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Int. J. Business Performance and Supply Chain Modelling, Vol. 5, No. 1, 2013

Practices of environmentally responsible reverse logistics systems in Brazilian companies Fernando César Almada Santos*, Emília Mendonça Andrade, Ana Carolina Ferreira and Patrícia Cristina Silva Leme Engineering School of Sao Carlos, University of São Paulo, Av. Trabalhador São-Carlense, 400, CEP 13566-590, São Carlos – SP/Brazil Fax: 16-3373-9425 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] *Corresponding author

Charbel Jose Chiappetta Jabbour São Paulo State University, Avenida Engenheiro Edmundo Carrijo Coube, 14-01, Vargem Limpa, Bauru, Sao Paulo, 17033-360, Brazil Fax: +55-14-31036122 E-mail: [email protected] Abstract: The aim of this paper is to propose a classification of reverse logistics systems based on activities for value recovery from returned products. Case studies were carried out in three Brazilian companies. Research results show that Company 1 uses a reverse logistics system based on ‘disposal logistics system’, the main reason for returns is ‘end of life’ and the main motivation is ‘legislation’; Company 2 uses ‘Recycling logistics system’, the main reason for the returns is ‘products not sold’ and the main motivation is ‘recovery of assets and value’; finally, Company 3 uses ‘product reprocessing logistics system’, the main reason for returns is ‘end of life’ and the main motivation is ‘social and environmental responsibility’. Keywords: reverse logistics; returned products; value recovery; environmental management; strategic vision; motivations and constraints; Brazil. Reference to this paper should be made as follows: Santos, F.C.A., Andrade, E.M., Ferreira, A.C., Leme, P.C.S. and Jabbour, C.J.C. (2013) ‘Practices of environmentally responsible reverse logistics systems in Brazilian companies’, Int. J. Business Performance and Supply Chain Modelling, Vol. 5, No. 1, pp.63–85.

Copyright © 2013 Inderscience Enterprises Ltd.

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F.C.A. Santos et al. Biographical notes: Fernando César Almada Santos received his PhD in Business Management from the Business Management School of São Paulo from the Getúlio Vargas Foundation (FGV) and Bachelor’s degree in Industrial Engineering from the Engineering School of São Carlos (EESC), University of São Paulo (USP). He is an Assistant Professor of the Production Engineering Department at the Engineering School of São Carlos (EESC), University of São Paulo (USP). His areas of interest are integration of the strategies of human resources and production, human resource management and production management, interface between industrial engineering and environmental management. His papers were published in International Journal of Operations and Production Management, Journal of Cleaner Production, International Journal of Human Resource Management, Environmental Quality Management, International Journal of Continuing Engineering Education and Lifelong Learning, Business Process Management Journal, European Journal of Innovation Management and TQM Magazine. Emília Mendonça Andrade is an Environmental Engineer at the Alumar Refinery of Alcoa in Brazil. She received her Bachelor’s degree in Environmental Engineering from the Engineering School of São Carlos (EESC), University of São Paulo (USP). Her areas of interest are environmental engineering and environmental management systems. Ana Carolina Ferreira is an Environmental Engineer at the Hagaplan Planning and Projects. She received her Bachelor’s degree in Environmental Engineering from the Engineering School of São Carlos (EESC), University of São Paulo (USP). Her areas of interest are environmental engineering and environmental management systems. Patrícia Cristina Silva Leme obtained her PhD in Environmental Education from the Federal University of São Carlos (UFSCar) and Bachelor’s degree in Biology from UFScar. She is an Environmental Educator of the Environmental Programme USP Recicla, Innovation Agency, University of São Paulo (USP). Her areas of interest are education for sustainability, waste minimisation, green campus, curb side recycling programs. Charbel Jose Chiappetta Jabbour received his PhD in Industrial Engineering from the Engineering School of São Carlos (EESC), University of São Paulo (USP) and Bachelor’s degree in Administration (UNESP). He is an Associate Professor on Organizational Theory and Environmental Management in UNESP – The Sao Paulo State University. His areas of research interests: organisational and human dimensions necessary to the adoption and maintenance of practices in proactive environmental management in organisations. His papers published in Journal of Cleaner Production, Environmental Quality Management, Industrial Management and Data Systems, International Journal of Production Research and International Journal of Human Resource Management.

1

Introduction

Throughout history and mainly nowadays, the capitalist system has brought about increasingly complex systems in order to manufacture products and distribute them to consumer markets. As a consequence, a significant amount of knowledge in logistics has been developed and more recently the concept of reverse logistics has emerged (Carter

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and Ellram, 1998; Leite, 2003; Sarkis, 2006). Initially, this concept was related to products, which were returned to companies because of some of the following reasons: guarantee problems, transport damage, excessive stocks and expiry dates. The solution for these problems is important to achieve customer satisfaction. Environmental degradation motivated companies to set up and use reverse logistics: a concurrent improvement in the environmental and economical performance that a company could achieve by managing the reverse flow of materials (Wu and Dunn, 1995). Companies, which strive for excellence, and opportunities, which emerge from practices of environmental management, have implemented reverse logistics for reuse, recycling and reducing practices in order to reduce their environmental impact (Carvalho et al., 2010; Angell and Klassen, 1999; Brito et al., 2003; Gupta and Piero, 2003; González-Benito and González-Benito, 2006; Sarkis, 2006; Presley et al., 2007). This paper uses the meaning of reverse logistics as presented by Rogers and Tibben-Lembke (2001), i.e., “the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing or creating value or proper disposal”. Based on a perspective of improving the environmental performance of companies, as well as on the consequent business opportunities, which may emerge from proactive environmental management (Angell and Klassen, 1999; Berry and Rondinelli, 1998; Wu and Dunn, 1995), logistics may contribute to the return of products, reduction in eventual environmental damage caused by products with high environmental impact, recycling, replacement and reuse of materials, proper disposal of residues, reforming, repairing and remanufacturing of parts of products (Goldsby and Stank, 2000; Rao and Holt, 2005). However, most literature on reverse logistics presents motivations and constraints of this business practice in developed countries using research methods which are predominantly based on quantitative models (Rubio et al., 2008). As these studies took place in developed countries such as the Netherlands, Germany and the USA. These authors state that little is known about the reality of this practice in emerging countries. As a consequence, the stimuli for this research are the following issues: •

What are the main activities of reverse logistics systems implemented by Brazilian companies?



