Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects

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Reverse Logistics: Antecedents of Successful Implementation and Firm

Performance Effects
Article in Journal of Supply Chain and Operations Management · May 2014
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Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Reverse Logistics: Antecedents of Successful

Implementation and Firm Performance Effects
Rajat Mishra
Stephen F. Austin State University, Nacogdoches, Texas, USA
Randy Napier*
University of Texas, Arlington, Texas, USA
Reverse logistics has gained significant attention in operations management research in recent
years, but few studies have focused on firm characteristics that lead to the effective implementation
of reverse logistics processes. Similarly, the effect of reverse logistics processes on firm
performance has not been widely researched. This paper reviews relevant literature, conceptually
analyzes the role of reverse logistics, and develops propositions regarding the antecedents of
effective reverse logistics processes and the effect of reverse logistics processes on firm
performance. Factors considered include successful implementation of forward logistics
processes, flexibility in transportation processes, proactive motivation for the adoption of reverse
logistics processes, and knowledge management processes. Potential future extensions of this
research, including empirical studies to validate or refute the propositions, are identified. Insights
from this research can inform the design and implementation of reverse logistics processes by
practicing managers.
* Corresponding Author. E-mail address: rnapier@uta.edu
I. INTRODUCTION success stories have been widely reported, but

research examining firm characteristics that
Reverse logistics has gained significant support effective reverse logistics processes is
attention in operations management research in scarce. Similarly, few published papers in the
recent years. Attention to environmentally operations management literature have
responsible practices and sustainable considered the effect of reverse logistics
operations has been influenced by diverse processes on firm performance. This paper
stakeholders, including government agencies addresses those gaps in the literature by
and environmental activists as well as business offering relevant propositions concerning the
customers and end-users. Environmentally antecedents of successful reverse logistics
responsible practices in supply chain process implementations, and the effect of
management are often referred to as green reverse logistics on firm performance.
operations. Reverse logistics, which involves A schematic representation of a closed
the flow of products or materials back upstream loop supply chain, consisting of typical forward
through the supply chain, is an important logistics and reverse logistics processes, is
element of green operations. Reverse logistics shown in Figure 1.
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
33
FIGURE 1. REPRESENTATION OF A TYPICAL CLOSED LOOP SUPPLY CHAIN
A manufacturing firm has a network of In response to these developments, the

