1.
INTRODUCTION
Shipbuilding,
in the present day, is a multibillion dollar business with the major share of
shipbuilding activity occurring in China, South Korea and Japan (Barry Rogliano
Salles – Annual Review 2012). As the number of new ships introduced to the
existing fleet of ships increase year-on-year, to meet the increasing demand of
international trade, older ships are phased out from the fleet. The ships taken
out of service are sent to the scrap yards for demolition and possible recovery
of materials. However, lately there have been concerns on the environmental and
human safety aspects, at places where demolition of ships take place. Almost 92
per cent of the ship scrapping in 2011 took place in developing Asian countries
such as India, Bangladesh, China and Pakistan (UNCTAD, 2012).
Although
there are economic implications of shipbreaking business as it provides jobs to
thousands of people, there are legal, environmental and ecological safety
issues as well. According to Basel Convention, prevention, minimization,
recycling, recovery and disposal of hazardous and other wastes subject to the
Basel Convention must be undertaken, taking into account social, technological
and economic concerns. This is where sustainable operations have an important
role to play. In order to balance the economic and environmental aspects of business,
the supply chain may be extended to incorporate reverse logistics thereby
recapturing value at the end of the value chain and reintroducing it back into
supply chain. This will enable us achieve success in the form of the triple
bottle line – profit, people, planet, all of which are vital in today’s balance
sheets, for businesses to survive (KLEINDORFER, et al. 2005). This paper also
discusses on minimizing the carbon footprint in the business processes in the
shipbuilding supply chain thereby making the processes more efficient and
environment friendly.
2.
LITERATURE REVIEW
There
are mainly four areas where the extant literature has been studied. They are:
reverse and closed loop supply chains, ship-breaking business, sustainable
operations and ship recycling process. A brief of the literature that has been
reviewed is elaborated, as follows:
2.1.
Reverse and closed loop supply chains
Strategic
issues in product recovery management (PRM) have been studied (THIERRY et al.,
1995), and the information required for making accurate analysis on PRM has
been enlisted as: composition of manufactured product, magnitude and
uncertainty of return flows, markets for reprocessed products and materials,
actual product recovery and waste management operations, product recovery
options, repair, refurbishing, remanufacturing, cannibalization, and recycling.
Quantitative models for reverse logistics have been developed (FLEISCHMANN, et
al., 1997) including MRP system for product recovery. Product returns for
remanufacturing may be managed by a mix of activities termed as product
acquisition management (GUIDE, WASSENHOVE, 2000) which includes value creation,
profit maximization by product returns management, operations streamlining and
creating new markets for reused goods and products. The options for collecting
used products for remanufacturing in a closed loop supply chain has been
analyzed (SAVASKAN et al., 2004). Among three options dealt within the study
i.e. – direct collection from customer, collection by retailer and collection
by third party, it has been concluded that maximum supply chain profits (as
same as centrally coordinated supply chain) are attained when the retailer
collects the used product. The case of competing retailers in the reverse
channel design has been studied (SAVASKAN, WASSENHOVE, 2006) wherein there is
interaction between manufacturer’s reverse channel choice to collect used goods
and the forward channel pricing decision. When the buy-back payments are
transferred to the retailers for postconsumer goods, as against direct
collection, a wholesale pricing is achieved that can be used to price
discriminate between retailers of different profitability.
2.2.
Shipbreaking business
Much has been discussed in literature about shipbreaking in recent times
due to the controversies regarding dumping of toxic waste materials associated
with the shipbreaking process. This has renewed interests in developing methods
by which scrapping of ships may take place without adversely affecting the
environment. Reddy et al. (2003) have discussed about the quantification and
classification of ship scrapping waste at Alang-Sosiya (India), one of the
biggest ship-breaking yards in the world. This industry generates a huge
quantity of solid waste in the form of broken wood, rubber, insulation
materials, paper, metals, glass and ceramics, plastics, leather, textiles, food
waste, chemicals, paints, thermocol, sponge, ash, oil mixed sponges,
miscellaneous combustible and non-combustible substances. A sampling experiment
revealed that 96.71 metric tons of wastes per day are deposited on the shore
due to the scrapping activity (REDDY, et al., 2003).