Which types of value do these systems recover from returned products?



How is the environmental dimension considered by these systems?



Are these systems a part of the strategic vision of business management?



What are the main motivations and constraints to implement reverse logistics systems?

The literature review on these issues is complemented by case studies in Brazilian companies in order to identify the main features of reverse logistics systems based on the value that these companies have recovered from returned products. Although the focus of this paper is the environmental dimension of reverse logistics, it may contribute to other dimensions of sustainability by improving economical results of companies and creating new jobs, thus contributing to the social dimension. After the introduction of this paper (Section 1), the main features of reverse logistical systems are presented (Section 2). In Section 3, the levels of the value that reverse

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logistics may recover from returned products are discussed. A classification of the reverse logistics systems is proposed in Section 4. The main motivations and constraints related to these reverse logistics are analysed in Section 5. The research methods, which were used in the case studies in three Brazilian companies, are described in Section 6. Three Brazilian case studies are described in Section 7. Finally, final remarks and opportunities for future research are presented in Section 8.

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Inclusion of environmental dimension in reverse logistics

Environmental management in companies, defined in the broad sense of the term, consists of a set of principles and practices that a company uses to reduce the environmental impacts that its activities, products or services cause in the environment (Boufateh et al., 2011; Berry and Rondinelli, 1998; Buchholz, 1998; Jabbour and Santos, 2006; Mccloskey and Maddock, 1994). To meet the level of excellence, environmental management usually has to implement logistical reverse systems. A clear understanding of reverse logistics requires identifying its activities that form its. Various different approaches for these activities are presented in the literature (Wu and Dunn, 1995; Rogers and Tibben-Lembke, 2001). The reverse logistics of returned products and packaging may be classified according to its activities and objectives. Brito and Dekker (2003) deal with this aspect by recommending alternatives to recover the value of products, i.e., direct recovery of materials, energy or value, or based on the reprocessing of returned products. The authors point out four main activities of the reverse flow for value recovery: collection, inspection, sorting, reprocessing or direct recovery and redistribution. These activities are presented in Figure 1. Figure 1

Activities of reverse logistics

Collection

Inspection

Selecting and sorting

Direct recovery Reuse resale redistribution

Reprocessing Market

Repair refurbishing remanufacturing retrieval recycling incineration

Source: Adapted from Brito and Dekker (2003)

The condition of a returned product may be the cause of its return. It usually implies if the product will be reused or reprocessed. If these activities are not possible, recycling and final disposal are considered to be the only possible alternatives (Brito and Dekker, 2003). The alternatives for recovering higher value from returned products are positioned on the top of the pyramid, whereas the options at the bottom recover less value (Figure 2).

Practices of environmentally responsible reverse logistics systems Figure 2

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Alternatives for value recovery from returned products

Direct recovery

Resale reuse redistribution

Process recovery

Repair Refurbishing Remanufacturing Retrieval Recycling Incineration Disposal in landfill sites

Source: Adapted from de Brito and Dekker (2003)

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Levels of value recovery

The value recovery from returned products may be done in different ways, depending on the features of their products and processes (Thierry et al., 1995; Brito and Dekker, 2003). As shown in Section 2, the activities needed for the value recovery may be classified according to different criteria. However, if different levels of value recovery of returned products are considered, little information about the organisation of these activities is available. The value of a returned product varies according to the activities. The more a product progresses over the levels of value recovery from the bottom to the top of pyramid (Figure 2), the more the recovered value from this product increases. If the final activities of this process are resale, reuse or redistribution, a product recovers its original function, that is to say, its maximum value. If the alternative is at the bottom of the pyramid, value recovery is related to the recovery of materials, energy or proper disposal of residues. Recovery is partial and usually linked to legal and/or environmental reasons as opposed to economical ones (Thierry et al., 1995). The value recovery of returned products has different levels of importance according to the business sector. A product has high value recovery, if its return or disposal implies waste of raw material, energy and time. Some sectors depend more directly on the recovery of their products, such as music and publishing industries, whose particular policies assure freedom for returning products with leftovers or an extremely short life cycle (Rogers and Tibben-Lembke, 1998). The objective of this classification is to organise a system which assures the structuring of activities needed for the appropriate reprocessing of returned products. As a consequence, different objectives, motivations and constraints will be related to implementing different reverse logistics systems. The definition of a clear and integrated

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set of the activities for a reverse logistics system is a main requisite for satisfactory performance (Rogers and Tibben-Lembke, 1998).

