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Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
33
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
Reverse logistics has gained significant
attention in operations management research in
recent years. Attention to environmentally
responsible practices and sustainable
operations has been influenced by diverse
stakeholders, including government agencies
and environmental activists as well as business
customers and end-users. Environmentally
responsible practices in supply chain
management are often referred to as green
operations. Reverse logistics, which involves
the flow of products or materials back upstream
through the supply chain, is an important
element of green operations. Reverse logistics
success stories have been widely reported, but
research examining firm characteristics that
support effective reverse logistics processes is
scarce. Similarly, few published papers in the
operations management literature have
considered the effect of reverse logistics
processes on firm performance. This paper
addresses those gaps in the literature by
offering relevant propositions concerning the
antecedents of successful reverse logistics
process implementations, and the effect of
reverse logistics on firm performance.
A schematic representation of a closed
loop supply chain, consisting of typical forward
logistics and reverse logistics processes, is
shown in Figure 1.
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
34
FIGURE 1. REPRESENTATION OF A TYPICAL CLOSED LOOP SUPPLY CHAIN
A manufacturing firm has a network of
suppliers through which the necessary raw
materials, components, and products are
brought in. Once they are in, further processing
and/or assembly is conducted through internal
supply chain coordination. Finished products
are then shipped to the firm’s external
customers. This is the general model of forward
logistics processes.
The concept of reverse logistics has
gained prominence for a variety of reasons.
These include increasing pressure from
government entities and other stakeholders to
operate in an environmentally responsible way.
But it has also become clear that reverse
logistics can yield direct business benefits.
These benefits can include reduced costs and
higher revenue. Reduced costs can result from
the recovery and recycling of materials at the
end of the life of an individual product unit.
Customers may prefer products from
environmentally responsible companies; this
can increase revenue, raise product brand
values, and boost common stock prices.
In response to these developments, the
practice of capturing and collecting used
products for disposal and/or recycling has
become more common. The recovered
materials, components, and energy are
extracted from the used product, and the waste
and pollutants are disposed of in an
environmentally responsible and regulation-
compliant manner.
In simple terms, reverse logistics is the
backward flow of materials and information
with an objective to re-use, remanufacture and
recycle the useful components, energy content,
or the product as a whole. Reverse logistics
links the physical movement of all recovered
materials from the customers to the suppliers.
Reverse logistics in service settings may
require analysis that differs from the
perspective applied in manufacturing.
Typically, in transportation operations the
supply chain focus is distribution, where the
starting point is the finished product that must
be delivered to the client in a timely manner.
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
35
Recovering and putting the recovered products
into usable form can be difficult.
Reverse logistics processes are
critically important in certain industries. In the
pharmaceutical industry, for example,
inventory deemed unsuitable must be identified
by customers and returned to suppliers in a
timely and cost-effective manner. This is
particularly important where the health of
patients may be put at risk if drugs are not
withdrawn from retail environments
expeditiously and completely. Given the large
number of locations where drugs are kept—
including hospital wards, operating theatres,
local clinics, and retail pharmacies—this can be
complicated and time consuming (Ritchie,
Burns, Whittle, and Hey 2000).
Cooper, Lambert and Pagh (1997) list
effective procurement, demand management,
and order fulfillment as the elements of forward
supply chain management. Guide and Van
Wassenhove (2002) list reverse logistics,
inspection and disposition, reconditioning, and
distribution and sales as the elements of reverse
supply chain management. In this paper we
analyze the relationships in the two directions
of material flow, identify relevant linkages, and
develop propositions regarding the antecedents
of effective reverse logistics processes and the
effect of reverse logistics processes on firm
performance.
The remainder of this paper is organized
as follows. Section two presents a review of the
relevant literature. Section three develops the
theory and concepts leading to the propositions
regarding reverse logistics. Section four
discusses the relevance and contribution of this
research, considers its limitations, and
discusses potential future extensions. Section
five presents concluding remarks, and section
six lists the references cited in the paper.
