A reverse logistics decisions conceptual framework☆
Highlights
► The seven elements are: coordinating system, gatekeeping, collection, sorting, treatment, information system and disposal system. ► Each of these is reviewed in terms of generic process mapping, decisions, economics aspects, and performance measures. ► The participating companies operate in different sectors: electricity utility, electronics multinational and small manufacturer of domestic products.
Introduction
Reverse logistics (RL) is the process of planning, implementing, and controlling the efficient and cost effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal (Rogers & Tibben-Lembke, 2001). Moreover, it prevents pollution by reducing the environmental burden of End-of-Life (EOL) at its source (Toffel, 2003). The rise of green concerns makes reverse logistics a time demanding and relevant area of interest. Recycling, remanufacturing, and disposal are the three main factors in this arena for facing the challenges of globalization and sustainability. Available holistic literature and theory on developing a reverse logistics system is still very limited. In general, the related literature and resources found in this area usually lack in-depth insight with respect to the processes that construct such a system.
The directive of the European Union (EU) on Waste Electrical and Electronic Equipments (WEEE) works very effectively on electronic manufacturers for the collection and proper disposal of their End-of-Life (EOL) products. Although different countries have their own regulations for recycling and disposal of by-products and waste, European legislation is generally believed to be more advanced and as such, provides guidelines for other countries. For example, the Japanese government has been following a planned strategy since the early 1990s under the basic 3Rs directive–Reduce, Reuse, Recycle (Department of Trade, 2005).
In addition to green proactive concerns, there are many reasons which may push a company to implement reverse logistics (RL): they may be legal, economic, or commercial. Legal motivations are one of the most effective, but are not necessarily the most welcomed. In the case of the WEEE directive, governments enforce manufacturers to be responsible for the entire lifecycle of their products for the purpose of sustainability. Economic factors act as the second motivation for implementing RL. For example, the case of recycling used cars where the scrap yard takes back the car, removes all valuable components for resale, and sells the rest for its metal value. This process usually generates profits. The EU directive on End-of-Life (EOL) vehicles requires automakers by 2006, to reuse or recycle 85% of an EOL automobile’s weight and 95% by 2015 (Toffel, 2003). Every year, Black and Decker, a renowned consumer electronics company generates revenue of $1 million from their remanufactured products (Alvarez, Berrone, Husillos, & Lado, 2007). For this company, the organizational slack has a positive effect on reverse logistics to meet the demand of both internal and external pressures. The third motivation for implementing RL is for commercial reasons which actually means that the business contacts dictate the terms for returning products, as in the case of unsold or defective products, or those requiring service. Trust and commitment from both sides is essential in this case. But no matter what factors are considered for the successful implementation of reverse logistics, the choices made by top management and individual attitude (proactive or conservative) are the two most critical determinants in the decision-making process (Alvarez et al., 2007).
The importance of RL is difficult to evaluate because it is often embedded within other processes in a company’s logistics infrastructure. Stock (2001) estimates RL to be about 4% of the total logistics cost. To put this figure in perspective, the total transportation costs in the United States in 2004 reached $636 billion according to Wilson (2005), meaning that approximately $25 billion were spent on RL transportation costs. After adding obsolescence and revenue loss, this figure greatly increases. In the United Kingdom, about 40% of RL costs are attributable to inefficient processes as reported in Tulip (2004). In 2005, the cost of RL in North America was estimated at about $46 billion (Blumberg, 2005). Total transportation costs were up 14.1% and total inventory carrying costs increased by 17% (Wilson, 2006). With increasing fuel costs, logistics costs will continue to rise.