Hossain and Islam (2006) conducted a study on the ship
breaking activities and its impact on the coastal zone of Chittagong
(Bangladesh). They have come up with a fourteen point recommendation for
incorporating sustainable practices in ship breaking industry. European Commission Directorate General
(July 2007) in its report has prescribed the guidelines for ship dismantling
and pre-cleaning of ships, including exploring different options for developing
strategies for ship dismantling in European Union. A statistical overview of
ship recycling was carried out in order to quantify some aspects of recycling
such as size of operating fleet, lightship, age of ship etc. (MIKELIS, 2007).
The work provided some interesting insights such as:
there is a direct correlation between the freight markets and recycling prices.
Price differentials that exist are not only due to shipping market but also due
to differences in labor and environmental costs in recycling at different
locations, and due to the internal ship steel demand in different economies.
The activities at Alang ship-breaking yard, including conditions of workers,
impact of shipbreaking on ecology, and recent controversies on asbestos dumping
has been treated in detail (THOMAS, 2007). The case of scrapping of asbestos
laden Blue Lady (cruise liner) at Alang, and the legal, environmental and human
hazard related problems associated with it has been elaborated (PELSY, 2008).
Sonak et al. (2008) discusses the case of French
aircraft carrier ‘‘Le Clemenceau’’, which was sent to Alang, India, for
disposal. They further assessed the implications of shipping hazardous waste to
developing countries and emphasized the need for promoting research to plug the
gaps and for implementing stringent measures to check the trade of environmental
pollutants. In order to ascertain quantitatively, a methodology to model the
environmental impacts of ship dismantling has been suggested (CARVALHO, et al.,
2009). They have also elaborated on the impact on the ecology with respect to
the type of ship that is being dismantled.
2.3.
Sustainable operations
The
idea of sustainable operations has gained much ground especially in the last
decade, due to concerns about the ecological and human impact of day-to-day
operations. The evolution of sustainable operations management has been
thoroughly elaborated (KLEINDORFER, et al., 2005) detailing the three major
areas of integration of sustainable operations i.e. green product & process
development, lean & green operations management and remanufacturing &
closed-loop supply chains. Demaria (2010) explained about the ecological
distribution conflict emanating out of dumping toxic wastes associated with
ship breaking, at the cost of environment, local workers, farmers and fishers.
In
his doctoral dissertation, Sivaprasad (2010) has elaborated on formulating a
set of best practices for sustainable development in ship-breaking industry and
implementing the 4E principles i.e. eco- friendliness, engineering efficiency,
energy conservation and ergonomics in core operations. Technologies for reduced
environmental impact from ships - ship building, maintenance and dismantling
aspects have been discussed (Hayman, et al. 2010) at length.
2.4.
Ship recycling process
Statistical
data regarding ship recycling has been collated and discussed in detail (MIKELIS,
2008). Chang et al. (2009) has elaborated on the historical background,
structure and enforcement of the Hong Kong International Convention on safe and
environmentally sound recycling of ships. The polycyclic aromatic and aliphatic
hydrocarbons pollution at the coast of Aliga (Turkey) ship recycling zone has
been studied in detail by Neser et al. (2012). In this study, sediments were
investigated to perform an environmental risk assessment. The results suggested
that the sediments were likely to be contaminated. The pollution was due to
shipbreaking industry and the petrochemical complex.
Dimakopoulos
(2005) described about International Maritime Organization’s (IMO) role in ship
recycling activities. The formation of guidelines by special working group
formed by Marine and Environmental Pollution Committee (MEPC) of IMO and
International Labour Organization (ILO) has been discussed. He further
elaborated on how recycling contributes to sustainable development and why IMO
encourages and promotes ship recycling in compliance with the international
standards of safety, health and environment. Hossain et al. (2010) has
discussed on the recent status of ship recycling industry in Bangladesh. They have
further elaborated on the social and environmental impacts of ship recycling,
its positive economical contribution and also its negative effects like lack of
occupational health and safety standards. It has been further analyzed whether
it is better in an overall sense for Bangladesh to support this business on its
own soil. Some viable recommendations have been made in the conclusion.
3.
