A decisionmaking model for reverse logistics in the computer industry

• Published in: The international journal of logistics management Vol. 17; no. 3; pp. 331 - 354
• Main Authors: Wee Kwan Tan, Albert, Kumar, Arun
• Format: Journal Article
• Language: English
• Published: Emerald Group Publishing Limited 01.09.2006
• Subjects: Decisionmaking; Electronics industry; Modelling; Reverse scheduling; Supply chain management
• ISSN: 0957-4093; 1758-6550
• DOI: 10.1108/09574090610717518

Purpose This paper seeks to present a decisionmaking model for manufacturers to maximize their profits in reverse logistics operations. Designmethodologyapproach A system dynamic model has been developed to complement with prior models and is validated using data collected from a computer company manufacturer handling returns with volumes transacted over a period of two years. Findings The results from the model indicate that part replacements from suppliers are more profitable than refurbished computer parts. In addition, transportation delay and supplier delay in processing returns have a significant impact on the viability of reverse logistics regardless of return volumes. Research limitationsimplications The current model is not designed for thirdparty logistics 3PL offering reverse logistics services. However, this can be accomplished by resetting some of the parameters in the model. The other limitations are exchange rate fluctuation and product depreciation which are not incorporated in the model. This is important in Asia where each country has its own currency which fluctuates with time. Practical implications This dynamic model will assist decisionmakers to test new policies related to reverse logistics, for example, liberal versus conservative return policy from supplier, shipment consolidation longer delays versus direct shipment, batch longer delays versus JIT remanufacturing, pricing of new parts versus recondition parts, as well as to examine its longterm viability. Originalityvalue Using system dynamics to understand the profitability of reverse logistics for both replacement parts to suppliers and refurbished parts to manufacturers.