A reverse logistics decisions conceptual framework

Computers & Industrial Engineering 61 (2011) 561–581

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Computers & Industrial Engineering

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A reverse logistics decisions conceptual framework q

Serge Lambert a,1, Diane Riopel b,2, Walid Abdul-Kader c,⇑a Université du Québec à Trois-Rivières, Département de génie industriel, C.P. 500, Trois-Rivières, Québec, Canada G9A 5H7b Departement of Mathematics and Industrial Engineering, École Polytechnique de Montréal, P.O. Box 6079, Station Centre-Ville, Montréal, Québec, Canada H3C 3A7c Department of Industrial and Manufacturing Systems Engineering, University of Windsor, Windsor, Ontario, Canada N9B 3P4

a r t i c l e i n f o a b s t r a c t

Article history:Received 13 January 2010Received in revised form 23 February 2011Accepted 23 April 2011Available online 29 April 2011

Keywords:Reverse logisticsConceptual frameworkManagementDecision making process

0360-8352/$ - see front matter � 2011 Elsevier Ltd. Adoi:10.1016/j.cie.2011.04.012

q This manuscript was processed by Area Editor Mo⇑ Corresponding author. Tel: +1 519 253 3000x260

E-mail addresses: [email protected] (S. Lamb(D. Riopel), [email protected] (W. Abdul-Kader).

1 Tel.: +1 819 376 5011x3907; fax: +1 819 376 50702 Tel.: +1 514 340 4711x4982; fax: +1 514 340 4173

This research work proposes a reverse logistics decisions conceptual framework that offers flexibility andcovers a wide variety of situations that may arise in the practical working environment. The methodologyadopted in this paper is inspired by and taken from the various research papers published in the litera-ture. The proposed framework considers seven important elements of the reverse logistics system. It isdivided into three hierarchical levels (strategic, tactical, and operational). By carrying out experimenta-tion with the proposed conceptual model, all three levels were tested in different industrial sectors dur-ing its development. Three real-world case studies are presented to test and to show the flexibility andapplicability of the framework. The proposed conceptual framework will help practitioners in the field tostructure their reverse logistics activities and also help academics in developing better decision models.

� 2011 Elsevier Ltd. All rights reserved.

1. Introduction

Reverse logistics (RL) is the process of planning, implementing,and controlling the efficient and cost effective flow of raw materi-als, in-process inventory, finished goods, and related informationfrom the point of consumption to the point of origin for the pur-pose of recapturing value or proper disposal (Rogers & Tibben-Lembke, 2001). Moreover, it prevents pollution by reducing theenvironmental burden of End-of-Life (EOL) at its source (Toffel,2003). The rise of green concerns makes reverse logistics a timedemanding and relevant area of interest. Recycling, remanufactur-ing, and disposal are the three main factors in this arena for facingthe challenges of globalization and sustainability. Available holisticliterature and theory on developing a reverse logistics system isstill very limited. In general, the related literature and resourcesfound in this area usually lack in-depth insight with respect tothe processes that construct such a system.

The directive of the European Union (EU) on Waste Electricaland Electronic Equipments (WEEE) works very effectively on elec-tronic manufacturers for the collection and proper disposal of theirEnd-of-Life (EOL) products. Although different countries have theirown regulations for recycling and disposal of by-products andwaste, European legislation is generally believed to be more ad-

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hamad Y. Jaber.8; fax: +1 519 973 7062.ert), [email protected]

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vanced and as such, provides guidelines for other countries. Forexample, the Japanese government has been following a plannedstrategy 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 reasonswhich may push a company to implement reverse logistics (RL):they may be legal, economic, or commercial. Legal motivationsare one of the most effective, but are not necessarily the most wel-comed. In the case of the WEEE directive, governments enforcemanufacturers to be responsible for the entire lifecycle of theirproducts for the purpose of sustainability. Economic factors actas the second motivation for implementing RL. For example, thecase of recycling used cars where the scrap yard takes back thecar, removes all valuable components for resale, and sells the restfor its metal value. This process usually generates profits. The EUdirective on End-of-Life (EOL) vehicles requires automakers by2006, to reuse or recycle 85% of an EOL automobile’s weight and95% by 2015 (Toffel, 2003). Every year, Black and Decker, a re-nowned consumer electronics company generates revenue of $1million from their remanufactured products (Alvarez, Berrone,Husillos, & Lado, 2007). For this company, the organizational slackhas a positive effect on reverse logistics to meet the demand ofboth internal and external pressures. The third motivation forimplementing RL is for commercial reasons which actually meansthat the business contacts dictate the terms for returning products,as in the case of unsold or defective products, or those requiringservice. Trust and commitment from both sides is essential in thiscase. But no matter what factors are considered for the successfulimplementation of reverse logistics, the choices made by top man-agement and individual attitude (proactive or conservative) are the

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562 S. Lambert et al. / Computers & Industrial Engineering 61 (2011) 561–581

two most critical determinants in the decision-making process(Alvarez et al., 2007).

The importance of RL is difficult to evaluate because it is oftenembedded within other processes in a company’s logistics infra-structure. Stock (2001) estimates RL to be about 4% of the totallogistics cost. To put this figure in perspective, the total transporta-tion costs in the United States in 2004 reached $636 billion accord-ing to Wilson (2005), meaning that approximately $25 billion werespent on RL transportation costs. After adding obsolescence andrevenue loss, this figure greatly increases. In the United Kingdom,about 40% of RL costs are attributable to inefficient processes as re-ported in Tulip (2004). In 2005, the cost of RL in North America wasestimated at about $46 billion (Blumberg, 2005). Total transporta-tion costs were up 14.1% and total inventory carrying costs in-creased by 17% (Wilson, 2006). With increasing fuel costs,logistics costs will continue to rise.