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Classification of reverse logistics systems

The classification of reverse logistics systems of this paper (Figure 3) is created based on the levels of value recovery from returned products presented in the pyramid in Figure 2. The criteria used for this classification are: final recovered value, reduction of possible environmental impacts and activities of different levels. Figure 3

Classification of reverse logistics systems

Resale reuse redistribution Repair Refurbishing Remanufacturing

Product reprocessing logistics system

Retrieval Recycling Recycling logistics system

Incineration Disposal in landfill sites

Disposal logistics system

The more the environmental issue and the value recovered are close to the top of pyramid, the higher they are. The lowest level is called Disposal Logistics System whose main objective is to follow the current norms and legislation, the proper disposal of products, mainly the hazardous ones, as well as internalisation of the negative externalities. This system includes the proper final destination of materials and products, as well as their incineration and a possible and partial recovery of the energy produced by product burning. The activities include collection, transportation and inspection of returned products, which are common activities to all the levels of recovery, and, finally, products may go through different activities, which vary according to their particularities. Some examples of these products are fluorescent lamps, batteries and packaging for pesticides. The hazard of the residues of these products encourages their producers to supervise their disposal, assuring proper waste management and final destination. The intermediate level is called the recycling logistics system whose main objectives are: recovery of raw material, minimisation of environmental impacts, reuse of materials from returned products, and a posterior reduction of costs caused by the implementation of a reverse logistics system which is used to sell or reuse recycled materials. This system

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includes separation and identification of materials that can be recycled, proper destination of residues, and the sale and reuse of recovered materials. The main examples of sectors that may use this system are the construction sector, publishing, pulp and paper, and aluminium industries. The product reprocessing logistics system is close to the top of the pyramid (Figure 3). Its main objectives are: high value recovery of returned products, reuse of products, minimisation of environmental impacts, which can be caused by either product disposal or the manufacturing of a new product in order to replace the returned one, and the inclusion of the environmental dimension in product design in order to make its future disassembly easier. This system includes various activities: repair, refurbishing, remanufacturing, retrieval and resale, reuse and redistribution. Products related to this system are usually considered ‘semi-new’ ones, which return to the system to have small repairs, or are customers’ returns. However, changes in the environmental scenario have implied the increasing use of product reprocessing techniques which enable companies to receive their products in any phase of their life. This is a factor which encourages the development of technology and production systems and makes this process possible and easier. Some examples of companies which may use this reverse logistics system are producers of copiers, computers, heavy machinery and car parts. All the levels of the value recovery are presented in Figure 3. The practices closer to the top of the pyramid lead to a higher value recovery and cause less intense environmental impact than the practices positioned at the lower levels of the pyramid. However, there are motivations and constraints linked to implementing and maintaining reverse logistics in companies. Figure 4 presents the research framework. Based on the ‘levels of value recovery’ and ‘types of reverse logistics systems’ (Rogers and Tibben-Lembke, 1998), it was assumed that the reverse logistics adoption is influenced by motivations and constraints (Carter and Ellram, 1998). It is presented in the research framework and the motivations and constraints will be discussed in Section 5. Figure 4

Research framework Motivation

Levels of value recovery

Types of reverse logistics systems

Constraints

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Motivations and constraints to reverse logistics

There are countless motivations and constraints linked to reverse logistics (Rogers and Tibben-Lembke, 1998; 2001; Carter and Ellram, 1998).

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5.1 Motivations Implementing a reverse logistics system is related to particular features of business sectors. This fact requires companies to pay attention to the need of recovering their products and/or packaging. The motivation for economical reasons comes from the recovery of assets whereby a company achieves direct or indirect economical gains. This motivation is prevalent mainly in the product reprocessing logistics system, whereas the recycling logistics system achieves a lower economical return and the disposal logistical system does not achieve any gain. Moreover, disposal may be costly. With regards to competitive reasons, a company may recover its products in order to build up a positive image and develop a satisfactory relationship with customers. This sustainable attitude may be part of a global strategy of relations with customers, considering the fact that environmental sustainability increasingly concerns society (Brito and Dekker, 2003). Legislation shows the way a company is responsible for the recovery of its products and/or packaging. Laws usually deal with mandatory recycling, prohibition of final disposal, trade regulations, recycling norms, environmental labels, tax incentives and purchasing of products with minimum levels of recycling (Rogers and Tibben-Lembke 1998). The lowest value recovery of disposal and recycling logistics systems means drawing up particular legislation, which consists of the main motivation for their implementation. The social and environmental responsibility is related to some values or principles, which motivates a company to have a higher commitment to reverse logistics. The incorporation of sustainability into the strategic planning of companies and the concern for welfare in their areas of influence are encouraged. Rogers and Tibben-Lembke (1998), Stock (2001) and Gupta and Piero (2003) highlight reverse logistics as a strategic programme and its impact on long-term results of businesses. The main motivations of reverse logistics analysed in the literature review of this research are presented in Table 1. Table 1

Motivations to implement reverse logistics Motivations to implement reverse logistics Legislation Competitive reasons Improvement of corporate image Recovery of economical value Renewal of stock Economical gains Social and environmental responsibility Value recovery Rendering of remarkable services Source: Rogers and Tibben-Lembke (1998)

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This table summarises the main motivations to implement the reverse logistics systems presented in this paper. Legislation is not a motivation for the product reprocessing logistics system because its objectives include a range of reasons, which are broader than the respect for current norms/legislation/regulation alone. The disposal logistics system does not have any economical motivation, and there may be economical constraints for this system because it is mainly costly. If there is any return, it tends to be indirect, as a consequence of other motivations, such as the improvement of the corporate image and competitive reasons. Table 2

Motivations of the implementation of reverse logistics systems Product reprocessing logistics system

Motivations

Disposal logistics system

Recycling logistics system

Legislation

X

X

Competitive reasons

X

X

X

Improvement of corporate image

X

X

X

Recovery of economical value

X

X

Renewal of stock

X

X

Economical gains Social and environmental responsibility

X

Recovery of assets Rendering of remarkable services

X

X

X

X

X

X

X

X

X

Source: Based on Rogers and Tibben-Lembke (1998), Stock (2001) and Gupta and Piero (2003)

5.2 Constraints Considering that the practice of reverse logistics was not successful in many companies, the existence of various constraints for its implementation and management is clear. Rogers and Tibben-Lembke (1998) conducted a research with various companies to analyse issues on reverse logistics. These companies are from various economic sectors, for example, food (21.4%), electronics and computers (15.1%), general merchandise (12.7%), and others. Some results are: •

‘importance of reverse logistics relative to other issues’ is the main barrier to a successful reverse logistics, according to 39.9% respondents;



‘bar codes’ is the main technology to assist the returns handling in reverse logistics;



returns are motivated by ‘competitive reasons’ for 64.9% respondents;



returns processing cycle time for most of the products is ‘more than 2 days to 1 week’ for 25.6% respondents.

