The challenge of selecting and evaluating third-party reverse logistics providers in a multicriteria perspective: a Brazilian case

Highlights

• Engaging 3PRLP in reverse logistics ensures efficiency in product-take-back.

• Identifying the best suppliers of services is essential in business processes.

• Decisions related to selecting 3PRLP requires a proper set of criteria and methods.

• MCDA provides some tools for decision makers when solving decision problems.

• A framework of selecting 3PRLP could serve as a basis for decision making.

Abstract

Following recent legislations and public policies on solid waste and product take-back, companies in Brazil are now impelled to incorporate reverse logistics practices in their business processes. The Brazilian National Policy of Solid Waste – NPSW, approved in 2010, obligates companies to implement reverse logistics. Considering this, many companies in Brazil have studied the possibility to outsource these activities by engaging third-party reverse logistics providers – 3PRLP. Considering these demands, it is important to define which systematic approaches can be used to select the most suitable 3PRLP. The objective of this article is to identify the main criteria, the systematic methods that can be used in order to select the most appropriate 3PRLP and also propose a framework based in multicriteria decision aid approach to select 3PRLP. Thus, a Systematic Literature Review was carried out and a conceptual framework for decision making in this context using Multicriteria Decision Aid – MCDA modeling was proposed. Therefore, this paper presents two contributions: i) a SLR covering the past decade based on the MCDA experiences in 3PRLP selection, highlighting the main criteria and systematic approaches used; ii) based on this SLR, a proposal for a conceptual methodological framework to help decision makers and researchers in performing a MCDA in the area of 3PRLP selection.

Introduction

Reverse Logistics – RL have an important role in green supply chains by providing customers with the opportunity to return end life products to the manufacturer, thus re-evaluating them and including them again in the production cycle (Efendigil et al., 2008). In 2010, the Brazilian National Policy of Solid Waste – NPSW was approved. It introduced shared responsibility and the obligation of reverse logistics for some sectors of industry (Brazil, 2010a). The purpose of NPSW is to internalize costs and liabilities to manufacturers, retailers and consumers while implementing reverse logistics, which is considered a challenge in Brazil (Jabbour et al., 2014).

Thus, the RL based on the 'polluter pays' principle provides a central component of the NPSW (Brazil, 2010a). The law/policy outlines a variety of options for producers to work together within their sectors to comply with the law/policy, with reverse logistics service providers, as well as with municipal and state governments, in order to manage waste flows and to recapture/collect, recycle; and ultimately; dispose these materials (Brazil, 2010b).

Based on this context, many organizations have studied the possibility to outsource their reverse logistics activities by working with third-party logistics providers, thus ensuring efficiency in product-take-back activities (Efendigil et al., 2008). The most important services offered by 3PRLPs and the most important aspects of operational performance were identified by Liu and Lyons (2011). The authors assessed the relationship between service capabilities and performance for 3PLs and also investigated the impacts of the service capabilities of 3 PL providers which correspond to customers' key priorities on financial performance. Moreover, the authors carried out a comparative analysis between Taiwan and the UK and found similarities but also some clear differences in their logistics practices.

Decisions regarding selecting of services and products suppliers are, in general, complex due to various conflicting objectives involved and, consequently, various qualitative and quantitative criteria (Choy et al., 2005). Taking this into account, the processes of identifying the best suppliers for services and/or products or even evaluating the performance of a former supplier are challenging for decision makers (DM), but essential in business processes (Bozarth and Robert, 2008). Furthermore, growing environmental concerns have motivated businesses to include environmental criteria when selecting services and product suppliers (Efendigil et al., 2008). Returning used products is becoming an important logistics activity due to government legislation and the increasing awareness in society (Kannan et al., 2011).

Moreover, in the last decades, some articles have tackled issues related to selecting the most appropriate Third-Party Reverse Logistics Provider – 3PRLP. These articles use different methods, such as: the Two-phase model based on Artificial Neural Networks and fuzzy logic (Efendigil et al., 2008); Mixed-Integer Programming Model – MIP and a genetic algorithm (Min and Ko, 2008); Multi – Criteria Group Decision Making – MCGDM model in a fuzzy environment (Kannan et al., 2011); Analytical Network Process – ANP (Cheng and Lee, 2010); New Chance – Constrained Data Envelopment Analysis – CCDEA approach (Azadi and Saen, 2011) and; Interpretive Structural Modeling – ISM methodology (Govindan et al., 2012).

In this context, in the Fig. 1 a graphical abstract aiming to present the scope and the contribution of this research is shown.

As shown in Fig. 1, based on the current demand for reverse logistics activities and considering the recent Brazilian legislation on public policy for solid waste generation, companies have basically two options to comply with the law/policy: i) execute reverse logistics activities internally; and ii) outsource reverse logistics activities. This article focuses on the second option and to be able to select the most appropriate 3PRLP, it is proposed a conceptual framework using MCDA modeling is proposed, which has systematized steps with the purpose of support decision makers in these kinds of decisions. The steps assist DMs to structure the decision problem regarding selecting of 3PRLP from the identifying objectives and the set of criteria to defining the most suitable MCDA approach and method, depending on the rationality of the DM.

Thus, decisions related to selecting most appropriate 3PRLP are essential and require the definition of proper criteria and models. In order to assist the decision makers in this kind of situation, the main approaches and set of criteria used must be known, as well as having a systematized model in which the most appropriate 3PRLP can be selected. Therefore, the purpose of this article is to identify the main criteria, the methods that can be used to select the most appropriate 3PRLP by a Systematic Literature Review – SLR, and also based on that, propose a systematized framework to help decision makers in this decision context.

In general decisions related to selecting of suppliers and logistics providers have been taken based only on experience, because managers often rely on simplified reasoning to make difficult decisions (Kahneman, 2011). Besides that, many managers make decisions based only on economic factors instead of environmental ones, which can cause errors in evaluation, without considering limitations that are posed by legislation and regulations as well the trends that a company may have to analyze the environmental performance of its activities (Tsoulfas and Pappis, 2008).

In addition, this article identified the key criteria, methods and problems approached related to selecting of 3PRLP by a SLR, which is useful to researchers and practitioners by highlighting the existing tools and performance measures that could be applied in this context. Besides that, using the modeling multicriteria decision aid approach makes it possible to present a formal framework for 3PRLP selection considering multiple criteria. The conceptual framework enables that decision-making in this context having well-defined steps and not just based on experience.

First of all, a review of the literature on Brazil's NPSW and reverse logistics was conducted. Second, the main concepts of Multi-criteria Decision Aid are shown. Third, the methodological procedures used are described in order to validate the research. Fourth, the discussion of articles on selecting and evaluating of 3PRLP is presented. Fifth, a theoretical model for evaluating and selecting of 3PRLP is proposed and, finally the last section presents the concluding remarks and suggestions for future studies.