REVERSE SUPPLY CHAIN MODEL IN SHIPBUILDING BUSINESS
In
the classical business supply chain of manufacturing industries, the finished
product passes on from manufacturer to wholesaler, then from the wholesaler to
retailer, then from the retailer to the customer who is the end-user of the
product. After the service life of the product, the customer ‘throws away’ or
disposes the product. This was the case till a few decades ago. However, in
recent times, the producer or manufacturer of the product has been trying to
retrieve the product from the customer after its use. This is done by providing
incentives to the customer, for example, by buying back the product (of course,
at a reduced price) at collection points (for instance, authorized retailers, 3rd
party collectors etc.) near the location of customers.
Collection
of disposed products and remanufacturing helps the manufacturer to achieve the
3 Ps. Increase in ‘profits’ due to reduction in cost of manufacturing from raw
materials, as disposed products can be collected and refurbished, recycled or
remanufactured. ‘Planet’ friendly – lesser damage to the environment as
disposed products are not released into the environment, but rather collected
back. ‘People’ friendly – better health for humans, as they are saved from
toxicity that emanate from products that are dumped in the environment. An
illustration of the reverse supply chain is shown in Figure 1.
Similarly,
for shipbuilding business as well, there is an extension of the classical
supply chain, to make it a closed loop supply chain. The difference of
shipbuilding closed loop supply chain from that of normal products such as FMCG
goods or automobiles is that the collection point of decommissioned ships
(ships out of service) is clustered.
Figure
1 - Reverse Supply Chain
This
is an advantage as the collection effort required is lesser than for other
products. Over the last decade, over 80% of the world ship breaking took place
in two ship breaking yards, one at Alang (India) and two at Chittagong
(Bangladesh). These shipbreaking yards are a dominant source of cheap ship
steel which constitutes almost 95 per cent of the ship (ABDI, 2003).
The
6,000 metric tons of steel that come out of Alang every day, on average,
account for about 15 per cent of India’s total steel output. It is not just
steel that come out of these mammoth shipbreaking yards. A plethora of
machinery and outfit components are also sold cheap at second hand rates. These
include air compressors, chilling units, lathe machines, drilling machines,
welding generators, oil purifiers, oil pumps, water pumps, heat exchangers,
condensers, diesel generators, alternators, marine engines, incinerators,
turbochargers, and many more equipment. Various outfit items and household
equipment such as ladders, kitchen appliances, kitchen machinery, office and
home furniture, handrails, fittings, mirrors, cupboards and sideboards,
crockery and cutlery, flower pots and holders, used cables, steel pipes, nuts
and bolts, screws, electric motors, bulbs and light fittings, wood, partition
sheets etc. are also sold at considerable discount rates.
The
sustainability part of the business chain comes into play with the accrual of
profit that emanates out of shortening of the supply chain. The steel procured
for ship construction previously was imported predominantly from abroad, which
is now available as recycled steel at reduced prices. The lead time for
procurement and transportation costs also reduce by purchasing from steel from
nearby mills that produce recycled steel. This is as shown in Figure 2.
Figure
2 - Reverse Supply Chain in
Gujarat
The
distance to be covered for transporting steel from East Asian countries like
Japan and South Korea to Gujarat in India is about 20,000 km. This gets reduced
to less than 250 km when scrap steel from Alang is sent for recycling at mills
in Gujarat at nearby districts of Rajkot and Ahmedabad. The re-rolled steel is
sent as raw material to shipyards in Bhavnagar and Hazira which are at close
proximity, as can be seen in the figure.
Apart
from this, use of recycled steel reduces the usage of virgin natural resources
such as iron ore. The installation of steel recycling mills also provides
employment opportunities to thousands of workers in the region. However, there are
concerns about the environmental and human hazard problems associated with the
shipbreaking industry. Part of the extra profits accrued from the closed loop
supply chain can be allocated to resolve this problem. This is treated in
detail in the next section.
3.1.
Environment and human friendly ship-recycling
Much
of the environmental damage occurs due to breaking of the ship by the beaching
method, which is practiced in the Indian subcontinent, without pre-cleaning of
ships. The old ships contain toxic substances like mercury, asbestos, oil
sludge, bilge, ballast water, zinc and other heavy metals which if released
freely poses a danger to the environment, as it adversely affects agricultural
produce, fishing catchment, human safety etc. (DEMARIA, 2010).