II. LITERATURE REVIEW
Corbett and Klassen (2005) defined
reverse logistics as the materials management
activities needed to perform product recovery,
including the upstream movement of materials
and source reduction. Recovery of reusable
materials and energy is subject to strict
regulations, and affects both internal and
external stakeholders of the firm. Strong
motivation is often needed to initiate such
activities, and to gain economic benefits from
this effort. Carter and Ellram (1998) observe
that reverse logistics processes must meet two
objectives: collecting and reintegrating used
products and waste materials into the forward
supply chain, and minimizing system-wide
resource consumption and environmental
impact. These authors explicitly recognize that
efficient design and coordination of an
integrated two-way supply chain yields higher
performance than two separate unidirectional
chains. This is consistent with the argument that
a broader view, one that includes an
environmental perspective, leads to a better
understanding of the overall system. It is noted,
however, that challenges in managing the
incentives and relationships among supply
chain partners must be addressed (Carter and
Ellram 1998).
Corbett and Klassen (2006) assert that
the benefits to OM theory and practice of
adopting an environmental perspective are
subject to the “law of the expected unexpected
side benefits.” This means that adopting an
environmental perspective is beneficial, but
that these benefits usually materialize in
unexpected forms—and are often greater after
the fact than can accurately be predicted in
advance. Implementing reverse logistics incurs
costs for transportation, recycling, reuse and/or
remanufacturing. The resulting economic
benefits may not be immediately recognized
and quantified, but these benefits may emerge
over the time and in multiple forms—
eventually surpassing the initial investment and
the operating costs incurred. In a different
domain, the claim of Crosby (1979) that
“quality is free” (i.e., the view underlying
programs such as “zero defects” and “zero
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
36
waste”), has been applied to environmentally
responsible operations by King and Lenox
(2002). This argument posits that the reduction
of waste yields benefits that can fully offset the
related costs. Chandrasekhar, Dougless and
Avery (1999) applied a similar argument,
noting that environmental responsibility is free
based on an analysis of cost reductions. In a
more recent study, Reed and Chiang (2012)
developed and detailed strategies for gaining
competitive advantage through sustainable
business practices.
Dowlatshahi (2010) defined reverse
logistics, unlike traditional forward logistics, as
involving a manufacturing entity that retrieves
previously shipped parts and products from the
point of-consumption to the manufacturing
entity for possible recycling, remanufacturing,
or disposal. The use of these recovered
components reduces the cost of manufacturing
and production and at the same time is
environmentally responsible. Thierry,
Salomon, van Nunen, and Van Wassenhove
(1995) identified three disposition alternatives
for companies involved with reverse logistics:
direct reuse, which refers to reselling the
product; product recovery by repairing,
refurbishing, remanufacturing, cannibalization
and recycling; and waste management.
Melbin (1995) determined that firms
practicing reverse logistics secured other
benefits beyond the psychological satisfaction
of supporting social causes by reducing the
environmental impact of their activities and
eliminating waste. These firms can also benefit
from stronger customer loyalty due to being
perceived as an environmentally aware
organization—which can ultimately increase
firm revenue and income.
Some studies indicate that firms may
adopt environmentally responsible operating
practices without specifically focusing on
reverse logistics processes. One example of
this is provided by Wu, Dunn, and Forman
(2012), where a review of green operating
practices in large global firms does not
specifically highlight reverse logistics
processes. This reinforces the view that
attention to the effect of reverse logistics
processes on firm performance, as considered
in this research, is warranted.
Recent literature on closed-loop supply
chains focuses on business economics, and
treats reverse logistics processes as an element
of closed-loop supply chain management.
Atasu, Guide, and Van Wassenhove (2008)
provide a review of published research on
product reuse in closed-loop supply chain
research, and treat reverse logistics as an
element of remanufacturing processes. Guide
and Van Wassenhove (2009) consider reverse
logistics in the broader context of developments
in research on closed-loop supply chains, and
advocate a business economics focus for
closed-loop supply chain research. Souza
(2013) offers a review and classification
framework for closed-loop supply chain
research, and recognizes reverse logistics costs
as an element of optimization models for
network design. The call for research in this
general area to address business economics is
consistent with our recognition of the firm
performance effects of reverse logistics
processes.
