates greater value added than the alternatives, such as incineration and landfill. Incineration and landfill ends the life-cycle of the product and, as a result, less value is reclaimed from the material. The economic value of recycling old carpet compared with the alternatives is presented in Figure 7.3.

It is far easier to recycle and re-use post-industrial waste from internal manufacturing than it is to reclaim post-consumer waste to use as a raw material input. Although a few firms have created an infrastructure for returning used carpet, two major issues still exist. The first issue concerns how to reclaim the

132 M. Helms and A. Hervani

carpet on a large scale. The solution to this issue seems paramount to the development of new products that utilise the carpet waste and used carpet. Once sales of these products grow, there will be a greater demand for post-consumer waste carpet. It will be easier to achieve the volume needed from commercial users (large office buildings, apartments, educational facilities, government offices and military installations) than from individual homes. Working with retail outlets and installers is also paramount to gathering the carpet.

Figure 7.3. Alternative uses of old carpets: cost vs benefits

A second issue is the cost of recycling. If fuel and labour costs to reclaim and recycle carpet are too high, the resulting products created from the waste material will not be competitive or profitable in the marketplace. Education of consumers and legislative representatives on the true and total costs of recycling must be in place. There is also a need for an industry-wide initiative for recycling. Working together and developing industry solutions with a united front may be the best option in addressing the issue. Legislative changes on the kerbside disposal of carpet must be enacted to facilitate recovery.

7.5 Influencing Recycling: Policy Options and Implications Recycling is not completely market-driven, and government intervention may be necessary to help to push the market in achieving efficient solutions to material re-use and recycling. To divert recyclable materials from landfill, many state governments have passed mandatory laws to help to increase the supply of recyclable materials. To promote demand for those recovered materials, states have

Carpeting Reverse Logistics 133 implemented minimum constant standards along with various tax incentives to promote recycling. The government policy options to help to rectify the recycling bottleneck would be twofold: (1) to internalise externalities and (2) to require the producers to internalise the externality. Government can influence recycling efforts on the demand and supply side of the industry, among others, and through several policy options, as outlined in Table 7.3.

Table 7.3. Government policy options for improving recycling efforts Policy type Impact on recycling

Supply-oriented:

The introduction of mandatory recycling programmes such as:

Drop-off programmes

Kerbside recycling Helps to increase supply levels

Encourages recycling through convenience

Imposition of a user fee in the residential sector Helps to pay for

collection efforts

Imposition of a ban on product disposal (i.e. carpet disposal) Diverts old carpets from landfill

Use of volume-based pricing of waste Reduces disposal volume

(costs of disposal are

incurred by consumers) Introduction of unit pricing of waste Encourages recycling

through reduction of

waste volume (costs of

disposal are incurred by

consumers)

The granting of tax credits to private collectors Helps to increase supply

levels by helping to pay

for collection costs

The granting of tax credits for transportation costs Helps to increase supply levels

The granting of tax credits on storage costs Helps to increase supply

levels

The introduction of a requirement for deposit programmes on recyclable items Helps to increase supply levels

Public-sector construction of waste separation and sorting plants Helps to increase supply levels

The granting of loans to municipalities for the creation of recycling programmes Helps to increase supply levels

Demand-oriented:

The creation of a standard for minimum recycled content Helps to increase the

demand: responsibility of producers (EPR)

The granting of tax credits and exemptions for

recycling programmes owned by private

businesses

Encourages recycling

The granting of more patents Encourages recycling by

providing technical

assistance for recycling

programmes

134 M. Helms and A. Hervani

Table 7.3. (continued)

Policy type Impact on recycling The introduction of a requirement for producers

to use coding or labelling

Eases recycling

The introduction of a requirement for take-back recycling programmes Placing responsibility on producers (EPR)

The granting of tax credits for investment in product redesign and improvement (e.g. tax credits for R&D) Eases recycling: responsibility on producers (EPR)