Thus,
it is imperative for the ship-owners to decontaminate the ship, and remove all
the hazardous wastes prior to export to its graveyard destination. The other
alternative would be to remove the environmentally toxic materials once the
ship has arrived at the site of shipbreaking. This option is recommended by
International Maritime Organization (IMO).
Till
now, the ship-owners have been reluctant to bear the extra costs of
pre-cleaning the olds ships, which the BASEL convention requires them to do so
for disposing ships out of service. However, with the changing equation,
instilled by sustainable operations practices, it becomes possible for ship
owners to scrap ships without spending too much money or damaging the
environment. The classical equation for ship scrapping without sustainable
operations practices is as shown below:
∑
Xi = Pi + Wi + Ai + Ei +
Hi (1)
Where,
∑ Xi
= Total cost for scrapping ith ship
Pi = Pre-cleaning
cost before scrapping ith ship
Wi
= Labour and equipment cost for scrapping ith ship
Ai = Administration
and licensing cost for scrapping ith ship
Ei = Environmental
cost (damage to environment) due to scrapping ith ship
Hi =
Human hazard cost related to scrapping ith ship
As
the Wi and Ai components cannot be done away with, as it
is integral to the part of ship-breaking, most players in the business try to
do away with the Pi component (pre-cleaning cost). This is at the
expense of environmental and human hazard related cost (Ei + Hi).
The inclusion of sustainable operations practices and usage of recycled steel
for ship-building purposes in yards located in close proximity, tweaks the
equation in the following beneficial form.
∑
Xi = Pi + Wi + Ai + Ei +
Hi - Mi - Ti (2)
Where
the new terms are,
Mi
= Price of steel sold for recycling from ith ship
Ti = Reduction in
transportation cost due to steel procured from scrapping of ith ship
The
introduction of the new terms Mi and Ti, partly bears to
provide for the pre-cleaning costs of ships to be scrapped. The pre-cleaning
and effective decontamination of ships will decrease the environmental and
human hazard related costs associated with shipbreaking. Sustainable operations
in shipbreaking also involve reducing the carbon footprint associated with the
shipbuilding supply-chain. The carbon dioxide emissions in freight transport in
grams carbon per ton freight carried per kilometer by different modes of
transport are as shown in Figure 3.
|
Figure 3 - Comparison of CO2 emissions in
freight transport by mode of transport Source:
UNCTAD, 2012 |
Needless
to say that there is significant reduction in carbon dioxide emission by local
sourcing of steel than importing from abroad. For instance, procuring steel
from a recycling mill located 250 km from the yard instead of a steel
manufacturer (located in East Asia) 20,000 km away (even by a bulk carrier
which has the lowest carbon footprint by maritime route) saves CO2
emissions of the order of 20 kg CO2 per ton of freight carried. To
put this in real life perspective, for building an average general cargo ship
of 20,000 Lightweight Tons, the savings accrued due to procurement from local
recycling yard is of the order of 400 Tons of CO2 emission.
Therefore,
the ship-owners have an incentive to trade carbon credits to the local
shipbuilders as a motivation to buy from the local steel recycling mills.
Similar to steel sourcing, machinery and outfit components may also be sourced
locally if refurbishment of old equipment to ‘new equipment quality’ is viable
and technologically feasible.
4.
BENEFITS OF GREEN PRACTICES
In
this section we shall deal with the advantages of recycling a ship vis-à-vis
scrapping a ship in a more analytic manner using a tool. This analysis is
called life-cycle-assessment or cradle-to-grave analysis. The tool we are using
is “OpenLCA”, an open source software used for cradle-to-grave analysis. Note
that in this context we are doing a relative analysis of the benefits of
recycling a ship with respect to scrapping it, not an absolute one.
Nevertheless, the results we obtain are valuable.
4.1.
Methodology of Life Cycle Assessment
Firstly,
in order to do the life cycle assessment, we have to define the boundary of a
system and the materials that go into and out of it, and the path they follow.