Researchers investigating the effect of
environmentally responsible management
practices on firm performance have used
different measures of firm performance. Some
published papers use market-based measures
related to changes in the share price of publicly-
traded companies, others use measures drawn
from published financial statements, and some
papers consider other evaluation criteria. Stock
price changes in response to public
announcement of environmental management
initiatives, awards, and certifications were used
as the measure of firm performance by Jacobs,
Singhal, and Subramanian (2010). Stock
market price performance, as measured by
Tobin's q, is used as the measure of firm
performance for multinational enterprises that
invest in emerging nations by Dowell, Hart, and
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
37
Yeung (2000). King and Lenox (2002)
examine the relationship between
environmental initiatives and firm
performance; these authors use financial
statement-based return on investment (ROI) as
well as Tobin's q to evaluate firm performance.
Menon and Menon (1997) explore the effect of
a marketing strategy that emphasizes
environmental responsibility, and call for a
measure of firm performance that recognizes
some combination of (a) increasing sales and
profit, and (b) environmental and social
performance.
Examples of firm performance
measures can also be found in papers that
address operations management topics other
than environmental management. Hendricks
and Singhal (1997 and 2001a) examine the
effect of successful total quality management
(TQM) implementation on firm performance,
and use changes in operating income
(Hendricks and Singhal 1997) and changes in
operating income before depreciation, sales
growth, and the relationship of total sales to
total expenses (Hendricks and Singhal 2001a)
to measure firm performance. These same
authors have also used stock price performance
as the measure of firm performance with
respect to successful TQM implementation
(Hendricks and Singhal 2001b). Jiang, Frazier,
and Prater (2006) examine the relationship of
outsourcing to firm performance; these authors
use operationally-oriented ratios drawn from
published financial statements to evaluate firm
performance. These ratios include measures of
efficiency (sales to total expenses), productivity
(total sales to asset classes and total sales per
employee), and profitability (return on assets
and net profit margin).
III. THEORY AND PROPOSITIONS
3.1. Successful Implementation of Forward
Logistics Processes
The level of interdependence among
parties in a supply chain is high. This
interdependence can present the risk of trading
partners displaying opportunistic behavior to
the detriment of other supply chain participants.
Yet—despite the risks involved—timely order
fulfillment, coupled with proper demand
management and cost-efficient procurement
methods, can positively influence participants’
perceptions of the inter-organizational
relationship. This can create higher brand value,
and positive perceptions among trading
partners foster loyalty and dependability within
the supply chain. This facilitates the sourcing of
materials, components, and products as well as
the design and implementation of forward
logistics processes.
The major hurdles in reverse logistics
involve completing the return of products and
components in a timely way, and selling
remanufactured or refurbished products while
creating the perception that refurbished items
can function as well as the original product. An
effective forward supply chain process helps to
create loyalty among the trading partners and
customers, and thus increases the likelihood
that these obstacles can be overcome in reverse
logistics processes. Timely return of products
and components becomes more likely as trading
partners and customers develop a sense of
accountability with respect to the process.
Higher sales may ultimately result as channels
are managed properly and customers’
perceptions of the firm are elevated. At the
same time, it becomes necessary to manage the
launch and branding of the refurbished products
so that the market position of the newly-
manufactured items is not compromised.
Managers should plan and manage their
investment in forward and reverse supply
chains jointly in order to design sustainable
supply chains with reverse logistics processes.
This tends to promote balance among
environmental responsibility, social
responsibility, and profitability - thus honoring
the three pillars included in the triple bottom
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
38
line model, as coined by Elkington (1994). This
includes minimizing waste in the forward
supply chain, and effectively managing the
reverse supply chain to include product returns
for repair, remanufacturing, and material
recovery. This paradigm can be extended to
include product design for disassembly.
Kocabasoglu, Prahinski, and Klassen (2007)
pointed out that established supply chain
relationships help managers optimize their
reverse logistics investment for two reasons.
First, information from both suppliers and
customers helps managers identify reverse
logistics investment opportunities. Second,
collaboration in the forward supply chain
enhances management of the reverse logistics
processes. For example, downstream supply
chain partners can collect, sort, and ship used
products. Therefore, positive relationships
within the supply chain should support better
process design and better decision making in
reverse logistics.
