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Reverse SCM in consumer electronics An Indian perspective

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348
Int. J. Logistics Systems and Management, Vol. 20, No. 3, 2015
Reverse supply chain management in consumer
electronics: an Indian perspective
Debadyuti Das*
Faculty of Management Studies,
University of Delhi,
Delhi – 110 007, India
Email: [email protected]
E-mail: [email protected]
*Corresponding author
Rohit Chaudhari
Parts and Components Exports,
Volkswagen India Private Limited,
Pune – 410 501, India
Email: [email protected]
Abstract: The present paper is an attempt to find out the strategic motive of an
organisation to undertake reverse supply chain management (RSCM) activities
with specific reference to consumer electronics industry in the Indian context. It
has identified the facilitating factors as also the inhibiting factors faced by an
organisation in pursuing RSCM activities by carrying out questionnaire survey
amongst retailers and service providers doing repairing, refurbishing and
remanufacturing of consumer electronic goods. This study has attempted to
categorise the returned goods in terms of recency, usability and residual value
and has tried to find out the percentage figures of individual element within
each category of recency, usability and residual value. It has further analysed
different return streams in terms of volume and residual value and revealed as
to which return stream/s contribute most to the organisations. Finally, this study
has analysed each element of RSCM activities in terms of time taken and cost
incurred and identified the major activities consuming maximum amount of
time and cost.
Keywords: RSCM; recency; usability; residual value; return streams; RSC
elemental time; RSC elemental cost; India.
Reference to this paper should be made as follows: Das, D. and Chaudhari R.
(2015) ‘Reverse supply chain management in consumer electronics: an Indian
perspective’, Int. J. Logistics Systems and Management, Vol. 20, No. 3,
pp.348–369.
Biographical notes: Debadyuti Das is an Associate Professor in the Faculty of
Management Studies, University of Delhi, Delhi. His current research interests
include reverse supply chain management, sustainable supply chain
management, supply chain coordination, environmental and supply chain issues
in project management, and supply chain issues in tourism, etc. His research
papers have appeared in various journals such as International Journal of
Project Management, International Journal of Project Organization and
Management, International Journal of Services and Operations Management,
Productivity, Journal of Services Research, International Journal of Tourism
Policy, etc.
Copyright © 2015 Inderscience Enterprises Ltd.
Reverse supply chain management in consumer electronics
349
Rohit Chaudhari is currently the Operations Manager with Parts and
Components Business at Volkswagen India Private Limited (VWIPL) in Pune.
He has received his undergraduate degree in Engineering from College of
Engineering, Pune and MBA degree from Faculty of Management Studies,
Delhi University. His areas of interest include cost reduction, process
optimisation in addition to operations strategy.
This paper is a revised and expanded version of a paper entitled ‘Reverse
supply chain management in consumer electronics industry: an Indian
perspective’ presented at the 16th Annual International Conference of The
Society of Operations Management (SOM 2012), IIT Delhi, 21–23 December
2012.
1
Introduction
In recent years, reverse supply chain management (RSCM) has assumed great importance
in view of proliferation of varieties in a product as also the reduced life-cycle of the
same. This phenomenon has become even more acute in case of consumer electronic
products. Due to shortened life-cycle of a product, the number of end-of-life (EOL),
end-of-use (EOU) and other categories of returned products disposed of by consumers
has increased exponentially. This has created growing concern for environment amongst
customers and other stakeholders. For example, electronic products contain hazardous
materials such as lead, mercury and cadmium. If these products are crushed in landfills,
the hazardous materials leach into the soil (Lee et al., 2000). Such toxics can also threaten
the quality of ground-water supply and other related water sources in that area, causing
public health hazard to the community. Further, if the returned products are incinerated,
substantial amount of energy will be consumed in burning the same which will be emitted
through harmful gaseous waste into the atmosphere.
In order to address the above challenges, the governments in the developed countries
have passed regulations aiming to reduce the amount of waste stream and to properly
dispose of the EOL products for pollution prevention. EOL take-back laws have been
passed both in the European Union and the US (Prahinski and Kocabasoglu, 2006).