The absence of a complete RL decisions conceptual framework could explain these astonishing figures (Pimor, 2003) as RL literature is indeed very limited on the subject. Stock (1998) explains that a company that wishes to engage in RL must first map its business processes and put in place an activity-based costing system, but does not present a generic roadmap to successfully implement RL. Later, for controlling the returned products, a process map is generated (Stock, 2004). Carter and Ellram (1998) explain the different actors affecting reverse logistics, namely suppliers, governments, buyers and competitors. They also propose a hierarchy of reverse logistics ranging from resource reduction to disposal in landfill. By establishing appropriate strategies and programs, the problems related to the returned products can be eliminated significantly (Stock, Speh, & Shear, 2006). Reverse logistics represents one of the largest and most overlooked opportunities to facilitate return profits to a company. Currently, very few companies are doing a good job in addressing this issue. Most companies are overlooking their reverse logistics supply chain and are missing opportunities to improve customer satisfaction and loyalty (Vitasek, Manrodt, & Murphy, 2005). Chopra and Meindl (2007) propose a framework for designing a supply chain in four phases without any reference to reverse logistics. In light of the lack of the state-of-art literature on successful implementation or comprehensive undertaking of RL, this paper proposes a decisions conceptual framework that includes the generic business process, the decisions, the economic aspects, and the performance specific to RL activities. Through an extensive review of the literature, the paper identifies the most important and relevant elements to address RL activities in a comprehensive manner. In addition and based on a qualitative approach, the proposed decisions framework is divided into hierarchical levels: strategic, tactical, and operational. This segmentation is helpful in assigning different responsibilities to the proper levels of management.
The remainder of the paper is organized as follows: Section 2 begins with a literature review. Section 3 presents the methodology used to develop the framework. Section 4 elaborates and discusses the structure of this proposed framework. Section 5 presents an application of the framework to real-world industries where three case studies are addressed. Finally, conclusion and recommendations for future research are presented in Section 6.
Section snippets
Literature review
Fleischmann, Bloemhof-Ruwaard, Dekker, Van Nunen, and Van Wassenhove (1997) subdivide reverse logistics into three main areas; these are: distribution planning, inventory control, and production planning. They present a survey addressing the logistics of industrial reuse of products and materials from an Operational Research perspective. More recently, Meade, Sarkis, and Presley (2007) categorize the reverse logistics literature from 1998 to 2006 into four research categories: empirical,
Proposed methodology
The proposed methodology is based on the literature review, interviews and uses identified elements as summarized previously in Table 1. From the literature Giuntini and Andel, 1995b, Rogers and Tibben-Lembke, 1998, Stock, 2004, Schwartz, 2000 consider a four-step RL system: gatekeeping, collection, sorting and treatment. The disposal is not mentionned explicitly but it is required as it may happen at any of the 4 steps because of the nature of a product. In this era of information technology,
Reverse logistics conceptual framework
As indicated earlier, the proposed conceptual framework is made of the following seven elements: the coordinating system, the gatekeeping, the collection, the sorting, the treatment, the information system, and the disposal system. Each of these elements is reviewed in terms of process mapping, decisions to make, costs involved, and performance measures. Table 2 presents the performance measures of interest to RL, as derived from the literature. It is important to remember that the selection of
Application – industrial case studies
The main goal for developing a conceptual framework is to help managers organize their activities related to RL systems and for the growing concern over the environment. So, the exhaustive literature review presented earlier, which serves as a foundation for our qualitative methodology, is complemented by considering three different industrial cases to demonstrate and test the applicability of the proposed decisions framework in addressing real world situations. For this purpose, preliminary
Conclusion and recommendations for further research
There is no single reference model that all organizations can use to make their supply chains more efficient; each company must find a solution that best fits its specific situation. In this paper the proposed decisions conceptual framework includes generic process mapping, decisions, economic aspects, and performance measures with a distinction made with respect to the strategic, tactical, and operational levels. The application and demonstration of this decisions conceptual framework was
Acknowledgements
The authors acknowledge the constructive comments made on the manuscript by three anonymous referees. They also acknowledge the Natural Sciences and Engineering Research Council of Canada (NSERC) and Hydro-Quebec for their financial support, as well as the other participating companies for the opportunity to apply and validate this research work.
References (128)
- et al.
A two-level network for recycling sand: A case study
European Journal of Operational Research
(1998) - et al.