The absence of a complete RL decisions conceptual frameworkcould explain these astonishing figures (Pimor, 2003) as RL litera-ture is indeed very limited on the subject. Stock (1998) explainsthat a company that wishes to engage in RL must first map its busi-ness processes and put in place an activity-based costing system,but does not present a generic roadmap to successfully implementRL. Later, for controlling the returned products, a process map isgenerated (Stock, 2004). Carter and Ellram (1998) explain the dif-ferent actors affecting reverse logistics, namely suppliers, govern-ments, buyers and competitors. They also propose a hierarchy ofreverse logistics ranging from resource reduction to disposal inlandfill. By establishing appropriate strategies and programs, theproblems related to the returned products can be eliminated sig-nificantly (Stock, Speh, & Shear, 2006). Reverse logistics representsone of the largest and most overlooked opportunities to facilitatereturn profits to a company. Currently, very few companies aredoing a good job in addressing this issue. Most companies are over-looking their reverse logistics supply chain and are missing oppor-tunities to improve customer satisfaction and loyalty (Vitasek,Manrodt, & Murphy, 2005). Chopra and Meindl (2007) propose aframework for designing a supply chain in four phases withoutany reference to reverse logistics. In light of the lack of the state-of-art literature on successful implementation or comprehensiveundertaking of RL, this paper proposes a decisions conceptualframework that includes the generic business process, the deci-sions, the economic aspects, and the performance specific to RLactivities. Through an extensive review of the literature, the paperidentifies the most important and relevant elements to address RLactivities in a comprehensive manner. In addition and based on aqualitative approach, the proposed decisions framework is dividedinto hierarchical levels: strategic, tactical, and operational. Thissegmentation is helpful in assigning different responsibilities tothe proper levels of management.

The remainder of the paper is organized as follows: Section 2begins with a literature review. Section 3 presents the methodol-ogy used to develop the framework. Section 4 elaborates and dis-cusses the structure of this proposed framework. Section 5presents an application of the framework to real-world industrieswhere three case studies are addressed. Finally, conclusion andrecommendations for future research are presented in Section 6.

2. Literature review

Fleischmann, Bloemhof-Ruwaard, Dekker, Van Nunen, and VanWassenhove (1997) subdivide reverse logistics into three mainareas; these are: distribution planning, inventory control, and pro-duction planning. They present a survey addressing the logistics ofindustrial reuse of products and materials from an Operational Re-search perspective. More recently, Meade, Sarkis, and Presley

(2007) categorize the reverse logistics literature from 1998 to2006 into four research categories: empirical, theoretical, concep-tual and mathematical. They also present an interesting represen-tation of the relations between the functions, activities, inputs,outputs, mechanisms and overall system perspective. Rubio andCorominas (2008) present a review of reverse logistics andclosed-loop supply chain articles published in the period of1995–2005. They characterize the research topics in recovery/dis-tribution management, production and inventory managementand supply chain management, while the approach involved intheir researches is divided into case study, literature review, math-ematical modeling, and survey. The authors show also the presenceof a trend followed by researchers. For example, production andinventory issues are dealt with mostly by quantitative modelswhile articles on recovery and distribution management use bothquantitative and qualitative methodologies. The research con-ducted on supply chain management issues tends to employ qual-itative methodologies such as case study, literature review, andconceptual descriptions.

In order to adequately cover the various aspects of RL, we pres-ent five sub-sections where the first sub-section gives an overviewof the steps involved in RL and the second sub-section discussessupport systems integral to RL. The remaining three sub-sectionsreview the decisions, economic aspects and the performance mea-sures required to support RL.

2.1. Reverse logistics steps

In the literature, most of the authors, including Giuntini andAndel (1995b), Rogers and Tibben-Lembke (1998), Stock (2004),Schwartz (2000), and Marcoux, Riopel, and Langevin (2001), pro-pose an RL system with four main steps: gatekeeping (entry), collec-tion, sorting, and disposal. The communication among differentparties plays a major role in the successful implementation of thesesteps (Stock et al., 2006). These four steps are discussed below.

The first step is the entry to the reverse logistics system or therecognition of a product return. Rogers and Tibben-Lembke (1998)define it as deciding which products are allowed to enter the sys-tem. Moreover, they mention that this first step is essential in or-der to succeed in managing the system and controlling costs. Thesecond step involves the preliminary grouping of the collectedproducts based on the subsequent operations, for example theremanufacturing or recycling process. The collection step permitsthe retrieval of products from internal or external customers. De-tailed sorting (or the third step) decides the fate of each returneditem. At that moment, the company may decide what to do withthe product, be it subject to inspection, tests, or other manipula-tions. The last step involves the choice of disposal, i.e., the destina-tion of the product. Giuntini and Andel (1995a) give two possibledestinations: either renewal or removal from the process such asreturn to vendor, resale or disposing into landfill. Light (2000)mentions the following options as the principal activities of RL:relocation of stocks, donation to charity, remanufacturing, resell-ing, or selling to discount outlets. De Brito and Dekker (2004) re-port that industry differentiates between the terms repair andremanufacturing. They suggest that if only a part of the productdeteriorates, then recovery options like repair or part replacementare considered. While King, Burgess, Ijomah, and McMahon (2006)define the term repair as the correction of specified faults in aproduct; and state that the quality of repaired products is inferiorto those of remanufactured and reconditioned. Through an exten-sive survey of published works, Gungor and Gupta (1999) describethe steps that should be taken to ensure environmentally friendlyproduction. They discuss the scope of environmentally consciousdesign and manufacturing as well as the issues in the recovery ofproducts and materials. Issues involved in all major steps of

S. Lambert et al. / Computers & Industrial Engineering 61 (2011) 561–581 563

recovery operations are surveyed, and it is pointed out that dis-assembly is the most challenging operation as it requires the great-est amount of manpower and time. In order to overcome thisbottleneck, much research is required to determine the optimumdesign for disassembly, level of disassembly and its process plan.Goggin and Browne (2000a) developed a decision tool to determinethe level of disassembly on the basis of bill of disassembly. By eval-uating the value recovered and cost incurred in dismantling eachcomponent of a product, their tool determines the most appropri-ate level of disassembly. It also considers inventory levels in dis-assembly decisions and assets in product’s routing. Further,Goggin and Browne (2000b) developed a taxonomy of resourcerecovery. The generic typology includes remanufacturing, compo-nent reclamation, and material reclamation. The authors discusstypology of resource based on Customer Order Decoupling Point(CODP) such as recovery to stock, reassemble to order, disassembleto stock and recover to stock. They also describe other typologiesbased on product characteristics and market sectors in an elec-tronic manufacturing environment.

Srivastava (2008) develops a conceptual model for reverselogistics network design. He considers a multi-module productand multi-period time horizon. His optimization model consistsof two levels: first, to solve the simple location/allocation modelfor location of return centers, and second level, to optimize theflow of returned products of the network by considering factorslike transportation, inspection, disassembly and inventory cost.