suppliers through which the necessary raw practice of capturing and collecting used
materials, components, and products are products for disposal and/or recycling has
brought in. Once they are in, further processing become more common. The recovered
and/or assembly is conducted through internal materials, components, and energy are
supply chain coordination. Finished products extracted from the used product, and the waste
are then shipped to the firm’s external and pollutants are disposed of in an
customers. This is the general model of forward environmentally responsible and regulation-
logistics processes. compliant manner.
The concept of reverse logistics has In simple terms, reverse logistics is the
gained prominence for a variety of reasons. backward flow of materials and information
These include increasing pressure from with an objective to re-use, remanufacture and
government entities and other stakeholders to recycle the useful components, energy content,
operate in an environmentally responsible way. or the product as a whole. Reverse logistics
But it has also become clear that reverse links the physical movement of all recovered
logistics can yield direct business benefits. materials from the customers to the suppliers.
These benefits can include reduced costs and Reverse logistics in service settings may
higher revenue. Reduced costs can result from require analysis that differs from the
the recovery and recycling of materials at the perspective applied in manufacturing.
end of the life of an individual product unit. Typically, in transportation operations the
Customers may prefer products from supply chain focus is distribution, where the
environmentally responsible companies; this starting point is the finished product that must
can increase revenue, raise product brand be delivered to the client in a timely manner.
values, and boost common stock prices.
34
Recovering and putting the recovered products activities needed to perform product recovery,
into usable form can be difficult. including the upstream movement of materials
Reverse logistics processes are and source reduction. Recovery of reusable
critically important in certain industries. In the materials and energy is subject to strict
pharmaceutical industry, for example, regulations, and affects both internal and
inventory deemed unsuitable must be identified external stakeholders of the firm. Strong
by customers and returned to suppliers in a motivation is often needed to initiate such
timely and cost-effective manner. This is activities, and to gain economic benefits from
particularly important where the health of this effort. Carter and Ellram (1998) observe
patients may be put at risk if drugs are not that reverse logistics processes must meet two
withdrawn from retail environments objectives: collecting and reintegrating used
expeditiously and completely. Given the large products and waste materials into the forward
number of locations where drugs are kept— supply chain, and minimizing system-wide
including hospital wards, operating theatres, resource consumption and environmental
local clinics, and retail pharmacies—this can be impact. These authors explicitly recognize that
complicated and time consuming (Ritchie, efficient design and coordination of an
Burns, Whittle, and Hey 2000). integrated two-way supply chain yields higher
Cooper, Lambert and Pagh (1997) list performance than two separate unidirectional
effective procurement, demand management, chains. This is consistent with the argument that
and order fulfillment as the elements of forward a broader view, one that includes an
supply chain management. Guide and Van environmental perspective, leads to a better
Wassenhove (2002) list reverse logistics, understanding of the overall system. It is noted,
inspection and disposition, reconditioning, and however, that challenges in managing the
distribution and sales as the elements of reverse incentives and relationships among supply
supply chain management. In this paper we chain partners must be addressed (Carter and
analyze the relationships in the two directions Ellram 1998).
of material flow, identify relevant linkages, and Corbett and Klassen (2006) assert that
develop propositions regarding the antecedents the benefits to OM theory and practice of
of effective reverse logistics processes and the adopting an environmental perspective are
effect of reverse logistics processes on firm subject to the “law of the expected unexpected
performance. side benefits.” This means that adopting an
The remainder of this paper is organized environmental perspective is beneficial, but
as follows. Section two presents a review of the that these benefits usually materialize in
relevant literature. Section three develops the unexpected forms—and are often greater after
theory and concepts leading to the propositions the fact than can accurately be predicted in
regarding reverse logistics. Section four advance. Implementing reverse logistics incurs
discusses the relevance and contribution of this costs for transportation, recycling, reuse and/or
research, considers its limitations, and remanufacturing. The resulting economic
discusses potential future extensions. Section benefits may not be immediately recognized
five presents concluding remarks, and section and quantified, but these benefits may emerge
six lists the references cited in the paper. over the time and in multiple forms—
eventually surpassing the initial investment and
II. LITERATURE REVIEW the operating costs incurred. In a different
domain, the claim of Crosby (1979) that
Corbett and Klassen (2005) defined “quality is free” (i.e., the view underlying
reverse logistics as the materials management programs such as “zero defects” and “zero
35
waste”), has been applied to environmentally specifically highlight reverse logistics