The main constraints which are pointed out by Rogers and Tibben-Lembke (1998) are presented in Table 3, as well as the percentage of companies which stated that these constraints were significant for reverse logistics management.

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Table 3

Main constraints to implement reverse logistics

Constraint Underestimation of reverse logistics with regards to other practices Business policy Lack of systems Competitive reasons Managerial negligence Lack of financial resources Lack of human resources Legislation

Percentage 39.2 % 35.0 % 34.3 % 33.7 % 26.8 % 19.0 % 19.0 % 14.1 %

Source: Rogers and Tibben-Lembke (1998)

For most companies, the lack of managers’ attention and business policies are more problematic than the lack of human and financial resources. The problems related to legal issues seem to be less serious. Thus, the internal constraints of reverse logistics, such as business policies, have less influence than the external constraints, such as strict legislation (Rogers and Tibben-Lembke, 1998). If constraints are confronted with the proposed logistics systems, it is difficult to relate them to the different logistics systems, as the constraints mentioned in this section are mainly internal constraints influenced by the way companies deal with their internal issues. As a consequence, based on the particularities of different business policies, it is not possible to generalise the constraints which are more significant for the reverse logistics systems presented in this paper.

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Methodology

Within the context of qualitative research (Shah and Corley, 2006), this paper uses a strategy of multiple case studies, which is characterised by an in-depth analysis of a certain phenomenon, its past, present or future behaviour, which may be investigated in the context it really takes place in. It is usually an emerging and contemporary phenomenon, whose details, main features and consequences are not completely known. We opted for the multiple-case study that consists of comparing cases in order to have a better understanding of the phenomenon and a theoretical refinement of the existing theory (Cunningham, 1997). Thus, the use of case studies is justified by the following reasons: •

case studies are not as explored as research methods in reverse logistics in Brazil



these multiple case studies consist of a comparison between systems of reverse logistics which correspond to the types of reverse logistics systems presented in the literature review



more than half of the scientific studies on reverse logistics use mathematical modelling and the cases are located in developed countries (Rubio et al., 2008).

The definition of this strategy of this empirical research was followed by an interview script that was written based on the main aspects of the literature review. Thus, a

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questionnaire about the following issues was organised with questions regarding the following issues: •

reverse logistics system/value recovery from returned product and/or packaging



inclusion of the environmental dimension in the reverse logistical system



types of reverse logistics systems



their main motivations and constraints for their implementation in companies.

The main guidelines and questionnaire of the interview can be found in appendix 1. This research questionnaire was drawn up in 2007. Still in the planning of these case studies, the following aspects were reflected on: •

Definition of the quantity and type of respondents. Interviews were planned with managers responsible for the logistics area;



Interaction with core respondents during the interviews. The more experienced professionals were chosen because they accumulated more knowledge about the investigated phenomenon.

To complement the case studies and according to suggestions from the literature (Scheneider, 2006; Yin, 1989), the authors of this paper visited the administrative areas and of company plants. Based on these visits, it was possible to notice some particularities of the chosen companies. In order to increase the quality of collected data, various documents of the companies were consulted. It was not possible to select the same documents for the three companies because they were not always available. The analysis of documents was relevant to obtain information about environmental management, mainly about its history, turning points and successes achieved and registered. After defining the methods of this investigation and planning the data collection, companies were chosen for the case studies. The main requisite for selecting companies was the practice of a reverse logistics as an environmental mission. The choice of cases was started by checking if the companies met the aforementioned requisites and were also the basis of this research. The following was done: a register was systematised with data of some companies; a letter presenting this research was sent to them in order to ask for their contribution as a participant of these case studies. From all the contacts, only three companies confirmed their participation. The first company, which accepted our invitation in the middle of 2007, was called ‘case 1’. Still in 2007, the second and third companies confirmed their participation, and were respectively called ‘case 2’ and ‘case 3’. After accepting to take part in this research, first contacts were made with the representatives of the areas of reverse logistics and environmental management of these companies in order to check if these companies met the requisites of these case studies. According to the recommendations of the literature, each company was analysed in the following terms (Voss et al., 2002): •

Would there be coherence between the cases and the types of reverse logistics systems of the classification which was based on the literature review?



Would the cases be appropriate for analysing the studied phenomenon in a practical way?

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F.C.A. Santos et al. Would there be contact with the cases throughout the research?

Based on these questions, these companies were considered to have completely met the requisites and recommendations to be part of the sample of this research. The case studies were conducted in 2008. The initial phase was the first contact with companies and the last phase was the analysis of the collected data.