2.2. Reverse logistics support systems

The information management system and disposal system aretwo essential components in a successful RL system. The informa-tion system is responsible for managing returns, communicatingefficiently between the different parties involved, and playing arole in identifying a product and deciding how to deal with it. Witt(1995b) mentions that successfully integrating an information sys-tem in the RL chain is the biggest hurdle and requires the most ef-fort and time. Langnau (2001) goes further to say that theinformation system is a crucial actor in the success of the RL sys-tem. Today, the availability of commercial systems has increased,yet these systems still require a fair deal of customization. Knowl-edge Management System is a unique element in the design of aconceptual framework for reverse logistics (Wadhwa & Madaan,2007).

In addition to information systems, the outing or disposal sys-tem is not strictly addressed in the RL literature. It varies greatlyamong different industries and there are no well defined guide-lines. Being aware of government regulations about environmentalsafety and product take back policy, every organization developsits own disposal system with the intent of maximizing profit whileassuring the convenience of doing so. This area cannot be ignored ifimplementation of an RL system is to be successful.

2.3. Reverse logistics decisions

The strategic level of the RL hierarchy considers a 2–5 yeartimeline. Guide and Jayaraman (2000) advise that the survival ofa company depends on the management of strategic variables.The tactical level is itself concerned with a medium term planningtimeline of 1–2 years. Further down, the operational level dealswith the short-term, day-to-day decisions.

Several key impacts of Take-Back legislation on environmentand product design are given by Toffel (2003). The author discussesthe responsibilities of key actors in EOL product management un-der this legislation and the reasons why some companies take vol-untary initiatives. Furthermore, Toffel (2003) gives guidelines forselecting the requisite number of strategies such as Do nothing,

Promote market, Long-term contract, and Vertical integration.The number of policies is adapted by companies to channel the re-turn flow of product. Östlin, Sundin, and Björkman (2008) catego-rized these return policies under types of relationship betweenremanufacturers and their customer/suppliers. They describe theadvantages and disadvantages of seven such types: (i) Owner-ship-based, (ii) Service-contract, (iii) Direct-order, (iv) Deposit-based, (v) Credit-based, (vi) Buy-back, and (vii) Voluntary-based.

Seitz (2007) re-evaluates the commonly discussed motives ofremanufacturing companies. She argues that motives like ethical/moral responsibility, take-back legislation and economic benefitshave little influence especially on an OEM remanufacturer. Theauthor conducted a survey which confirms the above claim andidentifies some predominating motives. According to Seitz andparticipating interviewees, major reasons for undertaking remanu-facturing operations by OEM are as follows: (i) Aftermarket salesand warranty, (ii) Market share and Brand protection, and (iii) Cus-tomer service/satisfaction.

Many companies outsource their reverse logistics operations toa third party logistics provider (3PL). Some of the key factors inoutsourcing such decisions and in selecting an appropriate 3PLprovider are discussed by Feng and Zhijun (2008). They point outfactors like product lifecycle position, performance of 3PL, func-tions to be performed and scope of recovery operations. They alsodiscuss challenges faced by a 3PL provider such as customer satis-faction, return coordination, shipment consolidation and returncompensation.

The reviewed literature shows that some work has been doneon defining the decision-making process required for implement-ing an RL system. In general, only a few issues are raised at a time.Carter and Ellram (1998) identify the drivers and constraintsneeded in reverse logistics activities as regulations, customers,stakeholder commitment, top management support, policy entre-preneurs, quality of inputs, incentive systems, vertical coordina-tion and uncertainty. Dowlatshahi (2000) examines only thestrategic and operational factors. The same factors are reused byDowlatshahi (2005) to propose a decisional framework for reman-ufacturing which is capable of determining the viability of returnedproducts in reverse logistics systems. While not proposing a verydeveloped approach, de Brito and Dekker (2002, 2003) present adecisional framework divided into hierarchical levels. In de Britoand Dekker (2003), the authors give an analysis of some reasonsand activities involved in reverse logistics. They discuss why re-verse flows of products and materials are initiated by organizationsand provide reasons why products are returned such as manufac-turing defect, distribution and customer returns. They characterizethe types of product that are usually returned and the steps (Col-lection, Inspection, Recovery/Reprocessing, and Distribution) takento recover the remaining value of the product. They also determinethe type of issues arising from the combination of activities in a re-verse logistics system. Although the paper is informative, it doesnot provide directions on how to address decisions at the varioussteps of RL activities. De Brito and Dekker (2004) define the driversand reasons of reverse logistics in terms of why, how, what andwho. Tan and Kumar (2008) offer a series of questions in order tomaximize the viability of reverse logistics activities for a product.Fernandez and Kekale (2008) define the goals, actors, objectives,problems, recovery options and scenarios through the Delphi tech-nique for a two-echelon supply chain. Then using AHP, they set thepriorities on the variables found in the previous step. Some designdecisions and trade-off consideration for each reverse logistics stepare discussed in Barker and Zabinsky (2008). From the literature,they sort them into eight possible configurations.

At the strategic level, the decisions are high-level, such as deter-mining return policies, deciding whether to subcontract RL activi-ties in part or as a whole, establishing the location and capacities of


the sites, initiating activities, designing the products and so on. Thetactical decisions follow the strategic decisions. Finally, the opera-tional decisions come as consequences of the previous levels. As acontribution to this research, we summarize in Table 1 most of thework done with regard to those elements relevant to the RL sys-tem. Table 1 presents papers dealing with RL decisions by hierar-chical level in the first column, and the corresponding author(s)in the second column. The remaining seven columns address RLelements such as Coordinating system, Gatekeeping, Collection,Sorting, Treatment, Information System, and Disposal. These ele-ments are the basis for the proposed framework. More explana-tions will be provided in Section 3 about each of these elements.

Table 1Reverse logistics decisions.