Accurately estimating transportation
cost is an important element of cost
management in logistics operations. If the firm
has an effective system for outbound
transportation management and the parties who
perform these transportation activities are
reliable, it is likely that the same system and
service providers can be used for reverse
logistics. Additionally, if it is agreed that the
firm or its trading partners will bear the
expenses of outbound transportation, this
clarity in the forward supply chain supports
effective working relationships in reverse
logistics processes. On the contrary, discord
among trading partners will tend to increase
reverse logistics costs. Given that
transportation costs generally account for a
large percentage of the costs associated with
reverse logistics, it is important to have efficient
and reliable transportation processes in place.
Often the same transportation system and
service providers can be used for inbound and
outbound traffic; this will tend to reduce the
costs associated with planning and executing
reverse logistics processes.
The typical forward logistics process
involves the transportation of finished goods
(following the conversion of raw materials) to
support usage, resale, or consumption by the
firm’s customers. Cooper et al. (1997) pointed
out that improving performance in
procurement, demand management and order
fulfillment requires significant amounts of
information for analysis by management.
Reverse logistics includes completing the
return of materials and acquiring the related
information. It is logical to assume that higher
efficiency in the forward flow of materials and
information in the forward supply chain
facilitates the retrieval of products and related
information in reverse logistics processes. It is
likely that well-developed systems and
capabilities applied in forward supply chain
operations will yield success in reverse logistics
processes.
All of this highlights the significance of
forward supply chain design. A better-designed
forward supply chain can enhance the
probability of successful implementation of
reverse logistics processes—providing an
efficient way to recover the value and/or
dispose of returned products. This can yield
significant value-added opportunities. On the
other hand, poorly designed and executed
supply chain processes will tend to add cost and
impede responsiveness.
This leads to the following proposition:
Proposition 1: Successful
implementation of forward logistics
processes positively influences the
implementation of reverse logistics
processes.
3.2. Flexibility in Transportation Processes
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
39
The effective implementation of reverse
logistics processes offers many potential
benefits. These include compliance with
government regulations pertaining to
environmental management, satisfactory
response to pressure from stakeholders to adopt
environmentally responsible business practices,
and increased revenue. The probability of
realizing these benefits will be maximized if
reverse logistics processes are designed and
implemented systematically. This includes the
design and implementation of effective
processes for inbound and outbound
transportation. Dowlatshahi (2010) noted that
transportation costs play an important role in
determining the economic viability of reverse
logistics processes. If transportation costs are
prohibitively high, the economic viability of the
reverse logistics processes will be severely
limited. This becomes especially important
where, as is often the case, profit margins on
remanufactured items are small.
Jayaraman and Luo (2007) noted that
delay in transporting returned printers tends to
reduce the value remaining in the product.
Tracey (2004) identified transportation as a
source of competitive advantage. For most
companies engaged in reverse logistics,
determining the average transportation cost per
returned item can be difficult. With that in
mind, most practicing managers involved in
reverse logistics closely monitor and control
transportation expenses. Cost management
measures may include optimization modeling
for route selection, outsourcing transportation
to third-party service providers, and using
mixed modes of transportation.
As the preceding paragraphs indicate,
efficient transportation processes are critical to
the effective implementation of reverse
logistics. Transportation is a significant
element of reverse logistics cost. Flexibility in
transportation routes, mechanisms and forms
can yield cost reductions in both inbound and
outbound logistics. Transportation service
characteristics as identified by Ballou (2003)
include speed, dependability, capability,
availability and adequacy of equipment,
availability of service, frequency of service,
security, claims handling, shipment tracing and
problem solving assistance. Some of these
characteristics play a critical role in cost
containment and reduction. Depending on
specifics of the situation and required frequency
of service and/or reliability, transportation
flexibility may be compromised to meet
specific needs. For example, it may be possible
to consolidate routes so that the same routes and
transportation equipment can be used for both
new and remanufactured products. In other
cases, reverse logistics requirements may make
it necessary to establish new routes because the
pre-existing routes cannot be utilized efficiently
for the reverse product flow.