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Three Brazilian case studies

7.1 Case 1: Return of empty packaging of pesticides Company 1 is a non-profitable organisation, an agricultural cooperative, founded in 2002, whose objective is to manage the destination of empty pesticide packaging in Brazil in order to support and guide producers, distribution channels and farmers towards carrying out the responsibility defined by legislation, i.e., Decree number 4.074 (Brazil, 2002) which defines the sharing of responsibility by the final disposal of pesticide packaging, by farmers, retailers, agricultural cooperatives and producers and Law number 334 which regulates the environmental licence for establishments responsible for collecting of empty containers of pesticides (Brazil, 2003). If pesticide packaging is managed carelessly after being used, it can damage the environment with toxic substances, causing serious impacts to human health (carcinogenesis, mutagenesis and neurotoxicity) and to the environment (Spadotto, 2006). Company 1 is responsible for coordinating the efforts of various elements of the production chain to assure the maximum effectiveness of the pesticide packaging destination. The flowchart of this system is presented in Figure 5. Figure 5

Flowchart of the reverse logistics system of Company 1 Empty pesticide packaging

Farmers

Pesticide retailers

Final destination Centres for

Company 1

receiving and storing empty

Pesticide

Company 1

Recycling

Incineration

The transportation of packaging from the collection posts, located at pesticide retailers, to the reception centres is carried out independently of forward logistics, operating at a regional level. The collection is for recyclers and incinerators who share the same channels of forward logistics. Trucks transport products (pesticides) and, instead of coming back empty, they are tracked and used to transport empty packaging. The estimation of returned packaging is 90% and the cost of this reverse logistics system is 45% lower than the traditional logistics system. The main objective of reverse logistics is suitability to the current legislation. Although the value recovery is a consequence of the recycling of washed packaging, this is not the focus of this system. As the level of value recovery of this reverse logistics

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system is located at the bottom of the value recovery pyramid (Figure 3) it can be considered a Disposal Logistics System, whose motivations and constraints encourage the implementation of reverse logistics as a suitable programme for reducing the environmental impacts which results from the improper disposal of pesticide products and packaging.

7.2 Case 2: newspaper return Company 2 is a large-size company from the publishing industry which print newspapers on a daily basis. This company is located in São Paulo which is the largest Brazilian city. The newspapers are distributed all over Brazil and are delivered by local distributors. The distribution chain of newspapers is extremely complex and broad, encompassing more than 2 thousand distributors. The products which return to this company are newspapers which were not sold. They are returned by retailers, mostly newspaper stores, to the headquarters of the company. The disposal of these products causes a low impact on the environment, because paper has a low degradation time if it is compared to other products disposed in large quantities such as plastic. However, the production requires a significant amount of energy and raw material which means high importance in terms of environmental impact if this product’s whole life cycle is taken into account. Its disposal does not present a significant risk to environmental contamination, but it has to be minimised because of the high volume of used raw material and its extremely short lifetime. It is important to highlight that the return of newspapers from retailers is approximately 30%. The distribution and return activities of the newspapers of Company 2 are presented in Figure 6. Figure 6

Flowchart of the forward and reverse logistics systems of Company 2 Headquarters in São Paulo Counting

Weighing Recycling

Wholesale of newspapers Local distributors

Retail of newspapers Newspapers not sold at distributors in the downstream Only newspapers not sold

Forward logistics Reverse logistics

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This process does not imply significant additional costs because the routes of reverse and direct logistics are the same. After newspapers return, they are counted, weighed and stored in warehouses. Later, newspapers are mostly sold to trimming companies which recycle paper. As recycling is the only process carried out by the reverse logistics system of Company 1, this can be considered as a recycling logistics system, according to the classification of the levels of value recovery proposed in this paper.

7.3 Case 3: return of printers and toners Company 3 is a subsidiary of a multinational company with headquarters in the USA. It employs about 61,000 employees all over the world. The company produces and trades printers, multifunctional systems, copiers and their accessories. The returned products to the company may go through three different activities: reprocessing, recycling and proper disposal of residues. The activities which took place previously before the products were sent includes: packaging, inspection, separation, sorting and disassembly. Within the plant, the machines are examined and disassembled. The parts are cleaned, recovered and tested, which means they can be reused. The estimation of returned products for this process is 10%. The cost of reverse logistics is 15% of the value of forward logistics. The flowchart of the reverse logistics system of Company 3 is presented in Figure 7. Figure 7

Flowchart of the reverse logistics system of Company 3 Product shipment

National centre of part distribution Return of either products or parts

Sending of either products or parts

Technological centre of remanufacturing

Final consumer Product Return Recycling

National centre of destination

Analysing the activities linked to the product return of Company 3, its reverse logistics can be classified as a product reprocessing logistics system. The value recovery is achieved by reprocessing, recycling and reselling products. The objectives of the product return carried out by Company 3 are coherent with those presented for the product reprocessing logistics system: value recovery of returned products, reuse of products, minimisation of environmental impacts and inclusion of the environmental dimension in product design. It is relevant to mention that the Brazilian law for dealing with solid residues is under construction. As a consequence, legislation cannot be considered a constraint to implementing logistics reverse in Company 3 in the near future.

Packaging of pesticide

Newspapers

Printers and toners

1

2

3

Returned product or packaging

Product reprocessing logistics system

Recycling logistics system

Disposal logistics system

Reverse logistics system Law number 7.802/1989 decree number 4.074/2002 (Brazil 2002)

Legislation

End of life

Social and environmental responsibility

Recovery of assets and value

Legislation

End of life

Products not sold

Main motivation

Reason for return

Lack of financial resources

Lack of logistics activities and system

Continuous improvement of the system

Main constraint

Product design, reprocessing, reuse and proper disposal of products

Recycling of materials

Environmentally responsible destination of packaging

Incorporation of the environmental dimension

Table 4

Company

Practices of environmentally responsible reverse logistics systems Main results of the case studies in Brazilian companies

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7.4 Discussion of results The main results of the case studies in Brazilian companies are presented in Table 4. In fact, the studied companies are adopting reverse logistics concepts, according to the issues suggested by Carter and Ellram (1998), Leite (2003), and Sarkis (2006). The study of the reverse logistics systems of the three companies leads to comparative analysis of their logistical activities, as well as of their main motivations and constraints linked to reverse logistics. As companies were chosen because of features linked to different levels of value recovery, it is possible to connect this classification to the particularities of each case in order to compare the theoretical part of this paper with the practices of companies.