Modelling product returns in inventory control – Exploring the validity of general assumptions
International Journal of Production Economics
(2003) - et al.
Logistic planning of rework with deteriorating work-in-process
International Journal of Production Economics
(2004) - et al.
Quantitative models for reverse logistics: A review
European Journal of Operational Research
(1997) - et al.
Towards a taxonomy of resource recovery from end-of-life products
Computers in Industry
(2000) - et al.
Production planning and control for remanufacturing: A state-of-the-art survey
Robotics and Computer Integrated Manufacturing
(1999) - et al.
Scheduling policies for remanufacturing
International Journal of Production Economics
(1997) - et al.
Repairable inventory theory: Models and applications
European Journal of Operational Research
(1997) - et al.
A framework for supply chain performance measurement
International Journal of Production Economics
(2004) - et al.
Issues in environmentally conscious manufacturing and product recovery: A survey
Computers & Industrial Engineering
(1999)
Logistics simulation of recycling networks
Computers in Industry
A reverse logistics cost minimization model for the treatment of hazardous wastes
Transportation Research – Part E: Logistics and Transportation Review
Managing value in reverse logistics systems
Transportation Research – Part E: Logistics and Transportation Review
Optimal control of a one product recovery system with leadtimes
International Journal of Production Economics
Linking forward and reverse logistics supply chain investments: The role of business uncertainty
Journal of Operations Management
A model for reverse logistics entry by third-party providers
OMEGA – International Journal of Management Science
Periodic review, push inventory policies for remanufacturing
European Journal of Operational Research
The dynamic design of a reverse logistics network from the perspective of third-party logistics service providers
International Journal of Production Economics
Strategic safety stocks in reverse logistics supply chains
International Journal of Production Economics
The distribution-free newsboy problem with resalable returns
International Journal of Production Economics
The newsboy problem with resalable returns: A single period model and case study
European Journal of Operations Research
Product warranty logistics: Issues and challenges
European Journal of Operational Research
Importance of closed-loop supply chain relationships for product remanufacturing
International Journal of Production Economics
The market-oriented dynamic product recovery model in the just-in-time framework
International Journal of Production Economics
Optimal manufacturing–remanufacturing policies in a lean production environment
Computers & Industrial Engineering
A critical assessment of motives for product recovery: The case of engine remanufacturing
Journal of Cleaner Production
Reverse logistics system planning for recycling electrical appliances and computers in Taiwan
Resources Conservation and Recycling
Network design for reverse logistics
OMEGA – International Journal of Management Science
Reverse logistics, stakeholders’ influence, organizational slack, and managers’ posture
Journal of Business Research
There’s power in numbers
Transportation and Distribution
Recycle or reuse
Transportation and Distribution
Return to sender
Modern Materials Handling
Business logistics/supply chain management: Planning, organizing, and controlling the supply chain
Implementing leagility in reverse logistics channels
International Journal of Logistics: Research and Application
Reverse logistics network design: A conceptual framework for decision making
International Journal of Sustainable Engineering
Reverse supply chains for commercial returns
California Management Review
Introduction to management of reverse logistics and closed loop supply chain processes
Vers une gestion environnementale des entreprises?”
Revue Française de Gestion Industrielle
Reverse logistics – Untapped opportunities exist in returned products, a side of logistics few businesses have thought about-until now
Information Week
Reverse logistics: A review of the literature and framework for future investigation
Journal of Business Logistics
Supply chain management: Strategy, planning and operations
Reverse logistics: The relationship between resource commitment and program performance
Journal of Business Logistics
Reengineer your returns
Transportation and Distribution
A framework for reverse logistics
Vehicle routing and reverse logistics: The vehicle routing problem with simultaneous delivery and pick-up
OR Spektrum
Cited by (0)
- ☆
This manuscript was processed by Area Editor Mohamad Y. Jaber.
- 1
Tel.: +1 819 376 5011x3907; fax: +1 819 376 5070.
- 2
Tel.: +1 514 340 4711x4982; fax: +1 514 340 4173.