Directives on Waste Electrical and Electronic Equipment (WEEE) and end-of-life
vehicles (ELV) bear testimony to this fact (European Commission, 2004). India generates
about 400,000 tons of waste every year which is increasing at the rate of 10% to 15%
(Hazra et al., 2011). Majority of this waste (around 70%) comes from government
institutions and business houses. Unorganised sector takes back and processes more than
90% of this e-waste using the most rudimentary methods which do not allow them to
recover the full value of returned products. While processing the returned products, it has
been found that most of the times, the same contain modules and components in usable
condition, which if properly retrieved and cleaned, could be used along with the new
components in manufacturing new products. Sometimes partially used and unused
products are also returned. Some of these products may require minor repair while others
may require refurbishing which could further be sold to the prospective customers as
repaired and refurbished products along with the new ones. In addition, materials could
also be reclaimed from the EOL products through recycling. The above activities
including repair, refurbishing, remanufacturing and recycling (also known as product
recovery activity), on one hand, address the problem of resource depletion and on the
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D. Das and R. Chaudhari
other attempt to properly manage the disposal of waste stream. In addition, this also
creates the possibility of generating separate revenue stream for an organisation. Thus,
judicious disposition of returned products and its management takes care of
environmental concerns and also gives rise to profitable economic activity.
Most of the works carried out in the domain of RSCM has been in the field of
network design of reverse logistics (RL) (Assavapopokee and Wongthatsanekorn, 2012;
Cruz-Rivera and Ertel, 2009; Mutha and Pokharel, 2009; Srivastava, 2008; Chandiran
and Rao, 2008) and network design of closed-loop supply chain (CLSC) (Cardoso et al.,
2013; Xanthopoulos and Lakovou, 2010; Kusumastuti et al., 2008; Schultmann et al.,
2006) particularly with reference to the developed countries. The focus of these
researches are to find out the optimum number of set-ups for collection, repair,
remanufacturing and recycling of returned products and also the optimum flow among
these set-ups with a view to minimising the total costs across the whole reverse chain or
the CLSC. In addition, quite a few empirical works have also been carried out in the
developed countries (Rogers and Tibben-Lembke, 1999, 2001; Kumar and Putnam, 2008;
Li and Olorunniwo, 2008; Ramireź, 2012) and China (Lau and Wang, 2009; Xiang and
Ming, 2011). These empirical works have been mostly used in finding out the drivers and
barriers affecting RL functions in electronics and automotive industry. Very few
empirical studies on RSCM in consumer electronics have been undertaken in India which
provide managerial insights in understanding the challenges, barriers and the driving
forces relating to the return of used products faced by the electronic industries. Further,
hardly any study has been carried out in evaluating the quality and condition of returned
goods in terms of recency, usability and recovery value and the uncertainty involved in
each case. The success of any RSCM initiative depends, to a large extent, on the quality
and the uncertainty concerning returned goods. In addition, we have not come across a
proper study in which the percentage of time and cost required to carry out elemental
RSC function has been analysed.
With this backdrop, the present study is an attempt to identify the strategic motives of
the consumer electronic organisations in pursuing RSC initiative and to find out the
facilitating factors as also the inhibiting factors (both managerial and infrastructural) in
carrying out the above mission. The study will also attempt to evaluate the quality of
returned goods in terms of recency, usability and recovery value. It will further
demonstrate as to which particular element/s of RSC function consumes maximum
proportion of time and cost.
The organisation of this paper is as follows. The following section presents review of
relevant literature. Section 3 deals with research methodology encompassing the target
respondents, the design of questionnaire and its validity, etc. Section 4 provides research
findings and analysis of the same. The concluding section presents a brief summary,
managerial implication of the findings, limitations of the current work and future research
directions.
2
Literature review
Guide and Van Wassenhove (2002) have recommended dividing RSCM functions into
five components namely:
1
product acquisition
Reverse supply chain management in consumer electronics
2
RL
3
inspection and disposition
4
reconditioning
5
distribution and sales for proper management of entire RSCM functions.
351
Dowlatshahi (2000) has provided a holistic view of RL considering both strategic and
operational factors and mentioned 11 managerial insights for successful implementation
of RL. Researchers have viewed RSCM from different perspectives. Some of them have
given emphasis on driving forces and barriers in pursuing RSC functions, few others have
dealt with product return characteristics while others have analysed the dimension
concerning inspection and disposition decision of the returned products. Some of the
researchers have also touched upon the strategies for redistribution and sales of
remanufactured products. In addition, there exist a significant number of research papers
on network design of RL and CLSC. Recently, there has been a trend towards linking
RSC functions with green supply chain management (GSCM) and sustainable supply
chain management (SSCM). Thus, there exists huge potential in carrying out research on
different dimensions of RSCM. We have reviewed a significant number of pertinent
research papers covering the above aspects of RSCM. In addition, we also went through a
few white papers on RL written by consulting firm (Wipro) and 3PL service provider
(GENCO) in order to find out the contemporary practices of RSCM functions in the
industry. The literature review section has been organised under various sub-sections
based on different facets of RSCM.