7.4.1 Value recovery from returned product and packaging This study was conducted with companies from various economic sectors, in accordance with Rogers and Tibben-Lembke (1998). The activities of each system may be linked to the comparison between the amount of returned products and the total production and the intended reprocessing. Products with the highest rates of return (90% for pesticide packaging and 30% for newspapers) are returned with the same frequency and through the same channels of forward logistics, which makes the creation of a reverse logistics system with relatively reduced costs and objectivity of operations possible. With regards to this aspect, the system of Company 3 is different from the others because the returned of products had a low rate and was sporadic. Although the estimated total costs of reverse logistics were only 15% of the costs of the forward logistics, only 10% of the products were returned, which implies that the system of reverse logistics is proportionally more expensive than the forward logistics system and more costly than the other companies’ systems. The types of reverse logistics systems of the studied companies are mainly based on their main activity for recovering value: disposal, recycling or product reprocessing, according to Rogers and Tibben-Lembke (1998). In all the cases, it is possible to find a green motivation to the adoption of the reverse logistics (Wu and Dunn, 1995). However, this isolated criterion does not lead to a global comparison which considers all the features linked to each logistics system. All the studied companies recycled products, however, only Company 2 has its logistics system classified as a Recycling Logistics System. Company 3 has recycling as a secondary activity and the value recovery by reprocessing and reuse of products was the main focus of its reverse logistics system, which classifies it as a product reprocessing logistics system. Similarly, Company 1 recycles products, but its main purpose was to follow legislation and minimisation of environmental impact by finding proper destinations for pesticide packaging. These particular features may consider it as a Disposal System Logistics. Thus, it is possible to affirm that the value recovery of the returned products has different levels of importance according to the business sector. This finding confirms the study from Rogers and Tibben-Lembke (1998).

7.4.2 Inclusion of the environmental dimension in reverse logistics systems According to the criteria used to classify reverse logistics systems (levels of value recovery and reverse logistics activities), the concern with the reduction of possible

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environmental impacts was noticed in all the cases, confirming Wu and Dunn (1995), but at different levels. Company 1 considered this environmental dimension in the proper disposal of pesticide packaging, nonetheless this activity was implemented to follow legislation. This agricultural cooperative succeeded in including the environmental issue in the strategy of the companies which used its environmental services. The farmers’ awareness of the importance of returning packaging and their proper handling were constant concerns of Company 1 which continuously strives to increase the effectiveness of its reverse logistics system. With regards to value recovery, Company 1 conducts it in an indirect way by preventing the environment from a possible environmental impact and recovering part of the packaging recycling costs. On the other hand, Company 2 carries out reverse logistics as a sales strategy for its products, as previously explained. The particular features of the publishing industry and the rapid obsolescence of products transform this practice into a competitive need. As a consequence, the environmental dimension is added to its reverse logistics system, however, it is not its main objective. This particularity transforms the economical return and the improvement of the corporate image into the main objectives of its reverse logistics. Thus, the reduction of environmental impact caused by the disposal of newspapers is a result of various interests. In spite of the differences of the importance of the environmental dimension, it is possible to state that Company 2 can be classified according to the levels and criteria of the proposed classification. The objectives and the used criteria to classify each logistical system guided and made its study clearer. However, they cannot be considered as strict rules, but they make the interpretation of real practices according to the particularities of the activities of each company easier. Company 3 recovered value in the most complete way because its returned equipment went through most types of reverse logistical activities (Figure 3): disassembly to resale, recycling and proper disposal. Value recovery of returned product may be complete, if the product is reused, or partially, if the parts are reused in new equipment. The parts which cannot be reused, are forwarded to recycling, and may be sent to the production process as inputs. Parts and equipment (machines) which are not in conditions of use are disposed according to particular norms. Thus, the reverse logistics system of Company 3 can be classified as product reprocessing logistics system.

7.4.3 Main motivations and constraints to implement reverse logistics systems With regards to the motivations and constraints pointed out by the studied companies, it can be observed that each case study is coherent with the theoretical analysis of each type of reverse logistics system. It is possible to confirm the literature’s statement (Rogers and Tibben-Lenbke, 1998; 2001) that the lower the value recovery level, the greater concern exclusively with the laws and vice-versa. The disposal logistics system of Company 1 was mainly created to follow legislation. This is a fundamental feature for this type of reverse logistics system which deals with returned products whose disposal may cause serious damage to the environment. Thus, the second motivation pointed out by this company is the social and environmental responsibility, as its reverse logistics attempt to minimise impacts to the environment and human health which may be caused by inappropriate disposal of pesticides. The third most important motivation of the implementation of reverse logistics in Company 1 was