responsible operations by King and Lenox processes. This reinforces the view that
(2002). This argument posits that the reduction attention to the effect of reverse logistics
of waste yields benefits that can fully offset the processes on firm performance, as considered
related costs. Chandrasekhar, Dougless and in this research, is warranted.
Avery (1999) applied a similar argument, Recent literature on closed-loop supply
noting that environmental responsibility is free chains focuses on business economics, and
based on an analysis of cost reductions. In a treats reverse logistics processes as an element
more recent study, Reed and Chiang (2012) of closed-loop supply chain management.
developed and detailed strategies for gaining Atasu, Guide, and Van Wassenhove (2008)
competitive advantage through sustainable provide a review of published research on
business practices. product reuse in closed-loop supply chain
Dowlatshahi (2010) defined reverse research, and treat reverse logistics as an
logistics, unlike traditional forward logistics, as element of remanufacturing processes. Guide
involving a manufacturing entity that retrieves and Van Wassenhove (2009) consider reverse
previously shipped parts and products from the logistics in the broader context of developments
point of-consumption to the manufacturing in research on closed-loop supply chains, and
entity for possible recycling, remanufacturing, advocate a business economics focus for
or disposal. The use of these recovered closed-loop supply chain research. Souza
components reduces the cost of manufacturing (2013) offers a review and classification
and production and at the same time is framework for closed-loop supply chain
environmentally responsible. Thierry, research, and recognizes reverse logistics costs
Salomon, van Nunen, and Van Wassenhove as an element of optimization models for
(1995) identified three disposition alternatives network design. The call for research in this
for companies involved with reverse logistics: general area to address business economics is
direct reuse, which refers to reselling the consistent with our recognition of the firm
product; product recovery by repairing, performance effects of reverse logistics
refurbishing, remanufacturing, cannibalization processes.
and recycling; and waste management. Researchers investigating the effect of
Melbin (1995) determined that firms environmentally responsible management
practicing reverse logistics secured other practices on firm performance have used
benefits beyond the psychological satisfaction different measures of firm performance. Some
of supporting social causes by reducing the published papers use market-based measures
environmental impact of their activities and related to changes in the share price of publicly-
eliminating waste. These firms can also benefit traded companies, others use measures drawn
from stronger customer loyalty due to being from published financial statements, and some
perceived as an environmentally aware papers consider other evaluation criteria. Stock
organization—which can ultimately increase price changes in response to public
firm revenue and income. announcement of environmental management
Some studies indicate that firms may initiatives, awards, and certifications were used
adopt environmentally responsible operating as the measure of firm performance by Jacobs,
practices without specifically focusing on Singhal, and Subramanian (2010). Stock
reverse logistics processes. One example of market price performance, as measured by
this is provided by Wu, Dunn, and Forman Tobin's q, is used as the measure of firm
(2012), where a review of green operating performance for multinational enterprises that
practices in large global firms does not invest in emerging nations by Dowell, Hart, and
36
Yeung (2000). King and Lenox (2002) The level of interdependence among
examine the relationship between parties in a supply chain is high. This
environmental initiatives and firm interdependence can present the risk of trading
performance; these authors use financial partners displaying opportunistic behavior to
statement-based return on investment (ROI) as the detriment of other supply chain participants.
well as Tobin's q to evaluate firm performance. Yet—despite the risks involved—timely order
Menon and Menon (1997) explore the effect of fulfillment, coupled with proper demand
a marketing strategy that emphasizes management and cost-efficient procurement
environmental responsibility, and call for a methods, can positively influence participants’
measure of firm performance that recognizes perceptions of the inter-organizational
some combination of (a) increasing sales and relationship. This can create higher brand value,
profit, and (b) environmental and social and positive perceptions among trading
performance. partners foster loyalty and dependability within
Examples of firm performance the supply chain. This facilitates the sourcing of
measures can also be found in papers that materials, components, and products as well as
address operations management topics other the design and implementation of forward
than environmental management. Hendricks logistics processes.
and Singhal (1997 and 2001a) examine the The major hurdles in reverse logistics
effect of successful total quality management involve completing the return of products and
(TQM) implementation on firm performance, components in a timely way, and selling
and use changes in operating income remanufactured or refurbished products while
(Hendricks and Singhal 1997) and changes in creating the perception that refurbished items
operating income before depreciation, sales can function as well as the original product. An
growth, and the relationship of total sales to effective forward supply chain process helps to
total expenses (Hendricks and Singhal 2001a) create loyalty among the trading partners and
to measure firm performance. These same customers, and thus increases the likelihood
authors have also used stock price performance that these obstacles can be overcome in reverse
as the measure of firm performance with logistics processes. Timely return of products
respect to successful TQM implementation and components becomes more likely as trading
(Hendricks and Singhal 2001b). Jiang, Frazier, partners and customers develop a sense of
and Prater (2006) examine the relationship of accountability with respect to the process.
outsourcing to firm performance; these authors Higher sales may ultimately result as channels
use operationally-oriented ratios drawn from are managed properly and customers’
published financial statements to evaluate firm perceptions of the firm are elevated. At the
performance. These ratios include measures of same time, it becomes necessary to manage the
efficiency (sales to total expenses), productivity launch and branding of the refurbished products
(total sales to asset classes and total sales per so that the market position of the newly-
employee), and profitability (return on assets manufactured items is not compromised.
and net profit margin). Managers should plan and manage their
investment in forward and reverse supply
chains jointly in order to design sustainable
III. THEORY AND PROPOSITIONS supply chains with reverse logistics processes.
This tends to promote balance among
environmental responsibility, social
3.1. Successful Implementation of Forward
responsibility, and profitability - thus honoring
Logistics Processes
the three pillars included in the triple bottom
37
line model, as coined by Elkington (1994). This costs associated with planning and executing
includes minimizing waste in the forward reverse logistics processes.
supply chain, and effectively managing the The typical forward logistics process
reverse supply chain to include product returns involves the transportation of finished goods
for repair, remanufacturing, and material (following the conversion of raw materials) to
recovery. This paradigm can be extended to support usage, resale, or consumption by the
include product design for disassembly. firm’s customers. Cooper et al. (1997) pointed
Kocabasoglu, Prahinski, and Klassen (2007) out that improving performance in
pointed out that established supply chain procurement, demand management and order
relationships help managers optimize their fulfillment requires significant amounts of
reverse logistics investment for two reasons. information for analysis by management.
First, information from both suppliers and Reverse logistics includes completing the
customers helps managers identify reverse return of materials and acquiring the related
logistics investment opportunities. Second, information. It is logical to assume that higher
collaboration in the forward supply chain efficiency in the forward flow of materials and
enhances management of the reverse logistics information in the forward supply chain
processes. For example, downstream supply facilitates the retrieval of products and related
chain partners can collect, sort, and ship used information in reverse logistics processes. It is
products. Therefore, positive relationships likely that well-developed systems and
within the supply chain should support better capabilities applied in forward supply chain
process design and better decision making in operations will yield success in reverse logistics
reverse logistics. processes.
Accurately estimating transportation All of this highlights the significance of
cost is an important element of cost forward supply chain design. A better-designed
management in logistics operations. If the firm forward supply chain can enhance the
has an effective system for outbound probability of successful implementation of
transportation management and the parties who reverse logistics processes—providing an
perform these transportation activities are efficient way to recover the value and/or
reliable, it is likely that the same system and dispose of returned products. This can yield
service providers can be used for reverse significant value-added opportunities. On the
logistics. Additionally, if it is agreed that the other hand, poorly designed and executed
firm or its trading partners will bear the supply chain processes will tend to add cost and
expenses of outbound transportation, this impede responsiveness.
clarity in the forward supply chain supports
effective working relationships in reverse This leads to the following proposition:
logistics processes. On the contrary, discord
among trading partners will tend to increase Proposition 1: Successful
reverse logistics costs. Given that implementation of forward logistics
transportation costs generally account for a processes positively influences the
large percentage of the costs associated with implementation of reverse logistics
reverse logistics, it is important to have efficient processes.
and reliable transportation processes in place.
Often the same transportation system and
service providers can be used for inbound and 3.2. Flexibility in Transportation Processes
outbound traffic; this will tend to reduce the
38
The effective implementation of reverse include speed, dependability, capability,