Decisions Authors

StrategicIntegrate reverse logistics to the supply-chain (Yes/

No)Fleischmann et al. (1997), FleWassenhove (2001), ChouinaWang (2007)

Categorize return policies Östlin et al. (2008)Emphasize lean approach and define return policies in

RLBanomyong et al. (2008)

Allocate adequate financial resources Stock (1998) and DaughertySubcontract reverse logistics activities in part,

completely, or manage in-house or use aconsortium

Andel (1995), Dawe (1995),Krumwiede and Sheu (2002)

Determine reasons, actors, and issues related toreturns

Carter and Ellram (1998), DeInderfurth, and Wassenhove

Emphasize disassembly task Gungor and Gupta (1999) anEvaluate internal expertise in reverse logistics Witt (1995b) and Liu and FaDecide cooperation with third-party logistics

providers in RLMeade et al. (2007) and Fen

Implement an environmental management systemand acquire knowledge of directives, laws andenvironmental rules

Stasiak, Garrett, and Fenves(1999), Boiral (2000), Departet al. (2007)

Identify potential regions to locate the differentactivities

Barros et al. (1998), Krikke e

Choose activities (repair/rework, reuse, etc.) Giuntini and Andel (1995b),Lembke (1998), Teunter andSeitz (2007)

Risk assessment (Value of information anduncertainties)

Ferrer and Ketzenberg (2004

TacticalDevelop a planning system for the activities Guide et al. (1997, 1999), Gu

(2002), and Richter and GobDevelop a system for managing inventories Guide and Srivastava (1997b

Guide et al. (1999), Van Der(2001),Teunter (2001), KiesmDekker (2002, 2003), Teunte(2002), Kiesmüller (2003), K(2003),Teunter et al. (2004),(2006), Tang and Teunter (2

Elaborate products’ bill of materials Krupp (1992, 1993) and TanEstablish quality standards for the different activities Klausner, Grimm, HendricksDecide transportation means (train, boat, plane, truck,

combination)Ballou (2004) and Chopra an

Establish transportation routes Toth and Vigo (1999), DethloDefine technical support to offer (in-store, Internet,

telephone, subcontractors)Dawe (1995) and Rogers and

Identify possible treatment activities for each product Giuntini and Andel (1995b),and Tan and Kumar (2008)

Define packaging methods of products Anonymous (1993), Heine (1Rogers and Tibben-Lembke (

Define return policies Zuo et al. (2000) and MurthyIdentify hazardous waste and elaborate a treatment

programHu et al. (2002), Zografos an(2008)

Define performance measures Dawe (1995), Giuntini and Aand Daugherty et al. (2001)

Decide the location and allocation of repair facilitiesfor third party logistics

Min and Ko (2008)

Determine site capacities (warehousing and treatmentspace)

Anonymous (2000), Freese (

2.4. Reverse logistics economic aspects

From the evidence in many texts and papers published aboutRL, the economic aspects of RL are proven and cannot be avoided.First, Dawe (1995) mentions that failing to grasp the cost of RL is asign that the RL system needs to be reviewed. Second, Schwartz(2000) explains that it is not an easy task to pinpoint the true costsof RL. Minahan (1998) indicates that 20% of all economies comefrom better management of resources and the rest from reductionof transportation costs and stocks. Activity-based costing is pro-posed as a solution to make sound decisions with regard to logis-tics activities (Stock, 1998 and Goldsby & Closs, 2000). RL has a

Elementsa

1 2 3 4 5 6 7

ischmann, Beullens, Bloemhof-Ruwaard, and Vanrd, D’amours, and Aït-Kadi (2003), and Yang and

�

� ��

et al. (2001) �Stock (1998), Levy (1999), Rowley (2000),, and Guide and Van Wassenhove (2002)

� � � � � � �

Brito and Dekker (2003), Dekker, Fleischmann,(2004), and Fernandez and Kekale (2008)

� � � � � � �

d Teunter (2006) �ng (2007) �g and Zhijun (2008) � �

(1996), Johnson (1998), Stock (1998), Van Hoekment of Trade and Industry (2005), and Meade

�

t al. (1999), Lu et al. (2001), and Shih (2001) � � � � � �

Carter and Ellram (1998), Rogers and Tibben-Flapper (2003), Flapper and Teunter (2004), and

�

) and Ketzenberg et al. (2006) �

ide and Srivastava (1997a), de Brito and Dekkersch (2003)

� �

), Inderfurth (1997), Yuan and Cheung (1998),Laan et al. (1999), Toktay et al. (2000), Minnerüller and Van der Laan (2001), de Brito and

r and Van der Laan (2002), Teunter and Vlachosiesmüller and Minner (2003), Mahadevan et al.Mostard et al. (2005), Mostard and Teunter

006), and Van der Laan and Teunter (2006)

� � �

and Kumar (2008) � �on, and Horvath (1998) �d Meindl (2007) � �

ff (2001), and Landrieu (2001) � �Tibben-Lembke (1998) �

Rogers and Tibben-Lembke (1998), Stock (1998), �

993), White (1994), Kroon and Vrijens (1995),1998), and Stock (1998)

� �

et al. (2004) �d Androutsopoulos (2004), and Tan and Kumar �

ndel (1995c), Hirsch et al. (1998), Stock (1998), �

�

2000) � � �

Table 1 (continued)

Decisions Authors Elementsa

1 2 3 4 5 6 7

Choose handling methods Morrell (2001), Ballou (2004) �Choose warehousing methods Giuntini and Andel (1995c) � �Do the transportation in-house or subcontract Ballou (2004) � � �Establish operational politics (production and

inventory)Gooley (1998) � � � �

Study cost-efficient approach for RL Kocabasoglu, Prahinski, and Klassen (2007) � � �Develop model for RL network design Srivastava (2008) � � � � � � �Case Studies for Reverse Logistics De Brito, Dekker, and Flapper (2003) � � � � � � �Optimal manufacturing–remanufacturing policies Rubio and Corominas (2008) � �Rethink the production process Toffel (2003) �OperationalTrain personnel Stock (1998) and Anonymous (2000) � � � � � � �Analyze returns in order to improve products Giuntini and Andel (1995b) �Manage information de Brito and Dekker (2002) � �Scheduling de Brito and Dekker (2002) � �Emphasize cost control Witt (1995a) and Goldsby and Closs (2000) � �Consider time value of return as most influential Blackburn et al. (2004) � � � � �Determine level of disassembly Goggin and Browne (2000a) � �Returns acquisition Guide and Van Wassenhove (2001) and Guide et al. (2003) �

a 1: Coordinating system; 2: Gatekeeping; 3: Collection; 4: Sorting; 5: Processing or Treatment; 6: Information System; and 7: Disposal or Expedition System.