Several dimensions of transportation
flexibility can impact the cost of transportation.
Reverse logistics processes can employ single
transportation modes or multiple modes in
conjunction, including aircraft, ships, rail cars,
and road vehicles (Ballou 2003). Transporting
goods by multiple modes without unpacking is
termed as intermodal transportation.
Each transportation mode has inherent
advantages and disadvantages in terms of cost,
distance, and flexibility. Air transportation is
fast and may be preferable for moving high-
value products over long distances, but is
expensive in terms of cost per ton-mile.
Transportation by ship or barge is inexpensive
in terms of cost per ton-mile, but is slow and not
available for inland locations. Rail
transportation is inexpensive in terms of cost
per ton-mile but unreliable from a scheduling
perspective. Trucking is more expensive per
ton-mile than other land-based modes, but
trucks are the most flexible mode and can be
used for long hauls over the highway network
or for last-mile transportation to locations not
served by other modes. Pipeline transportation
offers low variable cost, but is only available
for bulk products in liquid, gaseous, or slurry
forms (Ballou 2003).
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
40
Thus, there are many tradeoffs to be
considered in designing transportation
processes. Intermodal transportation can offer
lower overall transportation costs in many
forward and reverse logistics applications. As
noted by Dowlatshahi (2010), “Intermodal
transportation increases the reach of an entity to
reclaim parts and products from a larger
geographic area; therefore, increasing the
viability and profitability of reverse logistics
endeavors. Intermodal service must also be
timely scheduled to avoid any scheduled
production delays or poor machine and labor
utilization.”
Dowlatshahi (2010) also observed that
shipping in bulk maximizes cube utilization
while minimizing per mile charges. If shipping
in bulk can be combined with freight
consolidation for inbound and outbound routes,
transportation costs can be reduced
significantly. There are, however, situations
where firms cannot wait for the entire truckload
to fill before shipping because of demand and
due date considerations. Again, this highlights
the effect of the firm’s flexibility with regard to
transportation processes and the related costs.
As the preceding paragraphs indicate,
flexibility in transportation processes offers
potential economic advantages through
economies of scale and reduced transportation
costs. These advantages can be realized in both
forward and reverse logistics processes.
This analysis leads to the following
proposition:
Proposition 2: Flexibility in
transportation processes positively
influences the implementation of
reverse logistics processes.
3.3. Proactive Motivation to Implement
Reverse Logistics Processes
The field of operations management has
increasingly embraced the needs of
stakeholders other than those with a direct
economic interest in the firm. See, e.g.,
Krajewski, Ritzman, and Malhotra 2010. This
gives rise in operations management literature
to increasing consideration of corporate social
responsibility and the need to operate in an
environmentally responsible way. This
underscores the desirability of implementing
reverse logistics processes proactively to
support social responsibility initiatives rather
than reactively to comply with coercive
governmental regulations.
The proactive approach to reverse
logistics process implementation should
encompass concepts such as life cycle analysis
and design for environment that incorporate
reverse logistics as a value-added activity that
can be used to generate long-term competitive
advantage. Under this view, product recycling
should not be done only to comply with
government regulations, only to respond to
pressure from anti-growth environmentalists, or
only to match the environmentally responsible
actions of competitors.
Responding to such pressures would
constitute a reactive strategy where values and
processes are not focused on positive outputs.
In this situation, reverse logistics activities
would be conducted in circumstances
characterized by confused and disoriented
dynamism.
On the other hand, proactively
implementing environmental programs to
extract valuable materials from recycled
products creates a positive backdrop for the
implementation of reverse logistics processes.
Applying reverse logistics to reduce costs,
improve quality, and increase cleanliness is
more likely to yield enthusiastic participation—
and therefore succeed—than a program
implemented merely to satisfy external
pressures (Chandrashekar, Dougless and
Avery, 1999).