logistics processes offers many potential availability and adequacy of equipment,
benefits. These include compliance with availability of service, frequency of service,
government regulations pertaining to security, claims handling, shipment tracing and
environmental management, satisfactory problem solving assistance. Some of these
response to pressure from stakeholders to adopt characteristics play a critical role in cost
environmentally responsible business practices, containment and reduction. Depending on
and increased revenue. The probability of specifics of the situation and required frequency
realizing these benefits will be maximized if of service and/or reliability, transportation
reverse logistics processes are designed and flexibility may be compromised to meet
implemented systematically. This includes the specific needs. For example, it may be possible
design and implementation of effective to consolidate routes so that the same routes and
processes for inbound and outbound transportation equipment can be used for both
transportation. Dowlatshahi (2010) noted that new and remanufactured products. In other
transportation costs play an important role in cases, reverse logistics requirements may make
determining the economic viability of reverse it necessary to establish new routes because the
logistics processes. If transportation costs are pre-existing routes cannot be utilized efficiently
prohibitively high, the economic viability of the for the reverse product flow.
reverse logistics processes will be severely Several dimensions of transportation
limited. This becomes especially important flexibility can impact the cost of transportation.
where, as is often the case, profit margins on Reverse logistics processes can employ single
remanufactured items are small. transportation modes or multiple modes in
Jayaraman and Luo (2007) noted that conjunction, including aircraft, ships, rail cars,
delay in transporting returned printers tends to and road vehicles (Ballou 2003). Transporting
reduce the value remaining in the product. goods by multiple modes without unpacking is
Tracey (2004) identified transportation as a termed as intermodal transportation.
source of competitive advantage. For most Each transportation mode has inherent
companies engaged in reverse logistics, advantages and disadvantages in terms of cost,
determining the average transportation cost per distance, and flexibility. Air transportation is
returned item can be difficult. With that in fast and may be preferable for moving high-
mind, most practicing managers involved in value products over long distances, but is
reverse logistics closely monitor and control expensive in terms of cost per ton-mile.
transportation expenses. Cost management Transportation by ship or barge is inexpensive
measures may include optimization modeling in terms of cost per ton-mile, but is slow and not
for route selection, outsourcing transportation available for inland locations. Rail
to third-party service providers, and using transportation is inexpensive in terms of cost
mixed modes of transportation. per ton-mile but unreliable from a scheduling
As the preceding paragraphs indicate, perspective. Trucking is more expensive per
efficient transportation processes are critical to ton-mile than other land-based modes, but
the effective implementation of reverse trucks are the most flexible mode and can be
logistics. Transportation is a significant used for long hauls over the highway network
element of reverse logistics cost. Flexibility in or for last-mile transportation to locations not
transportation routes, mechanisms and forms served by other modes. Pipeline transportation
can yield cost reductions in both inbound and offers low variable cost, but is only available
outbound logistics. Transportation service for bulk products in liquid, gaseous, or slurry
characteristics as identified by Ballou (2003) forms (Ballou 2003).
39
Thus, there are many tradeoffs to be stakeholders other than those with a direct
considered in designing transportation economic interest in the firm. See, e.g.,
processes. Intermodal transportation can offer Krajewski, Ritzman, and Malhotra 2010. This
lower overall transportation costs in many gives rise in operations management literature
forward and reverse logistics applications. As to increasing consideration of corporate social
noted by Dowlatshahi (2010), “Intermodal responsibility and the need to operate in an
transportation increases the reach of an entity to environmentally responsible way. This
reclaim parts and products from a larger underscores the desirability of implementing
geographic area; therefore, increasing the reverse logistics processes proactively to
viability and profitability of reverse logistics support social responsibility initiatives rather
endeavors. Intermodal service must also be than reactively to comply with coercive
timely scheduled to avoid any scheduled governmental regulations.
production delays or poor machine and labor The proactive approach to reverse
utilization.” logistics process implementation should
Dowlatshahi (2010) also observed that encompass concepts such as life cycle analysis
shipping in bulk maximizes cube utilization and design for environment that incorporate
while minimizing per mile charges. If shipping reverse logistics as a value-added activity that
in bulk can be combined with freight can be used to generate long-term competitive
consolidation for inbound and outbound routes, advantage. Under this view, product recycling
transportation costs can be reduced should not be done only to comply with
significantly. There are, however, situations government regulations, only to respond to