2.1 Motivating factors and inhibiting factors to pursue RSCM functions
Rogers and Tibben-Lembke (2001) indicated in their findings that the competitive
pressure is the dominant reason for most of the firms in taking back the returned goods.
They further mentioned that the main barriers to implementing RL functions are the
importance of RL functions relative to others and the ineffective company policies. The
study carried out by Lau and Wang (2009) in four consumer electronic manufacturing
firms based in China revealed that the driving forces of RL activities vary from firm to
firm while the barriers are mostly common. However, two drivers namely fulfilment of
obligation for environment protection and improvement of customer service seem to be
present in all these firms. The major barriers encountered are the lack of enforceable laws
or regulations, the absence of economic support and preferential tax policies, etc. to
motivate manufacturers to carry out RSCM functions. Kovacs et al. (2006) have
attributed the significant changes in the RSC functions of the Finnish glass recycling
supply chain to the legislative changes in the European Union. Toffel (2004)
identified few motivating factors namely reducing production costs, promoting an
environmentally-friendly image, meeting customer needs, protecting after markets and
pre-empting regulations which induce an organisation to undertake RL activities. Guide
and Van Wassenhove (2009) emphasised that the volume and quality of returns are the
major drivers of RSC functions. Erol et al. (2010) indicated that the firms pursuing
RSCM functions do the same due to national legislative liabilities and competitive
compulsions. They also added that the lack of legislation and economic incentives as also
improper company policy is the main reason for non-availability of an efficient RSCM in
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D. Das and R. Chaudhari
electronic industry in Turkey. Akdoğan and Coşkun (2012) have identified broadly three
drivers of RL activities namely economic reasons, legislation and corporate citizenship
(or environmentally-friendly image) with reference to household appliance industry in
Turkey. Their work further revealed that the importance of these drivers vary over
products and firms. Shams and Subramanian (2012) also came up with similar kind of
findings while identifying the factors influencing the implementation of EOL computer
recycling operations. They indicated that the government legislation, incentive and
customer demand are the major drivers of RSCM functions. The case study carried out by
Ritchie et al. (2000) in a pharmaceutical firm demonstrated that significant financial and
operational benefits are the most important reasons for the firm in pursuing RL process.
Bellmann and Khare (2000) have dealt with the economic feasibility of recycling EOL
vehicles with a view to containing the environmental damage.
2.2 Return flow types and their characteristics
Rogers and Tibben-Lembke (1999) classified the categories of returns depending on the
type of origin – items returned by supply chain partner (B2B) or items returned by the
final customer (B2C). Rogers et al. (2002) have indicated how the returns of various
types including consumer returns, marketing returns, asset returns, etc. should be
managed across the whole RSC. deBrito and Dekker (2003) differentiated returns
according to supply chain phases: manufacturing returns, distribution returns and
customer returns. In addition, they classified returned products based on returning
reasons, i.e., function failures (e.g., warranty and service returns) and function of the
product is no longer needed (e.g., functional returns). Guide (2000), Guide et al. (2000)
and Toffel (2004) mentioned that the uncertainty in product returns, imbalances in return
and demand rates and the unknown condition of returned products make the production
planning and control of remanufacturing extremely complicated. Guide et al. (2000)
further identified the differences between traditional manufacturing environment and
recoverable manufacturing environment in terms of production planning and control,
inventory control, forecasting, purchasing, logistics, etc. Krikke et al. (2004) suggested
applying a product life cycle-based classification that allows evaluating business
opportunities and requirements for processing different types of product returns. They
have suggested four different categories of returns namely EOL returns, EOU returns,
commercial returns and re-usable items. The B2B commercial returns include wrong
deliveries, damaged, outdated or unsold goods (deBrito and Dekker, 2003; Rogers and
Tibben-Lembke, 1999). The B2C commercial returns refer to products that are returned
by the end consumers in cases when their expectations were not met (deBrito and
Dekker, 2003; Krikke et al., 2004; Rogers and Tibben-Lembke, 1999). Thus, depending
on return reasons, type and origin, impact of environmental policies and business
opportunities for commercial returns, the requirements for handling reverse flows may
vary significantly. These may require establishing several reverse flows with
contradictory focuses on cost, speed and quality (deBrito and Dekker, 2003; Krikke et al.,
2004; Rogers and Tibben-Lembke, 1999). Tibben-Lembke and Rogers (2002) have
pointed out many differences between forward and RL processes from the perspective of
retail environment. Tan and Kumar (2008) examined the viability of reverse supply chain
in computer industry by developing a decision making model and showed that RSC could
only be profitable when the returns volume is high.