Fig. 1. Reverse logistics system elements.


significant economic, environmental, and strategic influence formany organizations (Dowlatshahi, 2005). Hidden costs also remaina factor in reducing profits. Identifying RL costs is therefore of par-amount importance. Giuntini and Andel (1995c) give the followingbreakdown of costs: acquisition, warehousing, and material re-sources. Moreover, certain costs cannot easily be quantified, aswould be the case for loss of reputation or environmental impact.These costs, despite the inherent difficulty in gauging their true va-lue, cannot be ignored when designing an RL system. Banomyong,Veerakachen, and Supatn (2008) present a concept of ‘leagility’ inreverse logistics. They show the benefit of better customer servicethrough agile logistics and lower cost (waste) by lean strategiescan be achieved by introducing leagility in the reverse logistics sce-nario. With the help of a case study they show that retail storesmay become an excellent decoupling point of the two strategiesif these stores provide essential services to customers while com-plex repairs are handled by service centers. Therefore, early inspec-tion and sorting of returned items is possible, which will furtherimprove the performance of the supply chain. Üstündag, Baysan,and Çevikcan (2007) conducted an empirical study on the benefitsof using reusable radio frequency identification tags. They per-formed a simulation-based study to determine the overall cost-benefit of using reusable tags and showed that results depend onquantity and quality of tags. The possible economical advantagesof introducing a remanufacturing operation in a lean manufactur-ing environment has been investigated by Rubio and Corominas(2008). They analyzed the transfer of capacity between manufac-turing and remanufacturing lines by considering variable capacitycost along with return rates and use rate of EOL products. Chopraand Meindl (2007) explain that changing the design of a distribu-tion network affects the costs of inventories, transportation, facili-ties, handling, and information. The situation is not different ifreverse logistics is considered.

2.5. Reverse logistics measures of performance

The selection of performance measures remains the final con-sideration involved in the conceptual framework and is a key factorin implementing a successful RL system (Dawe, 1995 and Stock,1998). Gunasekaran, Patel, and McGaughey (2004) subdivide themeasures of performance into three hierarchical levels during deci-sion mapping which provides positive functional feedback. The RLliterature does not contain much information about this area.

However, Daugherty, Autry, and Ellinger (2001) give some mea-sures segregated by service and cost. Their measures include con-formity with environmental regulations, improving customerrelations, asset recovery, cost control, increase in profitability,and the overall efficiency of the RL system. The Supply ChainCouncil has developed the Supply Chain Operations Reference(SCOR) model, which contains many performance measures. Themanagement of returned products has been added in the fourthversion of this model. Version 9.0 was reviewed in order to identifyperformance measures applicable to RL systems. It also includes


expanded risk management capabilities, as well as new fea-tures to guide companies’ environmental sustainability efforts.Gunasekaran, Patel, and Tirtiroglu (2001) propose a sound reviewof performance measures. It is divided in hierarchical levels andincludes all the stakeholders along the chain: the supplier, thecompany, and the customer. Chopra and Meindl (2007) proposemetrics for a supply chain separated according to the followingfunctions: facilities, inventories, transportation, information sourc-ing and pricing. Blackburn, Guide, Souza, and Van Wassenhove(2004) present an argument that marginal time value of return isthe most influential product characteristic to evaluate the perfor-mance of a reverse supply chain.

3. Proposed methodology

The proposed methodology is based on the literature review,interviews and uses identified elements as summarized previouslyin Table 1. From the literature Giuntini and Andel (1995b), Rogersand Tibben-Lembke (1998), Stock (2004) and Schwartz (2000) con-sider a four-step RL system: gatekeeping, collection, sorting andtreatment. The disposal is not mentionned explicitly but it is re-quired as it may happen at any of the 4 steps because of the natureof a product. In this era of information technology, an informationsystem is needed to keep track of what’s happening. The systemneeds to be integrated to cover all elements and possibly offer vis-ibility via a web portal. The most important element is the coordi-nating system which is responsible of the overall performance andmanagement of the RL system. The methodology considers the se-

Fig. 2. Different levels of the conc

ven elements to help address important decisions appropriate toan RL system. De Brito and Dekker (2002) offer a somewhat limitedconceptual framework containing decisions divided into hierarchallevels. The SCOR model (version 5 initially) provided us with addi-tional information. Also, visits to a certain number of companies indifferent sectors of activities helped in gathering valuable knowl-edge on the diversities of real RL systems. All of this informationserved as a starting point in the development of this conceptualframework as illustrated in Fig. 1. Each of these elements is ex-plained in more detail in the subsequent sections of the paper.

The goal of this RL conceptual framework is to propose a basisfor implementing or reviewing an RL system. Care is taken so thatthe proposed framework is easy to use based on best practices andgeneric in order to be applicable in a wide variety of possible situ-ations. The components required by this framework are describedand then the ‘‘how to use’’ methods are presented in the subsec-tions below.

3.1. Components

The steps used to develop each element of the conceptualframework involve the following actions: (1) undertake a processmapping; (2) single out the strategic, tactical, and operational deci-sions to take; (3) identify direct and indirect costs; (4) define per-formance measures; and (5) test with practical applications. Thelimitations of our conceptual framework are that only those com-ponents which are directly related to the system are shown andthat the details of the transactional aspects are not covered.

eptual decisions framework.


The process mapping of existing RL systems was done in orderto identify the processes used by different companies. At the sametime, those identified in the literature were considered. Then, ageneric process mapping for the seven elements was derived. Theresulting process mapping covers the most important aspects ofan RL system and does not go into detail on how specific tasksshould be conducted. In reference to Fig. 1 above, mapping the pro-cesses yields a graphical representation of a complete reverselogistics system (or the overall flow of activities in the RL process).It is important to note that within the same organization, manyprocesses may coexist. For example, the gatekeeping activity maybe different for the return of an expensive product compared to aproduct destined for recycling. The value generated by any expen-sive product is usually more than any recycled category productand so it gets more attention in the gatekeeping stage and isquickly forwarded to the subsequent stages for rework.

Examining the decisions that a manager must consider is animportant task in designing the RL system. These decisions stemfrom three different sources: the process mapping, the literaturereview, and an analysis of costs versus benefits. The list of decisionsis then classified in terms of its corresponding hierarchical level.