where firms cannot wait for the entire truckload pressure from anti-growth environmentalists, or
to fill before shipping because of demand and only to match the environmentally responsible
due date considerations. Again, this highlights actions of competitors.
the effect of the firm’s flexibility with regard to Responding to such pressures would
transportation processes and the related costs. constitute a reactive strategy where values and
As the preceding paragraphs indicate, processes are not focused on positive outputs.
flexibility in transportation processes offers In this situation, reverse logistics activities
potential economic advantages through would be conducted in circumstances
economies of scale and reduced transportation characterized by confused and disoriented
costs. These advantages can be realized in both dynamism.
forward and reverse logistics processes. On the other hand, proactively
implementing environmental programs to
This analysis leads to the following extract valuable materials from recycled
proposition: products creates a positive backdrop for the
implementation of reverse logistics processes.
Proposition 2: Flexibility in
Applying reverse logistics to reduce costs,
transportation processes positively
improve quality, and increase cleanliness is
influences the implementation of
more likely to yield enthusiastic participation—
reverse logistics processes.
and therefore succeed—than a program
implemented merely to satisfy external
3.3. Proactive Motivation to Implement
pressures (Chandrashekar, Dougless and
Reverse Logistics Processes
Avery, 1999).
Given that firms face multiple sources
The field of operations management has of pressure to meet environmental norms, the
increasingly embraced the needs of optimal response is to create effective reverse
40
logistics processes that will reduce costs and/or case studies include those by the leading
boost revenues. It has been argued that firms automobile manufacturers who have
have increasingly embraced environmental participated in the Auto Industry Pollution
management initiatives and implemented these Prevention Project. Blanchard (2007) estimated
from an opportunistic perspective. Corbett and that product returns cost US manufacturers and
Klassen (2006) argued that the acceptance of retailers $100 billion every year in lost sales,
voluntary environmental programs such as ISO transportation, handling, processing, and
14000, the Global Reporting Initiative, and disposal. The author further stated that
various greenhouse gas and other emissions customer returns could reduce a manufacturer’s
trading schemes, seem to be an immediate profitability by an average of 3.8% while
consequence of the increased importance reverse logistics costs consume 9 cents of every
attached to the social franchise and its impact sales dollar. According to Langnau (2001),
on the economic franchise. Handfield, Walton, reverse logistics costs in the United States total
Seeger, and Melnyk (1997) stated that reacting approximately $35 billion per year, and
to regulations is no longer sufficient, and that analysts have predicted that average cost per
world-class enterprises must anticipate and pre- product return would be $30–$35 in the near
empt changing environmental regulations and future. Chandrashekar et al. (1999) argued that
customer expectations, and must proactively all case studies, in essence, show that properly
prepare products, processes and infrastructure administered environmental programs often
for these changes without sacrificing pay for themselves, and therefore can be
competitive advantage. considered free.
It can be argued that reverse logistics
This brings to mind the following proposition: should be implemented with an integrated plan
that recognizes the interests of all parties within
Proposition 3: Proactive motivation to the supply chain. This should be accompanied
implement reverse logistics processes by a strategy that is integrated with the launch
positively influences the implementation of new products. New products can be brought
of reverse logistics processes. to market with recycled materials obtained from
reverse logistics processes pursuant to
3.4. Knowledge Management Processes consultation and close cooperation of diverse
functional areas within the firm—including
Scholars have respectfully disagreed as marketing, operations, logistics, and finance.
to whether the practice of reverse logistics adds The use of recycled materials would lower the
value to the firm in generating better cost of these products. This would enable the
performances, or whether reverse logistics firm to offer these products at a lower price or
processes are implemented in response to a higher profit margin. This application of
coercive, normative and mimetic pressures reverse logistics processes could thus lead to
(DiMaggio and Powell 1983). Evidence is improved performance for the firm.
provided by companies like Kimberly Clark, In seeking to differentiate firms that
which estimated that US$1 in recycling leverage reverse logistics processes to improve
contributes the same amount to the bottom line firm performance from firms that do not, the
as US$14.62 in additional sales (McDermott knowledge-based view of the firm may be
1995). Similar successes have been reported by relevant (Nonaka, 1994; Nonaka and Konno,
many other organizations including 3M 1998; Nonaka and Takeuchi, 1995).
Companies, with their Pollution Prevention Knowledge creation theory involves
Pays (3P) program (Coddington 1993). Other continuous interaction of the epistemological
41
and ontological dimensions of knowledge It is thus conceivable that reverse