Reverse supply chain management in consumer electronics
353
Blackburn et al. (2004) demonstrate that there are broadly two categories of
product returns: returns with high marginal value of time (high MVT) also known as
time-sensitive products and the returns with low marginal value of time (low MVT) also
referred to as time-insensitive products. The loss in value per unit time for high MVT
products is very high with increasing delays at different layers of reverse supply chain.
They have further suggested a decentralised and responsive RSC for high MVT products
and centralised and efficient RSC for low MVT products. Guide et al. (2006) have added
that the companies facing large returns and high recoverable product value should adopt a
responsive reverse network. Savaskan et al. (2004) have considered three options for
collection of used products from customers. They have shown that the retailer happens to
be the most effective agent for collection of returned products.
2.3 Inspection and disposition of returned products
The inspection and disposition processes involve activities such as inspection, testing,
sorting, and grading returned products. The testing, sorting, and grading of returned
products are labour-intensive and time consuming tasks. These processes may take place
at retail store or at other echelons of supply chain. Prahinski and Kocabasoglu (2006)
identified four disposition options namely:
1
direct reuse
2
product upgrade
3
material recovery
4
waste.
According to Guide and Van Wassenhove (2002), disposition decision should be made
based on product characteristics such as quality and product configuration. Various
disposition options considered by the researchers are direct reuse, repair, refurbishing,
remanufacturing, cannibalisation and scrap (Thierry et al., 1995; Rogers and
Tibben-Lembke, 2001; Krikke et al., 2004). Rogers and Tibben-Lembke (2001) showed
the distribution of processing time of the returned products. Over 15% of the firms
process returns in two days or less while nearly 15% take more than one month to process
their returns. Over 40% of the firms process the returns in a week or less. Using data
gathered from a computer manufacturer based in Singapore, Tan and Kumar (2006)
observed that transportation delay and supplier delay in processing returns have a
significant impact on the viability of RL regardless of returns volume. Guide and
Van Wassenhove (2009) demonstrated that a slow reverse supply chain that takes
10 weeks to put returned products back on the market would result in a loss of 10% of the
total value in that product. Srivastava and Srivastava (2006) have presented a framework
for estimation of product returns and its disposition through various facilities under
strategic, operational and customer service constraints.
2.4 Redistribution and sales
Guide and Van Wassenhove (2002) have indicated that a company should make
investment to educate customers before marketing remanufactured or recycled products.
They have further added that significant business opportunities often exist in markets
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D. Das and R. Chaudhari
where customers cannot afford the new products but can buy used or refurbished ones at
lower prices. Thierry et al. (1995) have mentioned that the recovered products or parts
can be sold by the company, its supply chain partners or companies outside the supply
chain. Padmanabhan and Png (1995) have considered returns policy offered to the
distributor by the manufacturer as an incentive to coordinate the distribution channel.
Tibben-Lembke (2004) has given some suggestions as to how companies can maximise
their secondary market revenues without damaging their primary market sales and the
brand identity of main products. Liang et al. (2009) argued that the customers need to be
incentivised in order to attract them to return the EOL products. With the help of a
mathematical model, they attempted to show the relationship between the acquisition
price of returned products (referred to as cores) and the sales price of remanufactured
products (referred to as core products).