Given that firms face multiple sources
of pressure to meet environmental norms, the
optimal response is to create effective reverse
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
41
logistics processes that will reduce costs and/or
boost revenues. It has been argued that firms
have increasingly embraced environmental
management initiatives and implemented these
from an opportunistic perspective. Corbett and
Klassen (2006) argued that the acceptance of
voluntary environmental programs such as ISO
14000, the Global Reporting Initiative, and
various greenhouse gas and other emissions
trading schemes, seem to be an immediate
consequence of the increased importance
attached to the social franchise and its impact
on the economic franchise. Handfield, Walton,
Seeger, and Melnyk (1997) stated that reacting
to regulations is no longer sufficient, and that
world-class enterprises must anticipate and pre-
empt changing environmental regulations and
customer expectations, and must proactively
prepare products, processes and infrastructure
for these changes without sacrificing
competitive advantage.
This brings to mind the following proposition:
Proposition 3: Proactive motivation to
implement reverse logistics processes
positively influences the implementation
of reverse logistics processes.
3.4. Knowledge Management Processes
Scholars have respectfully disagreed as
to whether the practice of reverse logistics adds
value to the firm in generating better
performances, or whether reverse logistics
processes are implemented in response to
coercive, normative and mimetic pressures
(DiMaggio and Powell 1983). Evidence is
provided by companies like Kimberly Clark,
which estimated that US$1 in recycling
contributes the same amount to the bottom line
as US$14.62 in additional sales (McDermott
1995). Similar successes have been reported by
many other organizations including 3M
Companies, with their Pollution Prevention
Pays (3P) program (Coddington 1993). Other
case studies include those by the leading
automobile manufacturers who have
participated in the Auto Industry Pollution
Prevention Project. Blanchard (2007) estimated
that product returns cost US manufacturers and
retailers $100 billion every year in lost sales,
transportation, handling, processing, and
disposal. The author further stated that
customer returns could reduce a manufacturer’s
profitability by an average of 3.8% while
reverse logistics costs consume 9 cents of every
sales dollar. According to Langnau (2001),
reverse logistics costs in the United States total
approximately $35 billion per year, and
analysts have predicted that average cost per
product return would be $30–$35 in the near
future. Chandrashekar et al. (1999) argued that
all case studies, in essence, show that properly
administered environmental programs often
pay for themselves, and therefore can be
considered free.
It can be argued that reverse logistics
should be implemented with an integrated plan
that recognizes the interests of all parties within
the supply chain. This should be accompanied
by a strategy that is integrated with the launch
of new products. New products can be brought
to market with recycled materials obtained from
reverse logistics processes pursuant to
consultation and close cooperation of diverse
functional areas within the firm—including
marketing, operations, logistics, and finance.
The use of recycled materials would lower the
cost of these products. This would enable the
firm to offer these products at a lower price or
a higher profit margin. This application of
reverse logistics processes could thus lead to
improved performance for the firm.
In seeking to differentiate firms that
leverage reverse logistics processes to improve
firm performance from firms that do not, the
knowledge-based view of the firm may be
relevant (Nonaka, 1994; Nonaka and Konno,
1998; Nonaka and Takeuchi, 1995).
Knowledge creation theory involves
continuous interaction of the epistemological
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
42
and ontological dimensions of knowledge
(Linderman, Schroeder, Zaheer, Liedtke, and
Choo 2004), as shown in Figure 2 below.
Explicit knowledge has been defined as
that which is transferred through training or
communication, while tacit knowledge includes
technical and cognitive knowledge which may
not be easy to transfer. The epistemological
definition of knowledge includes both explicit
and tactical elements.
“The ontological dimension of
knowledge begins with individual knowledge,
and then moves to higher levels including
group, organizational, and inter-organizational”
(Linderman et al., 2004). The spiral interaction
of epistemological and ontological factors
yields four patterns: socialization,
externalization, combination and
internalization; the interaction of these patterns
represents the phenomenon of existing
knowledge giving rise to new knowledge.
Nonaka and Takeuchi (1995) observed that
whenever knowledge is converted through one
of the four modes of knowledge conversion, it is
amplified and moved to higher ontological
levels. The process of knowledge conversion in
the context of reverse logistics is presented in
Figure 3. Reverse logistics practices that foster
contact and interaction between supply chain
members allow knowledge to be created
through socialization. Reverse logistics
practices that help articulate or conceptualize
customer needs so that the desired products can
be brought in the market allow knowledge to be
created through externalization. Reverse
logistics practices that support analysis of
information allow knowledge to be created
through combination. Reverse logistics
practices that promote monitoring and feedback
of customer information allow knowledge to be
created through internalization.