(Linderman, Schroeder, Zaheer, Liedtke, and logistics can positively influence firm
Choo 2004), as shown in Figure 2 below. performance as the value recovered from
Explicit knowledge has been defined as recycled materials are reused in new products.
that which is transferred through training or These benefits can flow from the generation of
communication, while tacit knowledge includes new levels of knowledge among the employees
technical and cognitive knowledge which may of the firm and across the supply chain due to
not be easy to transfer. The epistemological the practice of reverse logistics. This would
definition of knowledge includes both explicit indicate that reverse logistics and the elevated
and tactical elements. level of knowledge could lead to better
“The ontological dimension of coordination among functional departments
knowledge begins with individual knowledge, within the firm, and among trading partners
and then moves to higher levels including within the supply chain. The resulting
group, organizational, and inter-organizational” advantages could include efficient practices for
(Linderman et al., 2004). The spiral interaction the design and launch of new products, and
of epistemological and ontological factors better overall recovery and reuse of reused
yields four patterns: socialization, materials.
externalization, combination and The essence of this argument is that
internalization; the interaction of these patterns knowledge created through the design and
represents the phenomenon of existing implementation of reverse logistics processes
knowledge giving rise to new knowledge. supports and enhances organizational
Nonaka and Takeuchi (1995) observed that performance. Applying the knowledge-based
whenever knowledge is converted through one view of the firm provides insight that can help
of the four modes of knowledge conversion, it is to distinguish organizations that are more
amplified and moved to higher ontological successful at deploying reverse logistics
levels. The process of knowledge conversion in practices from those that are less successful.
the context of reverse logistics is presented in The posited relationship between reverse
Figure 3. Reverse logistics practices that foster logistics and firm performance, as mediated by
contact and interaction between supply chain knowledge, is shown schematically in Figure 4
members allow knowledge to be created below.
through socialization. Reverse logistics
practices that help articulate or conceptualize The proposition that flows from this argument
customer needs so that the desired products can is presented as follows:
be brought in the market allow knowledge to be
created through externalization. Reverse
logistics practices that support analysis of
Proposition 4: Knowledge enhancement
information allow knowledge to be created
of firm employees, as suggested by the
through combination. Reverse logistics
knowledge-based view, mediates the
practices that promote monitoring and feedback
relationship between reverse logistics
of customer information allow knowledge to be
and firm performance.
created through internalization.
42
Tacit Explicit
Tacit Socialization Externalization