2.5 Network design of RL and CLSC
Modelling techniques are quite helpful in improving the RL processes and aid in
real-world RL problems. However, the issues relating to RSC are not as simple as
forward supply chain. Managers need to understand the trade-off between RL cost and
customer service while modelling a RL process (Rogers et al., 2012). A number of
researchers (Assavapopokee and Wongthatsanekorn, 2012; Cruz-Rivera and Ertel, 2009;
Mutha and Pokharel, 2009; Srivastava, 2008; Xanthopoulos and Lakovou, 2010) have
designed strategic network of RSC for collection and processing of EOL, EOU and
partially used products by utilising mathematical programming approach. The issue in the
above research findings is to derive economic benefits for the firms by offering repaired,
refurbished and recycled products to the customers and also to minimise the adverse
environmental impact of landfill and incineration. Chandiran and Rao (2008) made an
interesting revelation with regard to the design of reverse and forward supply chain
network for an automobile battery manufacturer. They mentioned that bypassing certain
stage of supply chain network in the reverse flow reduces the cost of the network and also
the amount of time spent by products in the supply chain network. Cardoso et al. (2013)
incorporated demand uncertainty into the RL network while developing a generic supply
chain with forward and reverse flows. A few researchers (Kusumastuti et al., 2008;
Schultmann et al., 2006) have proposed network design of CLSC with a view to making
both forward and reverse supply chain integrated and efficient. Pishvaee et al. (2009)
have developed a stochastic programming model for an integrated forward/RL network
design by incorporating uncertainty in respect of demand, quantity and quality of returns,
etc. Qiang et al. (2013) developed a CLSC network with decentralised decision makers
consisting of raw material suppliers, retail outlets and the manufacturers that collect the
recycled product directly from the demand market.
2.6 RL and GSCM
Researchers (Khor and Udin, 2013; Marsillac, 2008; Sheu, 2008) have shown that RL
processes including repair, refurbishment, reclamation, recycling of EOL, EOU and
partially used products minimise the exploitation of the earth’s virgin resources and at the
same time lessen the negative impact on ecological environment. This enables an
organisation to pursue its environmental goals on one hand by minimising landfill
through toxic waste and on the other, allows it to achieve economic goals by creating the
Reverse supply chain management in consumer electronics
355
possibility of developing a separate revenue stream from returned goods. This ultimately
helps the organisation to promote its green image. Few other researchers (Sarkis et al.,
2010; Rosa et al., 2013) have also indicated the benefits accrued to the broad stakeholders
of the society in addition to the economic and environmental benefits as a result of
undertaking RSCM activities. However, the findings of Lai et al. (2013) indicate that the
adoption of RL practices by Chinese manufacturers generates substantial environmental
and financial gains, but not social benefits.
The foregoing discussion suggests that the field of RSCM is very rich and diverse in
nature. However, the number of empirical research papers in this domain does not seem
to be noteworthy. Further, we have hardly come across any empirical paper on RSCM
with reference to Indian perspective. The present paper is an effort to bridge the gap
towards that direction.
3
Research methodology
The key issue in this research is to uncover the motives of consumer electronics firms in
pursuing RSCM activities, the facilitating factors and inhibiting factors faced by these
firms, etc. Accordingly research methodology followed in this work is primarily
exploratory in nature. This involves the design of survey instrument and validation of the
same which was followed by the selection of study site and identification of target
respondents. Finally, responses were secured from the respondents with the help of
survey instrument through face-to-face interview.
3.1 Design of survey instrument
Review of relevant research papers cited in the literature review section as well as the
company practices identified through white papers allowed us to design a preliminary
questionnaire incorporating all relevant dimensions of RSCM. Subsequently, the same
was shown to three experts consisting of one professor, one SC professional and one
retailer of consumer electronics products. All of them gave very diverse and valuable
inputs. We tried to incorporate these inputs to the maximum possible extent without
diluting the essence of RSCM dimensions which enabled us to revise the questionnaire.
The questionnaire was divided into five sections. The first section contains questions
relating to the background information of respondents while the second section seeks to
find out the strategic motive of RSCM functions and relative importance of the same with
the help of ranks. The third section tries to find out the perception of the respondents with
regard to the factors influencing an organisation to undertake RSCM activities. A
five-point Likert-scale was used as a response format for different factors with the
assigned values ranging from 1 = not at all true to 5 = absolutely true. The fourth section
attempts to capture information on recency, usability and recovery value of returned
products in percentage firms. This section also tries to find out the ranking of different
categories of return streams in terms of volume and residual value. The final section
seeks to capture the percentage of cost incurred and that of time taken in carrying out the
elemental functions of RSCM. The questionnaire was presented to the same experts once
again with a view to seeking their expert opinion on the adequate and appropriate
coverage of the items relevant to RSCM functions and also the user-friendliness and
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workability of the questionnaire. This helped us in achieving the content validity of the
questionnaire.