In our case, the ship we take into consideration is a ‘RoRo-LoLo
Semi-Submersible Heavy Lift Container Carrier Vessel” that is ready for
disassembly. We collate all the material part and residual inventory of the
vessel from authentic sources. Then we define various flows and processes
through which the materials go through in each scenario, be it ship scrapping
or ship recycling. This is done in the input/output columns where in details
such as amount of steel sections, distance travelled, amount of heavy fuel,
plastic wastes, landfill details, amount of incinerated wastes etc. are fed
into the software.
The
impact assessment method employed is CML 2001 of Center of Environmental
Science of Leiden University. Two hypothetical product systems namely,
‘recycling’ and ‘scrapping’ are compiled. In the project tab, comparison of the
product systems are done by CML 2001 method, based on various parameters. A
maximum of about 50 comparisons can be done for different parameters in CML
2001. We perform about 14 major comparisons.
4.2.
Results
The
results of the important comparisons of the “recycling product system” versus
“scrapping product system” are shown as below.
Acidification
potential – generic
|
|
Acidification potential is the result of aggregating acid air
emissions, expressed in SO2 equivalents. The acidification
potential is an important environmental indicator. |
|
|
Figure 4 - Acidification Potential: Recycling vs. Scrapping |
|
|
Climate change – GWP 500a
|
Climate change refers
to any significant change in the measures of climate lasting for an extended
period of time. In other words, climate change includes major changes in
temperature, precipitation, or wind patterns, among other effects, that occur
over several decades or longer. |
Figure 5 - Climate Change: Recycling vs. Scrapping |
Eutrophication
potential – generic
|
|
Eutrophication Potential is defined as the potential of nutrients to
cause over-fertilization of water and soil which in turn can result in
increased growth of biomass. |
|
|
Figure 6 - Eutrophication Potential: Recycling vs. Scrapping |
|
|
Freshwater aquatic eco-toxicity – FAETP 500a
|
Freshwater Aquatic Eco-toxicity refers to the impact on fresh water
ecosystems, as a result of emission of toxic substances to air, water and
soil. Eco-toxicity Potential (FAETP) is calculated with USES-LCA, describing
fate, exposure and effects of toxic substances. Characterization factors
are expressed as 1,4-dichlorobenzene equivalents/kg emission. The indicator
applies at global/continental/ regional and local scale. |
Figure 7 - FAETP: Recycling vs. Scrapping |
Freshwater
sediment eco-toxicity – FSETP 500a
|
Figure 8 - FSETP: Recycling vs. Scrapping |
Freshwater sediment eco-toxicity is the impact on the sediments of
freshwater or increase in the amount of toxic substances such as heavy metals
(cadmium, for example) over a period of time. |
Human
toxicity – HTP 500a
|
Human Toxicity is the degree to which a chemical substance elicits a
deleterious or adverse effect upon the biological system of human exposed to
the substance over a designated time period. The human toxicity potential
(HTP) reflects the potential harm of a unit of chemical released into the
environment. It is based on both the inherent toxicity of a compound and its
potential dose. It is used to weigh emissions inventoried as part of a
life-cycle assessment or in the toxic release inventory and to aggregate
emissions in terms of a reference compound. |
Figure 9 - HTP: Recycling vs. Scrapping |
Ionizing
radiation
|
Figure 10 - Ionizing Radiation: Recycling vs. Scrapping |
Ionizing radiation is radiation with enough energy so that during an
interaction with an atom, it can remove tightly bound electrons from the
orbit of an atom, causing the atom to become charged or ionized. Longer wave
lengths, lower frequency waves (heat and radio) have lesser energy than
shorter wave length than higher frequency waves (X-rays and gamma rays). Only
the high frequency portion of the electromagnetic spectrum which includes X-rays
and gamma rays is ionizing. |
Land-use
– competition
|
Land use competition refers to the conflict
over multiple forms of use for land resources especially over agricultural
use. This graph shows the amount of land lost from agricultural usage for
recycling and scrapping of ships respectively. |
Figure 11 - Land use competition: Recycling vs. Scrapping |
Marine aquatic eco-toxicity – MAETP 500a
|
Figure 12 - Marine Aquatic Eco-toxicity: Recycling vs. Scrapping |