Explicit Internalization Combination
FIGURE 2. MODES OF KNOWLEDGE CONVERSION (SOURCE: NONAKA 1994)
FIGURE 3. REVERSE LOGISTICS, KNOWLEDGE BASED VIEW

AND FIRM PERFORMANCE
43
Reverse Logistics Knowledge Firm Performance
FIGURE 4. KNOWLEDGE BASED VIEW MEDIATING THE RELATIONSHIP

BETWEEN RL AND FIRM PERFORMANCE
IV. DISCUSSION presented in this paper with empirical data.

Alternative approaches such as survey research
This paper presents conceptual insights and case studies would be well-suited to test
of interest to both researchers and practitioners and evaluate the relationships of reverse
regarding the reverse logistics and the logistics process implementation to forward
implementation of reverse logistics processes. logistics processes, transportation flexibility,
The four propositions developed in this paper proactive motivation, and knowledge
are summarized below. management. Archival data, including
published news articles and financial
Proposition 1: Successful implementation statements, can be used to test and confirm the
of forward logistics processes positively relationship between reverse logistics and firm
influences the implementation of reverse performance. Comments on appropriate
logistics processes. methods and data collection approaches for
Proposition 2: Flexibility in transportation extending this research follow.
processes positively influences the With regard to survey research, the
implementation of reverse logistics methodology set out by Forza (2002) would be
processes. appropriate for evaluating the propositions
Proposition 3: Proactive motivation to developed in this paper. This would include
implement reverse logistics processes detailed construct development, survey design
positively influences the implementation of and development of measurement instruments,
reverse logistics processes. pilot testing with a preliminary sample survey,
Proposition 4: Knowledge enhancement of data collection from the relevant target
firm employees, as suggested by the population, data analysis and hypothesis
knowledge-based view, mediates the testing, and generation of the empirical research
relationship between reverse logistics and report. We would regard members of one or
firm performance. more logistics-focused professional
associations such as the American Society of
These propositions, taken as a whole, Transportation and Logistics (ASTL) or the
provide a useful conceptual framework for Council of Supply Chain Management
understanding the antecedents of effective Professionals (CSCMP) as an appropriate target
reverse logistics process implementations and population for survey research to test the
the effect of effective reverse logistics on firm propositions.
performance. With respect to case study research, a
At this point it is useful to consider useful approach for logistics and related fields
potential future extensions of this research. is provided by Ellram (1996). This approach
First and foremost, it will be helpful to would be appropriate for gathering firm-
extend this research by testing the propositions specific data and qualitative information from
44
multiple companies to evaluate the propositions published financial statements. More

developed in this paper. This would include specifically, we would follow the example of
design of the case study, selection of firms to be Jiang et al. (2006) and use ratios that measure
included in the study, development of the aspects of operational performance such as
research protocol and interview questions, efficiency, productivity, and profitability. This
completion of a pilot study, evidence collection, choice is consistent with comments offered in
data analysis and coding, evaluation of the Hendricks and Singhal (1997) and Jiang et al.
propositions, development of additional (2006) to the effect that it is preferable to
findings, and preparation of the case study measure firm performance with archival
report. Single-site case studies could be useful financial statement data—as opposed to using
for exploratory research in this area managers' self-reported and perceptual
(Dowlatshahi 2010, citing McCutcheon and opinions (survey responses) for this purpose.
Meredith 1993), while multiple sites would be The selected firm performance
preferred in order to use case study results to measures are specified in Table 1. The
rigorously evaluate the propositions formulas in Table 1 vary slightly from the
(Eisenhardt 1989). formulas used by Jiang et al. so that the
With regard to firm performance contemplated ratios are calculated in a manner
measures to be used in empirically testing the consistent with practices that are widely used in
propositions offered in this paper, we would managerial accounting (e.g., Horngren et al.
propose to use archival financial data from 2009).
Table 1
TABLE 1. FIRM
Firm PERFORMANCE
Performance Metrics METRICS
Metric Categories and Descriptions Calculation Formulas
1. Cost efficiency
1a. Selling, General & Admin Expense / Sales SG&A / Sales

1b. Operating Expense / Sales (SG&A + COGS) / Sales
2. Productivity
2a. Asset Turnover Sales / Average Total Assets

2b. Fixed Asset Turnover Sales / Average PP&E Net of Depreciation
2c. Inventory Turnover COGS / Average Inventory
2d. Sales per Employee Sales / Average Number of Employees
3. Profitability
3a. Return on Assets (Net Income / Average Total Assets) × 100%