It is thus conceivable that reverse
logistics can positively influence firm
performance as the value recovered from
recycled materials are reused in new products.
These benefits can flow from the generation of
new levels of knowledge among the employees
of the firm and across the supply chain due to
the practice of reverse logistics. This would
indicate that reverse logistics and the elevated
level of knowledge could lead to better
coordination among functional departments
within the firm, and among trading partners
within the supply chain. The resulting
advantages could include efficient practices for
the design and launch of new products, and
better overall recovery and reuse of reused
materials.
The essence of this argument is that
knowledge created through the design and
implementation of reverse logistics processes
supports and enhances organizational
performance. Applying the knowledge-based
view of the firm provides insight that can help
to distinguish organizations that are more
successful at deploying reverse logistics
practices from those that are less successful.
The posited relationship between reverse
logistics and firm performance, as mediated by
knowledge, is shown schematically in Figure 4
below.
The proposition that flows from this argument
is presented as follows:
Proposition 4: Knowledge enhancement
of firm employees, as suggested by the
knowledge-based view, mediates the
relationship between reverse logistics
and firm performance.
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
43
Tacit Explicit
Tacit
Explicit
FIGURE 2. MODES OF KNOWLEDGE CONVERSION (SOURCE: NONAKA 1994)
FIGURE 3. REVERSE LOGISTICS, KNOWLEDGE BASED VIEW
AND FIRM PERFORMANCE
Socialization
Externalization
Internalization
Combination
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
44
Reverse Logistics Knowledge Firm Performance
FIGURE 4. KNOWLEDGE BASED VIEW MEDIATING THE RELATIONSHIP
BETWEEN RL AND FIRM PERFORMANCE
IV. DISCUSSION
This paper presents conceptual insights
of interest to both researchers and practitioners
regarding the reverse logistics and the
implementation of reverse logistics processes.
The four propositions developed in this paper
are summarized below.
Proposition 1: Successful implementation
of forward logistics processes positively
influences the implementation of reverse
logistics processes.
Proposition 2: Flexibility in transportation
processes positively influences the
implementation of reverse logistics
processes.
Proposition 3: Proactive motivation to
implement reverse logistics processes
positively influences the implementation of
reverse logistics processes.
Proposition 4: Knowledge enhancement of
firm employees, as suggested by the
knowledge-based view, mediates the
relationship between reverse logistics and
firm performance.
These propositions, taken as a whole,
provide a useful conceptual framework for
understanding the antecedents of effective
reverse logistics process implementations and
the effect of effective reverse logistics on firm
performance.
At this point it is useful to consider
potential future extensions of this research.
First and foremost, it will be helpful to
extend this research by testing the propositions
presented in this paper with empirical data.
Alternative approaches such as survey research
and case studies would be well-suited to test
and evaluate the relationships of reverse
logistics process implementation to forward
logistics processes, transportation flexibility,
proactive motivation, and knowledge
management. Archival data, including
published news articles and financial
statements, can be used to test and confirm the
relationship between reverse logistics and firm
performance. Comments on appropriate
methods and data collection approaches for
extending this research follow.
With regard to survey research, the
methodology set out by Forza (2002) would be
appropriate for evaluating the propositions
developed in this paper. This would include
detailed construct development, survey design
and development of measurement instruments,
pilot testing with a preliminary sample survey,
data collection from the relevant target
population, data analysis and hypothesis
testing, and generation of the empirical research
report. We would regard members of one or
more logistics-focused professional
associations such as the American Society of
Transportation and Logistics (ASTL) or the
Council of Supply Chain Management
Professionals (CSCMP) as an appropriate target
population for survey research to test the
propositions.