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the creation of a positive corporate image. Finally, the economical value recovery is the least relevant motivation because product recycling is not the main objective of this system. Furthermore, it depends on the evaluation of the condition of the returned packaging which is usually disposed. The constraints to the use of reverse logistics presented by Company 1 consist of challenges to the continuous improvement of this system. The logistics reverse system depends on the cooperation of several other agents who cannot be controlled by this agricultural cooperative and pesticide producers. As a consequence, a greater involvement and commitment of these agents in the reverse logistics system is fundamental for its improvement. Lack of initiative, expertise and attitude, which are essentially internal constraints, were also pointed out as deficiencies of Company 1. It can be concluded that the constraints to implement, enhance and improve this reverse logistics system are mostly related to business policy and the commitment of companies to its continuous improvement. Company 2 operates a recycling logistics system in order to recover assets and value. Within its business sector, the rate of product return is the most important motivation because it is essential to recover value in the most effective way. The social and environmental responsibility, similarly to Company 1, is pointed out as the second most significant motivation because the product recycling results in a reduction of the quantity of residues and, as a consequence, in less intense environmental impacts in the lifecycle of the product. Company 2 states that the lack of systems is the most important constraint to the reverse logistics system. It is clear that the lack of managerial control of the logistics system may cause problems to the operation of this system in a highly significant way, negatively influencing all the critical factors for the effective operation of the reverse logistics. As the product of this company has a wide distribution and high rate of return, the complexity of direct and reverse logistics systems requires strict managerial controls in order to achieve an optimal level of operation of this system. As this reverse logistics system is applied only to retail of newspapers, which represents about 30% of its total production, there is a high potential for extending this system to newspapers bought by subscribers. However, it is not possible to foresee this expansion because the lack of subscribers’ environmental awareness is its main constraint, as was stated by a manager of this company. This is an external constraint that probably exists due to customers’ lack of knowledge about the product’s return, as well as the inexistence of a plan which makes collecting and sending this material from shops to distributors easier. Contrary to the other case studied, the logistics system of Company 3 has social and environmental responsibility as its most important motivation. As it is a subsidiary of a multinational company, many of its organisational and cultural values are coherent with the business policy of the headquarters of the corporation. As a consequence, the vision of sustainability consists of the main reason to create a product return and value recovery system. As Company 3 implemented a product reprocessing logistics system, it achieves a high economical value recovery of returned products which is the second most relevant motivation stated by the company. Lack of financial and human resources are the two main constraints to implementing logistics reverse in Company 3, followed by the underestimation of logistics with regards to other practices. These reasons influence each other because the underestimation of the reverse logistics implied a restriction of financial and human resources to conduct

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activities related to its reverse logistics system. The most significant constraints, according to the company, contradict other responses given in the questionnaire which show evidence that the company considers reverse logistics as a strategic element for environmental suitability and value recovery. By analysing the results connected to business policy, the studied companies can be compared with regards to the inclusion of environmental dimension in the strategic vision of the company in order to evaluate the inclusion of reverse logistics in this context. As Company 1 is an organisation which coordinates several other companies from the pesticide sector, it reflects the vision and business policy of a group of companies connected to the destination of their residues and, as a consequence, to the life cycle analysis of their products. Although the main reason for packaging return and the setting up of Company 1 is the need to follow environmental legislation, the practice of reverse logistics is deeply embedded in the strategy of this company. The vision of social and environmental responsibility is used as an element to improve the corporate image by disseminating the positive results of this reverse logistics system whose development and continuous improvement characterise it as a success story and a reference in the area of reverse logistics in Brazil. With regards to the strategic vision, not only of reverse logistics, but also including environmental dimension in its activities, Company 2 cannot be considered as a proactive company. The main objective of this reverse logistics system is the asset recovery and, as a consequence, the environmental impact of the products is minimised. However, there is neither an environmental management system in this company, nor a proper environmental design of a reverse logistics system. These facts show that the policy and vision of this company do not consider reverse logistics and the vision of product life cycle as strategically valuable. A distinct feature of Company 3 is the practice of design for disassembly, which is planned to ease and optimise the disassembly and product reprocessing. This practice is based on the life cycle analysis of products. However, this process has not been totally consolidated yet. Furthermore, the company declared that reverse logistics is considered as a cost, instead of a strategic issue, which implies that the process is not appropriately included in the strategic vision and environmental policy of the company. Thus, only few companies consider reverse logistics from a strategic and sustainable point of view, confirming Wu and Dunn (1995).

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Final remarks

The research related to reverse logistics encourages further studies on: motivations and constraints for its implementation, the understanding of the importance of reverse logistics, the various ways to include the environmental dimension in the production process and the relevance of this inclusion. The aim of the classification of logistical systems is to understand the various classifications and names linked to the practices of reverse logistics by classifying its systems in a clear and objective way. It is clear that the implementation and maintenance of a reverse logistics programme is a constraint to companies that strive for a competitive advantage. The use of business policies, which include environmental sustainability in their priorities, is a factor that gives prominence to companies in the corporate environment and strengthens its

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marketing activities. Reverse logistics meet this demand, creating a reliable link with business strategy, improving the corporate image of companies and contributing to improving the life cycle analysis of products. Reverse logistics is a system that generally leads companies to a better understanding life cycle of their products and analysing environmental impacts at the end of their lives and their disposal. Reverse logistics can provide product design and a production process with relevant information in order to minimise environmental impacts. The relationship between these areas can result in distinct environmental advances. Considering the results of the case studies, the proposed classification of reverse logistics systems has to be interpreted according to the particularities of each case. It is not regulated by strict rules, but it is an approach to analysing the activities related to each system by using the variables of this classification: logistical activities, value recovery of returned products and environmental suitability. This paper did not explore the depth of knowledge needed to debate all the parameters and features of each type of reverse logistics systems. However, future studies dealing with the mapping and interpretation of various activities of reverse logistics are recommended. Reverse logistics may meet various objectives. Environmental suitability of companies is only one among the possible advantages that may be achieved by its practices. The constraints and challenges confirmed in this research are mostly internal, showing that the idea of strategic importance of reverse logistics is not consolidated in most areas of businesses yet. However, the motivations of implementing a reverse logistics system are countless, which explain the multi-faceted character of this system which may meet various objectives: improvement of corporate image, environmental suitability, value recovery from returned products and rendering of remarkable services. Finally, the proposal to classify reverse logistics systems of this paper seems to have been appropriate for the objectives of these case studies and to the systematic study of different reverse logistics systems with a focus on value recovery from returned products and the inclusion of the vision of environmental life cycles of products in business practices.