3b. Net Profit Margin (Net Income / Sales) × 100%
Source: Jiang, Frazier, and Prater 2006.
45
Other empirical studies can be the nature of specific problems encountered as

conducted to support additional extensions of reverse logistics processes are designed and
this research as they are discussed below. implemented.
Location and facility layout issues with The research highlights a number of
regard to reverse logistics process significant issues regarding reverse logistics
implementations could be examined in future process implementations, but it is appropriate to
studies. It would be useful to identify and study recognize the limited nature of this study. The
factors that distinguish situations where primary limitation is that the paper addresses
collection points for returned products should conceptual issues without empirical
be (a) in retail stores or other primary customer verification. It is intended that this paper will
service locations, (b) co-located at major define and guide the execution of a research
customer sites, or (c) subject to site-specific agenda that will include empirical research
dispatch of transportation vehicles for on- along the lines set out in the preceding
demand pick up. paragraphs.
The effect of delivery speed and
reliability issues on the effectiveness of reverse
logistics process implementation would be V. CONCLUSIONS
another promising avenue of investigation.
From the perspective of reverse logistics The effects of reverse logistics on
processes as a source of competitive advantage, supply chain operations are potentially
it would be useful to identify and study the significant and should not be overlooked. This
tradeoffs among delivery speed or reliability paper develops four propositions concerning
versus the cost advantages of accumulating the successful implementation of reverse
returned product to container or truckload logistics processes, and the potential effect of
quantities before shipping them to a recycling effective reverse logistics on firm performance.
facility. In many cases it will be economically Factors considered include successful
advantageous to use open vehicle capacity implementation of forward logistics processes,
following a forward delivery to transport flexibility in transportation processes, proactive
returned goods in what would otherwise be an motivation for the adoption of reverse logistics
empty or “deadhead” return trip. processes, and knowledge management
Notwithstanding the attention devoted processes. Potential future extensions of this
to reverse logistics in peer-reviewed literature research, including empirical studies to validate
and in the business press, many companies have or refute the propositions, are identified.
yet to design and implement optimal processes Insights from this research can inform future
for reverse logistics. It would be useful to research in reverse logistics, and can guide the
conduct exploratory research, such as case design and implementation of reverse logistics
studies and action research projects, to processes by practicing managers.
understand what prevents firms from
embracing reverse logistics and to define Acknowledgment
frameworks for cost-benefit analyses focused
on reverse logistics implementations. It is The authors wish to thank the reviewers
possible that the cost not to solve methodology for their depth of thought in analyzing the
presented by Napier and Prater (2011) could be earlier draft of this paper, and for providing
applied in the context of reverse logistics very specific guidance that has significantly
process proposals. One variant of this improved the finished product.
exploratory research could assess and compare
46
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Reverse Logistics: Antecedents of Successful Implementation and Firm

Article in Journal of Supply Chain and Operations Management · May 2014

Rajat Mishra Randy Napier

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Reverse Logistics: Antecedents of Successful

* Corresponding Author. E-mail address: rnapier@uta.edu

I. INTRODUCTION success stories have been widely reported, but

FIGURE 1. REPRESENTATION OF A TYPICAL CLOSED LOOP SUPPLY CHAIN

A manufacturing firm has a network of In response to these developments, the

waste”), has been applied to environmentally specifically highlight reverse logistics

The effective implementation of reverse include speed, dependability, capability,

and ontological dimensions of knowledge It is thus conceivable that reverse

Tacit Socialization Externalization

FIGURE 2. MODES OF KNOWLEDGE CONVERSION (SOURCE: NONAKA 1994)

FIGURE 3. REVERSE LOGISTICS, KNOWLEDGE BASED VIEW

Reverse Logistics Knowledge Firm Performance

FIGURE 4. KNOWLEDGE BASED VIEW MEDIATING THE RELATIONSHIP

IV. DISCUSSION presented in this paper with empirical data.

multiple companies to evaluate the propositions published financial statements. More

Metric Categories and Descriptions Calculation Formulas

1a. Selling, General & Admin Expense / Sales SG&A / Sales

2a. Asset Turnover Sales / Average Total Assets

3a. Return on Assets (Net Income / Average Total Assets) × 100%

Source: Jiang, Frazier, and Prater 2006.

Other empirical studies can be the nature of specific problems encountered as

VI. REFERENCES Sociological Review 48(2), 1983, 147-

Reed, M.E. and Chiang, D.T., “Eco-advantage

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