With respect to case study research, a
useful approach for logistics and related fields
is provided by Ellram (1996). This approach
would be appropriate for gathering firm-
specific data and qualitative information from
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
45
multiple companies to evaluate the propositions
developed in this paper. This would include
design of the case study, selection of firms to be
included in the study, development of the
research protocol and interview questions,
completion of a pilot study, evidence collection,
data analysis and coding, evaluation of the
propositions, development of additional
findings, and preparation of the case study
report. Single-site case studies could be useful
for exploratory research in this area
(Dowlatshahi 2010, citing McCutcheon and
Meredith 1993), while multiple sites would be
preferred in order to use case study results to
rigorously evaluate the propositions
(Eisenhardt 1989).
With regard to firm performance
measures to be used in empirically testing the
propositions offered in this paper, we would
propose to use archival financial data from
published financial statements. More
specifically, we would follow the example of
Jiang et al. (2006) and use ratios that measure
aspects of operational performance such as
efficiency, productivity, and profitability. This
choice is consistent with comments offered in
Hendricks and Singhal (1997) and Jiang et al.
(2006) to the effect that it is preferable to
measure firm performance with archival
financial statement data—as opposed to using
managers' self-reported and perceptual
opinions (survey responses) for this purpose.
The selected firm performance
measures are specified in Table 1. The
formulas in Table 1 vary slightly from the
formulas used by Jiang et al. so that the
contemplated ratios are calculated in a manner
consistent with practices that are widely used in
managerial accounting (e.g., Horngren et al.
2009).
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.
Metric Categories and Descriptions
Calculation Formulas
Table 1
Firm Performance Metrics
TABLE 1. FIRM PERFORMANCE METRICS
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Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
46
Other empirical studies can be
conducted to support additional extensions of
this research as they are discussed below.
Location and facility layout issues with
regard to reverse logistics process
implementations could be examined in future
studies. It would be useful to identify and study
factors that distinguish situations where
collection points for returned products should
be (a) in retail stores or other primary customer
service locations, (b) co-located at major
customer sites, or (c) subject to site-specific
dispatch of transportation vehicles for on-
demand pick up.
The effect of delivery speed and
reliability issues on the effectiveness of reverse
logistics process implementation would be
another promising avenue of investigation.
From the perspective of reverse logistics
processes as a source of competitive advantage,
it would be useful to identify and study the
tradeoffs among delivery speed or reliability
versus the cost advantages of accumulating
returned product to container or truckload
quantities before shipping them to a recycling
facility. In many cases it will be economically
advantageous to use open vehicle capacity
following a forward delivery to transport
returned goods in what would otherwise be an
empty or “deadhead” return trip.
Notwithstanding the attention devoted
to reverse logistics in peer-reviewed literature
and in the business press, many companies have
yet to design and implement optimal processes
for reverse logistics. It would be useful to
conduct exploratory research, such as case
studies and action research projects, to
understand what prevents firms from
embracing reverse logistics and to define
frameworks for cost-benefit analyses focused
on reverse logistics implementations. It is
possible that the cost not to solve methodology
presented by Napier and Prater (2011) could be
applied in the context of reverse logistics
process proposals. One variant of this
exploratory research could assess and compare
the nature of specific problems encountered as
reverse logistics processes are designed and
implemented.
The research highlights a number of
significant issues regarding reverse logistics
process implementations, but it is appropriate to
recognize the limited nature of this study. The
primary limitation is that the paper addresses
conceptual issues without empirical
verification. It is intended that this paper will
define and guide the execution of a research
agenda that will include empirical research
along the lines set out in the preceding
paragraphs.
V. CONCLUSIONS
The effects of reverse logistics on
supply chain operations are potentially
significant and should not be overlooked. This
paper develops four propositions concerning
the successful implementation of reverse
logistics processes, and the potential effect of
effective reverse logistics 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 future
research in reverse logistics, and can guide the
design and implementation of reverse logistics
processes by practicing managers.
Acknowledgment
The authors wish to thank the reviewers
for their depth of thought in analyzing the
earlier draft of this paper, and for providing
very specific guidance that has significantly
improved the finished product.
Rajat Mishra, Randy Napier
Reverse Logistics: Antecedents of Successful Implementation and Firm Performance Effects
Journal of Supply Chain and Operations Management, Volume 12, Number 2, May 2014
47
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