In order to be cost-effective, the economic aspects must beaddressed. In fact, this is part of the decision-making process. Themanager must know the costs of the RL activities and compare those

Table 2Decisions conceptual framework performance measures.

Performance measures Elementsa

1

StrategicEase of adjusting capacity (flexibility)Financial investment in RL XCustomer perceived level of service XDelivery performanceNet profit vs. productivity ratio XRate of return on investment XTreatment cycle time of a return XDelivery lead timeVariations with respect to the budget X

TacticalRespect of environmental regulations XCosts of authorizing a product return XDisposal costsWarranty costs XManaging and planning costsReception and warehousing costs of returned productsReception costs expressed in% of ‘‘Costs of returned products’’Costs of returned products XCost per return authorization demand XEffectiveness of master production scheduleDelivery reliabilityOrder entry methods for returned productsEmployment level XAccuracy of forecasting techniques XActivities cycle timeValue of returned products X

OperationalDefect-free deliveriesOpening costs of a product return authorizationCost per operation hour XVerification costs of returned productsDiagnosis accuracyInformation carrying cost XTotal inventory XNumber of days of inventory XQuality of delivery documentationQuality of delivered productsTime to collect a returnTotal time to serve a customerCapacity utilization X

a 1: Coordinating System; 2: Gatekeeping; 3: Collection; 4: Sorting; 5: Processing or T

costs with other options in order to determine the best course ofaction. The costs involved include personnel, space, and equipmentconsiderations, among others. Revenues, which are derived solelyfrom the treatment or processing activity, must also be considered.

Finally, the last component of the conceptual framework repre-sents the performance measures. The proposed performance mea-sures, divided by hierarchical level and based on the literature, areassigned for each element.

3.2. Use of the proposed decisions conceptual framework

Fig. 2 presents the logic behind the interactions of the processwithin the conceptual framework. The dotted lines indicate inputsto the system, diamonds represent decisions to be taken, and rect-angular boxes symbolize outputs. The goal of the first level is toalign the strategic objectives of the RL system with the companymission while respecting financial constraints. The decisions tobe made for the seven elements at this level are the ones presentedin Table 1. The output of this stage will be the tactical objectives tobe used in the following level. The definition of the operationalneeds of the RL system is addressed in the tactical level with thehelp of the generic process mapping described in the next section.It is here where costs and revenues of the system are evaluated.The last level, the operational level, will create the specific process

2 3 4 5 6 7

X

X

XX X X X X X

X

XXX

XX

X

X

XXX X X X X X

XX

XXX

XX

reatment; 6: Information System; and 7: Disposal or Expedition System.


mapping of the desired RL system. Then, the mapping can be usedto create the work instructions. It also is possible to return to theprevious stages if a reversal of an earlier decision is required.

4. Reverse logistics conceptual framework

As indicated earlier, the proposed conceptual framework ismade of the following seven elements: the coordinating system,the gatekeeping, the collection, the sorting, the treatment, theinformation system, and the disposal system. Each of these ele-ments is reviewed in terms of process mapping, decisions to make,costs involved, and performance measures. Table 2 presents theperformance measures of interest to RL, as derived from the liter-ature. It is important to remember that the selection of perfor-mance measures remains the final consideration involved in theconceptual framework and is a key factor in implementing a suc-cessful RL system (Dawe, 1995 and Stock, 1998).

4.1. Element 1: coordinating system

The RL manager is responsible for overseeing the entire RL sys-tem by means of the coordinating system. Continuous improve-ment also plays an integral part in the coordinating system andacts as a linkage to higher level management. The process mappingfor the design and improvement of an RL system is shown in Fig. 3.

The design of an RL system starts at stage 1: the decisions. Thisstage corresponds to the process presented in detail in Fig. 2. Onceall the decisions are taken, the selection of performance measuresand target setting is undertaken. These first 2 stages define the RLsystem to be implemented in stage 3. Stage 4 ensures feedback onthe performance of the system while providing a means of return-ing to previous stages in order to improve the system. A review ofthe performance measures should be done regularly in order to ad-just the objectives to the current market conditions or replacethem by better ones. Unless the market has new requirements orthe company has changed its strategic objectives, the program re-view will be more focused at the operational level.

The economic aspects mentioned before are intertwined withthe decisions to take; specifically, the RL manager needs to know

Fig. 3. Process mapping and improvement of an RL system.

the costs and potential revenues of the different alternatives in or-der to make the best decisions. Nineteen measures of performancehave been retained, as presented in Table 2 (Element 1). Six ofthem relate to the strategic level. For this process, the measuresare mostly concerned with the financial performance of the RLsystem.

4.2. Element 2: gatekeeping

According to Giuntini and Andel (1995b), the second element,gatekeeping, is a process that is encountered once a customer de-clares the need to return a product back to the company, as illus-trated in Fig. 1. At this juncture, the company preliminarily filterswhich products are allowed to enter the RL system, and whichare to be rejected due to non-functionality. Fig. 4 below may bepreceded by technical assistance given to the customer wherethe company attempts to identify the problem with the customer’sproduct before deciding to return it. Moreover, it is possible thatgatekeeping is absent from the process, as is the case with the recy-cling of laser cartridges, in which clear instructions are given to thecustomer about its return policy. Interestingly, a customer whowas refused through the process may end up sending his productback to the company anyway, and the company must plan to dealwith those cases as well.

Additional decisions, above and beyond those given in Table 1for Element 2, need to be taken and may include the following:the language of communication, the method of communication,whether the product should be returned, if a return authorizationis necessary, and which verifications should be done. The economicaspects of gatekeeping involve personnel, office automation, andoffice space. These costs vary as a function of the volume of re-turned products and the service level desired. Gatekeeping in-volves five performance measures as shown in Table 2 (Element 2).

4.3. Element 3: collection

Collection involves two stages: the pick-up of the returnedproduct and its transportation. The responsibility may rest uponthe company, a third-party, or the customer. The choice dependson many factors: complexity of products, reason for return, andterritories involved, among others. The process mapping of thiselement is shown in Fig. 5. For example, in the electronics industry,the use of a field technician is common practice. The technician vis-its the customer to repair the item on site, if possible. In the eventthat the customer is responsible for returning the product, thecompany must give clear instructions on packaging, return ad-dress, etc. As Rogers and Tibben-Lembke (1998) indicate, returnedproducts may go to different destinations depending on the returnreason. The decisions for Element 3 are presented in Table 1.