Marine aquatic ecotoxicology refers to the impact of toxic substances
emitted to marine aquatic ecosystems. The characterization factor is the
potential of marine aquatic toxicity of each substance emitted to the air,
water or/and soil. The unit of this factor is kg of 1,4- DB equivalents per
kg of emission. |
Marine sediment eco-toxicity – MSETP 500a
|
Marine sediments eco-toxicity refers to the accumulation of a variety
of contaminants that demonstrate toxicity. Toxicity identification evaluation
(TIE) methods provide tools for identifying the toxic chemicals causing
sediment toxicity like arsenic and chromium. |
Figure 13 - MSETP:
Recycling vs. Scrapping |
Photochemical oxidation (summer smog) – EBIR
|
Figure
14 - Summer Smog: Recycling
vs. Scrapping |
Oxidation occurs when a substance poses an electron and combines with
another substance. In some cases this reaction is initiated by having the
atoms excited by a wave length of light such as the Ultraviolet. The presence
of a catalytic surface like Ti-O may assist the process. Photochemical
oxidation is therefore the reaction of a chemical change in a substance which
causes it to lose electrons which is initiated by light. |
|
A
common example is photochemical smog which is caused by hydrocarbons and NOx
reacting under the influence of UV light. |
|
Resources – depletion of abiotic resources
|
This graph denotes the depletion of abiotic substances (any
fundamental chemical element or compound in the environment like hydrogen,
oxygen, carbon etc.) due to recycling and scrapping of ship respectively. |
Figure 15 - Depletion of Abiotic Substances: Recycling
vs. Scrapping |
Stratospheric ozone depletion – ODP 40a
|
Figure 16 - ODP - Recycling vs. Scrapping |
The growing emissions of synthetic chlorofluorocarbon molecules cause
a significant diminution in the ozone content of the stratosphere, with the
result that more solar ultraviolet-B radiation (290–320 nm wavelengths)
reaches the surface. This ozone loss occurs in the temperate zone latitudes
in all seasons, and especially drastically since the early 1980s in the south
polar springtime—causing the ‘Antarctic ozone hole’. |
|
Ozone
depletion are primarily based on atomic Cl and Cl-O, the product of its
reaction with ozone. The graph shows the stratospheric ozone depletion
due to recycling and scrapping of ships respectively. |
|
Terrestrial
eco-toxicity – TAETP 500a
|
Terrestrial eco-toxicity has been defined
as a parametric index in the subfield of ecotoxicology which uses tests to
study, evaluate and quantify the effects of toxic substances on the diversity
and function in soil-based plants and animals. Apart from measuring the relevant
parameters and meeting environmental requirements, an effective toxicity test
should be quick, simple, and replicable. A standard test should reveal a
toxic response given variation in environmental conditions such as pH,
solubility, exposure time, antagonism, and synergy. |
Figure 17 - TAETP: Recycling vs. Scrapping |
5.
CONCLUSION
The
reverse supply chain in shipbreaking helps the shipping industry gain financial
value out of zero-value vessels. It also enables the ship owner do away with
the operational burden of maintaining vessel which has higher operating costs
than its revenue. The reverse supply chain of large Built-to-order (BTO)
products, like ships, provide huge amount of re-rollable steel without exploiting
natural resources. The western geography of India does not have steel producing
units. The shipbreaking industry provides balance to the steel sector by
providing used steel to rerolling mills in Rajkot, Kutch, Hariza and Surat
(Gujarat).
Therefore,
the ship recycling industry saves a lot of time and logistics cost for the
steel sector industries. In addition to this, the reverse supply chain also
gives a heads up to sustainable business practices as it reduces the CO2
emission and reduces damage to the environment. A comparison based on CML 2001
life cycle assessment of various variables such as acidification potential,
climate change, eutrophication potential, freshwater aquatic eco-toxicity,
freshwater sediment eco-toxicity, human toxicity, ionizing radiation, land-use
competition, marine aquatic eco-toxicity, marine sediment eco-toxicity,
chemical oxidation, depletion of abiotic resources, stratospheric ozone
depletion, terrestrial eco-toxicity revealed that recycling of ships offers
much greater advantage than scrapping of ships, at an environmental as well as
human safety level.
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