The creation of investment tax brackets Encourages recycling by

placing responsibility on

producers (EPR) The imposition of a tax on use of virgin

materials

Encourages recycling

The introduction of a requirement for state or

local agencies to purchase recycled-content

products

Encourages recycling

Initiation of a tradable permit system in the

recycling market

Encourages recycling

EPR = extended producer responsibility

R&D = research and development

7.6 Areas for Further Research

Understanding and identifying the variables affecting the demand and supply of used carpets is essential for successful reclamation of resources. Future research should take an empirical approach to analysing the carpet industry in identifying the factors beyond the lack of demand, including estimation of the price elasticities of demand and supply. The presence of market imperfections in the carpet industry may hamper collection efforts and recycling rates. Furthermore, given the current market structure, government policies aimed at helping the industry will be ineffective. One possible reason for the lack of demand for used carpets is the lack of buyers, discouraging collection efforts. Future study should focus on an analysis of market structures within the carpet industry.

References

Blumberg, D.F. (1999) ‘Strategic Examination of Reverse Logistics and Repair Service Requirements, Needs, Market Size, and Opportunities’, Journal of Business Logistics

20.2: 141-59.

CRI (Carpet and Rug Institute) (2003) The Carpet Industry’s Sustainability Report 2003 (Dalton, GA: Carpet and Rug Institute (Available at: https://www.sodocs.net/doc/f413972340.html,/pdf_word_docs/03_CRI-Sustainability-Report.pdf).

Dowlatshahi, S. (2000), ‘Developing a Theory of Reverse Logistics,’ Interfaces 30.3: 143-

55.

Dunn, R.S. (2002) ‘Carpet Industry, Government Unite to Increase Recycling’ Textile World, February, p. 26.

Carpeting Reverse Logistics 135 Fishbein, B. K. (2000). “Carpet Take-Back: EPR American Style,” Environmental Quality Management, 10(1), autumn, 25-36 and Adapted from “Extended Producer Responsibility: Materials Policy for the 21st Century,” INFORM, Inc.

Gavin, K. (2001) ‘Fibre Report: Business Falloff Affects Outlook,’ Floor Covering Weekly (November 1, 2001): 50(29), p. 6-7.

Louwers, D., B.J. Kip, E. Peters, F. Souren and S.D.P. Flapper (1999), Reuse of carpets. A location-allocation model. Computers & Industrial Engineering 36(4), 855-869.

Floor Focus (2002) ‘Newsfront’, Floor Focus (August–September 2002): 14.

Helm, Darius “The Green Revolution” (2005) Focus, August/ September, p. 31-51. Kumaran, D. S.; Ong, S.K.; Tan, R. B. H., and Nee, A. Y.C. (2001) ‘Environmental Life Cycle Cost Analysis of Products,’ Environmental Management and Health, 12(2/3), 260-277.

Nagel, M.H. (2001) Environmental Quality in the Supply Chain of an Original Equipment Manufacturer in the Electronics Industry (PhD Dissertation, September 2001; Delft, The Netherlands: Faculty of Mechanical Engineering, Laboratory for Production Technology and Organisation, Delft University of Technology).

Polk, M., S. Kumar and Y. Wang (1994) ‘Fundamental Studies for the Utilisation of Carpet Waste’, in National Textile Centre Annual Report (September 1994; Spring House: PA, National Textile Centre (https://www.sodocs.net/doc/f413972340.html,/): 167-74.

Realff, M.J., J.C. Ammons and D. Newton (2000) ‘Strategic Design of Reverse Production Systems’, Computers and Chemical Engineering 24.2: 991-96.

Realff, M.J., J.C. Ammons and D. Newton (1999) ‘Carpet Recycling: Determining the Reverse Production System Design’, Polymer-Plastics Technology and Engineering

38.3: 547-67.

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Weitz, K. A., Smith, J. K. And Warren, J. L. (1994) ? “Developing a Decision Support Tool for Life-Cycle Cost Assessments,” Total Quality Environmental Management, autumn, 4(1), 23-37.

Whaley, P. (2002) ‘Covering New Ground’, Textile World (February 2002): 32-35. Williams, J. E. (1977). “Data Requirements for Life Cycle Costing,” American Association of Cost Engineers. AACE Bulletin, November/December, 19(6), 225.

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