In defining the return policies, the company must decide onwho pays for transportation of the returned product such as whenthe product is replaced or repaired when under warranty. Anydecisions made here must be in line with the customer service le-vel set by the company.

The economic aspects of this element can be grouped in twocategories of costs: transportation and consolidation space. Thesecosts depend on the volume of returned products, the transporta-tion mode, and the desired service level. Only three performancemeasures have been selected for this element as indicated in Ta-ble 2 (Element 3).

4.4. Element 4: sorting

The sorting process is generally present in RL systems in whichmany sites and many processes are involved. A preliminary sortingfirst occurs upon reception of the returned product by the

Fig. 4. Gatekeeping.

Fig. 5. Collection.


Fig. 6. Sorting.


company, which must then examine the item in view of decidinghow to treat it. Fig. 6 illustrates the process mapping. The next taskis to undertake a cross-verification of the returned item with thereturn authorization given at gatekeeping. Any discrepancies arecorrected in order to control the activity properly. The key deci-sions to take at this juncture are given in Table 1 (Element 4). Inaddition to these decisions, the company must determine the crite-ria for accepting a return, decide which products can be stocked,and take into account the intricacies of the sorting process amongother considerations. The economic aspects comprise receiving,warehousing, personnel, and handling methods. They vary mainlydue to the volume of returned products. Five performance mea-sures gauging the success of the sorting element are presented inTable 2 (Element 4).

4.5. Element 5: processing or treatment

Processing involves activities where treatment options such asrepair, reuse, remanufacturing, upgrade, and repackaging of the re-turned product are envisaged. Every option must consider theinventories of each and respect certain criteria, after which theitem may be subjected to the chosen treatment. This process map-ping is shown in Fig. 7, while Fig. 8 details the management ofinventory. Managing the inventory is an important activity thatwhen handled improperly may lead to excessive stocks of returneditems and obsolescence. Guide and Srivastava (1997b) present aliterature review on repairable stocks.

The decisions presented in Table 1 (Element 5) are comple-mented by further decisions regarding the fate of the returned

Fig. 7. Processing or treatment.

To Landfill

Fig. 8. Inventory management.


products, as each choice may impact the overall costs differently.For example, if a product still fails to function properly after repaira decision has to be made whether to invest in subsequent repairs

before scrapping the product. Precisely determining the initialstate of the returned item therefore has an influential role in thechoice of treatment.

Fig. 9. Reverse logistics information system.

(a)

Fig. 10. (a) Gatekeeping at Hydro-Quebec. (b) Collection at Hydro-Quebec. (c) Sorting at Hydro-Quebec. (d) Processing or Treatment at Hydro-Quebec.


Where economic aspects are concerned, this element involvescovering costs for working space, warehousing space, spare partsstocks, equipment, and personnel and represents the most sub-stantial amount following the transportation costs. As comparedto the other elements, treatment can actually generate revenues.In fact, it is the main goal of this activity to recuperate as much va-lue as possible from the returned products, even though not allactivities are able to generate revenues. The performance measuresof this element are given in Table 2 (Element 5).

4.6. Element 6: information system

As shown in Fig. 1, the information system interacts with all ele-ments of the RL system. The information system has to manageinformation for every element with regard to stocks and productionplanning, and must be able to provide information for product andcustomer satisfaction improvements. According to Yang and Wang(2007), information transparency in an RL information system im-proves information sharing through the entire supply chain

(b)

Fig. 10 (continued)


management (SCM). However, no RL-specific information systemcurrently exists because too many customizations and modifica-tions are required (Caldwell, 1999). Fig. 9 shows the basic structureof a system that could support an RL system. This system needs tobe connected to the enterprise system for inventory management,items, or the production data. Table 1 (Element 6) shows the differ-ent decisions regarding the RL information system. The economicaspects of this system comprise hardware, software, support, space(computer room and desk), and external services (i.e., Internet pro-vider). These costs depend on the volume of returns, the basicrequirements of each activity, the number of users, and the technol-ogy choices. To measure the performance of the information sys-tem, only two indicators are selected in Table 2 under Element 6.

4.7. Element 7: disposal system

The disposal system is the exit of the RL system. As shown inFig. 1, the decision to compensate a customer may occur at variouspoints in the process and depends on company policy. The com-pany may also decide to do nothing about the return. There is alsothe possibility that the same returned item needs to be shippedback to the customer. This last obligation requires that the infor-mation system and all the elements in the RL system track downindividual products. If an exchanged product is sent back to thecustomer, it must be the same model or of equivalent quality, per-formance, and functionality. In the event that no such product ex-ists, a monetary credit may be issued to the customer. The amountof the credit, however, may be litigious. The last sub-process isconcerned with the shipping of the product.

In an RL system, decisions for locating the different sites in-volved, for example in the gatekeeping, the sorting, and the treat-ment are influenced strongly by logistical considerations, such astransportation cost, customs, etc. Element 7 in Table 1 gives thedecisions involved in structuring the disposal system. The eco-nomic aspects of the process include transportation costs, packag-ing material, space for preparing orders, and shipping. These costsvary depending on the volume of products and the transportationmode used. Finally, eight performance measures are presented inTable 2, under Element 7.

The following section is dedicated to real-world case studies toshow the relevance of the proposed framework.

5. Application – industrial case studies

The main goal for developing a conceptual framework is tohelp managers organize their activities related to RL systemsand for the growing concern over the environment. So, theexhaustive literature review presented earlier, which serves as afoundation for our qualitative methodology, is complementedby considering three different industrial cases to demonstrateand test the applicability of the proposed decisions frameworkin addressing real world situations. For this purpose, preliminarycontacts with persons in charge in each of the three surveyedcompanies were made. The aim is to have an access authorizationto the center of activities, to observe and test/validate the appli-cability of the proposed framework. This important testing/vali-dation task has been made through different interviews aposteriori composed of several open-ended questions addressed

(c)

Fig. 10 (continued)


to people working in the immediate area of activities. These peo-ple were chosen according to their experience in the field andwere interviewed one by one.