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Brito, M.P. and Dekker, R. (2003) Reverse Logistics: A Framework, Report Series Research in Management, ERS-2003-045-LIS, Erasmus Research Institute of Management: Rotterdam, The Netherlands. Brito, M.P., Dekker, R. and Flapper, S.D.P. (2003) Reverse Logistics: A Review of Case Studies, Report Series Research in Management, ERS-2003-012-LIS, Erasmus Research Institute of Management: Rotterdam, The Netherlands. Buchholz, R.A. (1998) Principles of Environmental Management: The Greening of Business, Prentice Hall, London. Carter, C.R. and Ellram, L.M. (1998) ‘Reverse logistics: a review of the literature and framework for future investigation’, Journal of Business Logistics, Vol. 19, No. 1, pp.85–102. Carvalho, H., Azevedo, S.G. and Cruz-Machado, V. (2010) ‘Supply chain performance management: lean and green paradigms’, International Journal of Business Performance and Supply Chain Modelling, Vol. 2, Nos. 3/4, pp.304–333. Cunningham, J.B. (1997) ‘Case study principles for different types of cases’, Quality and Quantity, Vol. 31, No. 4, pp.401–423. Goldsby, T.J. and Stank, T.P. (2000) ‘World class logistics performance and environmentally responsible logistics practices’, Journal of Business Logistics, Vol. 21, No. 2, pp.187–208. González-Benito, J. and González-Benito, O.G. (2006) ‘The role of stakeholder pressure and managerial values in the implementation of environmental logistics practices’, International Journal of Production Research, Vol. 44, No. 7, pp.1353–1373. Gupta, M. and Piero, T. (2003) ‘Environmental management is good business’, Industrial Management, Vol. 45, No. 5, pp.14–20. Jabbour, C.J.C. and Santos, F.C.A. (2006) ‘The evolution of environmental management within organizations: toward a common taxonomy’, Environmental Quality Management, Vol. 16, No. 2, pp.43–59. Leite, P.R. (2003) Logistica reversa: meio ambiente e competividade, Prentice Hall, São Paulo. Mccloskey, J. and Maddock, S. (1994) ‘Environmental management: its role in corporate strategy’, Management Decision, Vol. 32, No. 1, pp.27–32. Presley, A., Meade, L. and Sarkis, J. (2007) ‘A strategic sustainability justification methodology for organizational decisions: a reverse logistics illustration’, International Journal of Production Research, Vol. 45, Nos. 18–19, pp.4595–4620. Rao, P. and Holt, D. (2005) ‘Do green supply chains lead to economic performance?’, International Journal of Operations & Production Management, Vol. 25, No. 9, pp.898–916. Rogers, D.S. and Tibben-Lembke, R.S. (1998) Going Backwards: Reverse Logistics Trends and Practices, Reverse Logistics Executive Council, University of Nevada, Center for Logistics Management, Reno. Rogers, D.S. and Tibben-Lembke, R.S. (2001) ‘An examination on reverse logistics practices’, Journal of Business Logistics, Vol. 22, No. 2, pp.129–148. Rubio, S., Chamorro, A. and Miranda, F. (2008) ‘Characteristics of the research on reverse logistics (1995–2005)’, International Journal of Production Research, Vol. 46, No. 4, pp.1099–1120. Sarkis, J. (2006) Greening the Supply Chain, Springer-Verlag, London. Scheneider, J.A. (2006) ‘Using multimethods ethnography to promote quality service and understand interactions among organizations’, Nonprofit Management and Leadership, Vol. 16, No. 4, pp.411–427. Shah, S.K. and Corley, K.G. (2006) ‘Building better theory by bridging the quantitative-qualitative divide’, Journal of Management Studies, Vol. 43, No. 8, pp.1821–1835. Spadotto, C.A. (2006) ‘Abordagem interdisciplinar na avaliação ambiental de agrotóxicos’, Revista do Núcleo Interdisciplinar, 10 May, pp.1–9. Stock, J. (2001) ‘The 7 deadly sins of reverse logistics’, Material Handling Management, Vol. 56, No. 3, pp.5–12.

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Appendix Questionnaire used in the case studies as interview script Features of reverse logistics system 1

Does the reverse logistics system of this company share the structure channel activities of traditional and forward logistics?

2

After returning products and packaging, which activities are carried out?

3

How are returned products and packaging stored?

4

Is any part of the storage outsourced? If yes, which activity is carried out? Please present details about it.

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Does the reverse logistics system of this company use models, mapping, software, information system or other elements?

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What is the percentage of returned products and packaging with regards to its total production?

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Is there an estimation of the total cost of reverse logistics with regards to forward logistics? Please could you present it?

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How many employees are directly involved with reverse logistics?

Identification of motivations and constraints 9

Is there legislation which requires the use of reverse logistics? If yes, could you mention it?

10 Present the main reasons for product and packaging return in the next table. Please write numbers in the second column showing their importance (1 is the most important; 2 is the second most important; and so on). End of life Defect Take-back Obsolete product Product not sold Inappropriate sending Other reasons:

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11 Present the main reasons to implement of reverse logistics in this company. Please write numbers in the second column showing their importance (1 is the most important; 2 is the second most important; and so on). Legislation Competitive reasons Improvement of corporate image Recovery of economical value Renewal of stock Economical gains Social and environmental responsibility Value or asset recovery Rendering of remarkable services Other reasons:

12 Present the main constraints to implement of reverse logistics in this company. Please write numbers in the second column showing their importance (1 is the most important; 2 is the second most important; and so on). Underestimation of this sector with regards to others Business policy Lack of systems Competitive reasons Managerial negligence Lack of financial resources Lack of human resources Legislation Underestimation of this sector with regards to others Other reasons:

13 Is this company concerned with the environmental life cycle during the development and/or production of its products? If yes, please give an example. 14 Is reverse logistics considered as a competitive advantage or an item of cost by this company? 15 Does this company use reverse logistics as a marketing element to improve its image? 16 Does this company demand social and environmental responsibility from its business partners, providers, distributors, and customers? If yes, please give examples. 17 Please tell us the main contributions of reverse logistics to the environment.