The testing has allowed/enabled us to enrich the frameworkwhile ascertaining its application in a real world setting. The par-ticipating companies operate in different sectors: electricity utility,electronics multinational, and small manufacturer of domesticproducts. The way they operate using our proposed framework isshown below with the help of Figs. 10–12. Since the process map-ping is generic, an activity could be eliminated to represent a par-ticular reality without compromising the proper functioning of theRL system. For each of these industries, not all the elements pro-posed in the framework are required as will become obvious fromthe case study summaries that follow.

5.1. Hydro-Quebec

Hydro-Quebec is the electric utility company for the province ofQuebec, Canada. It has to deal with the return of residual hazard-ous waste and other products. The RL system in place is simpleand meets the legal requirements of the Quebec Ministry of Envi-ronment. Internal procedures have been written for every productso that the gatekeeping process is without intervention and flowseasily onto the next stage of the process. Collection is then ensuredby the company, for which each site is visited frequently and prod-ucts brought back to treatment centers. Reception at the treatmentcenters follows Figs. 10a–d accordingly. A small difference occurswhen a return is not done properly by an internal customer; thecompany will issue a non-conformity report, correct the error,

(d)

Fig. 10 (continued)

(a)

Fig. 11. (a) Gatekeeping at Matrox. (b) Collection at Matrox (particular customer). (c) Collection at Matrox (OEM Customer). (d) Treatment or Processing at Matrox (particularcustomer).


and accept the return. The treatments possible are reuse, recycle,donate, and send to landfill as well as revalorize and resell on sec-ondary markets. The particular problems of recycling hazardouswaste were added to the original framework from this example.In Figs. 10a–d, the shaded boxes and the bold arrows indicate thesteps used at Hydro-Quebec.

5.2. Matrox Electronics

Matrox Electronics Systems is an electronics manufacturer withoffices around the world and repair centers located in Canada,

the USA, Ireland and Asia. The different policies for retail customersand large computers manufacturers create many different processmappings, one for each type. The process for the return of a cus-tomer’s product begins with the technical support service. The cus-tomer has to pass through this filter first. If technical support staffis unable to solve the problem, the customer is referred to the re-pair center. Thus, Matrox can directly collect information abouttechnical problems with its products. Next, the warranty ischecked. If the product is still under warranty, the private cus-tomer is issued an authorization number and given instructionsfor shipping. The private customer must send the product to the

Ship product

Transportation to the nearest company service point

Give shipping instructions

Collection responsibility

Send a replacement product or service to customer?

(b)

Fig. 11 (continued)


place indicated in the Gatekeeping element, and must assume theshipping fees. In the case of OEM clients, Matrox does not offertechnical support. Before sending the products, the OEM customersupplies Matrox with a list of serial numbers (for validation pur-poses) and type of return. Matrox has to confirm the return in ashort period of time. Every return costs Matrox money accordingto the contract, so as to compensate the OEM customers for theirrole in the reverse logistics process. The collection process is car-ried out by a third party for Matrox’s OEM customers. The mainprocessing activity is repair. Products are also systematically up-graded. In parallel, within the production information system, dataon repairs are kept. Thus, by entering a product’s serial number(which is given at the gatekeeping stage), it is possible to knowits whole history. Since the company has decided to create a stockof repaired products, the customer’s compensation is sent as soonas the product reaches the sorting stage. More details are pre-sented in Figs. 11a–d where the shaded boxes and bold arrowsindicate the steps used at Matrox.

5.3. Woodflame

Woodflame Inc., a small company in the Montreal, Canada, man-ufactures wood-burning barbecues with which it has won manyprizes over the years. Given the expansion of sales in internationalmarkets, the company is redeploying its reverse logistics functionto better meet the RL requirements of its clientele. One person isin charge of customer service, Gatekeeping, and is responsible forissuing return authorization numbers to retailers. A Canadian cus-tomer can just return the product directly to the manufacturer.

There is no Sorting stage, because all of the returned productscome to the company. For the United States and Europe, the situa-tion is different. In Europe, the customer must return the productto a service center, which checks the product and confirms thediagnosis. Spare parts are sent if they are not available on the spotto carry out the repair. Thus, the customer does not have to sendthe product to Canada. This process is not completely formalized.At the treatment/processing stage, the services offered are repair,remanufacturing/reconditioning, upgrading and sale on the sec-ondary markets for commercial returns. The company uses a man-ual information system to record the return authorizationnumbers. The shipping system is simple. Once the treatment orprocessing is done, the products are returned to the customers orkept in stock. More details are illustrated in Figs. 12a–c.

6. Conclusion and recommendations for further research

There is no single reference model that all organizations can useto make their supply chains more efficient; each company mustfind a solution that best fits its specific situation. In this paperthe proposed decisions conceptual framework includes genericprocess mapping, decisions, economic aspects, and performancemeasures with a distinction made with respect to the strategic, tac-tical, and operational levels. The application and demonstration ofthis decisions conceptual framework was carried out for threecompanies from different sectors of activities. These cases wereinstrumental in refining, improving, and testing the flexibilityand the applicability of the framework. The validation continues inorder to extend and improve this decisions conceptual framework.

Send a replacement product to customer?

Yes

No

Pick-up product

Ship product

Transportation to the nearest company service point

Give shipping instructionsExchange product

Collection responsibility

Company

External service

Third party Customer

Send a replacement

product or service to customer ?

Yes

No Exchange product or on-site repair

(c)

Fig. 11 (continued)

(d)

Fig. 11 (continued)


From the case studies it is evident that this framework providesgood direction to RL managers. A self-assessment guide to identifythe strengths and weaknesses of an RL system constitutes a direc-

tion for future research. This could lead to the development of anexpert system to assist RL managers in creating an improved RLsystem.

(a)

Fig. 12. (a) Gatekeeping at Woodflame. (b) Collection at Woodflame. (c) Processing at Woodflame.

(b)

Fig. 12 (continued)


(c)

Fig. 12 (continued)


Acknowledgements

The authors acknowledge the constructive comments made onthe manuscript by three anonymous referees. They also acknowl-edge the Natural Sciences and Engineering Research Council ofCanada (NSERC) and Hydro-Quebec for their financial support, aswell as the other participating companies for the opportunity toapply and validate this research work.

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A reverse logistics decisions conceptual framework

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