3.2 Study site and identification of target respondents
The present study has been carried out amongst the retailers of consumer electronic
goods and service providers engaged in repairing, refurbishing/remanufacturing of these
goods based in Delhi and Northern Capital Region (NCR) of India. Thus broadly two
categories of respondents, e.g., retailers and service providers responsible for
repairing/refurbishing of consumer electronic goods were considered in our study. We
targeted both organised and unorganised sectors. Initially we gathered an idea about the
establishment of the business units of these respondents from internet and other sources.
We made a preliminary assessment of these business units by looking at the relevant
information available through internet and other secondary sources. This allowed us to
pinpoint appropriate business establishments for the purpose of administering the survey
instrument to the owners/managers of those units. This, in essence, constitutes
judgmental sampling.
3.3 Plan for securing responses
We collected the contact addresses, telephone number and e-mail of the concerned
persons of consumer electronic stores and the repairing/refurbishing agents as mentioned
in Section 3.2 and tried to secure responses from them by first of all explaining them the
purpose of undertaking the current study over telephone. Subsequently, we sent them the
questionnaire through e-mail in order to enable them to have an idea about the kind of
responses required by us. In the next stage, we took an appointment with them and finally
visited their stores in person with hard copies of the questionnaire with a view to eliciting
responses from them through face-to-face interview. This process was necessary both
from the perspective of researchers and the respondents for the purpose of securing
reliable responses. This, in fact, allowed us to explain face-to-face, in nutshell, the issues
of RSCM to the respondents once again and also gave them the opportunity to seek
clarifications on different issues relating to RSCM.
4
Research findings
We could manage to approach 48 retailers of consumer electronic goods in Delhi and
NCR. However, 22 of them agreed to give responses to our survey with a response rate of
46%. Out of these 22 respondents, responses from 14 were collected through face-to-face
interview and the remaining eight were collected through telephonic interview. Further,
15 service providers doing repairing, refurbishing and remanufacturing of electronic
goods were approached out of which eight gave consent to provide responses in our study
thereby giving us a response rate of slightly more than 50%. Out of these eight
respondents, responses from four were collected through face-to-face interview and the
remaining four were received through e-mails.
Reverse supply chain management in consumer electronics
357
4.1 Composition of retailers and service providers
Broadly, three categories of retailers selling consumer electronic goods were identified.
These are:
1
retailers selling mobile phone and related hardware
2
retailers selling computer and accessories
3
retailers selling consumer durables which include air-conditioner, refrigerator,
washing machine, CTV, music system, micro-oven, etc.
It is found in our sample that the mobile phone retailers sell mobile phone of a particular
OEM only and also receive the returned mobiles of the same OEM. However, both
computer retailers and the retailers dealing with consumer durables sell goods of different
OEMs from the same retail store as observed in our sample. Further, they also receive
returned goods of different OEMs based on the conditions of the same. The distribution
of retailers is as follows:
Table 1
Composition of retailers
Categories of retailers
Number
% of retailers
1
Mobile phone
6
27.3%
2
Computer
11
50.0%
3
Air-conditioner, washing machine, refrigerator, CTV, etc.
5
22.7%
It is evident from the above findings that most of the retailers (50%) are in computer
retailing. As regards service providers, we identified three categories of service providers
for three types of consumer electronic products similar to the retailers:
1
service provider for repairing/refurbishing mobile phone
2
service provider for repairing/refurbishing computer
3
service provider for repairing/refurbishing consumer durables.
It is found in our sample findings that although the mobile phone retailers are exclusive
agents of a particular OEM, the service providers doing repairing/refurbishing of mobile
phone carry out these functions for several OEMs simultaneously. Similar trend of
pooling returned computers of different OEMs and returned consumer durables of
different OEMs by the computer service provider and the consumer durables service
provider respectively has been observed for the purpose of doing repairing/refurbishing.
Table 2
Composition of service providers
Categories of service providers
Number
% of service providers
1
Mobile phone
2
25.0%
2
Computer
3
37.5%
3
Air-conditioner, washing machine, refrigerator, CTV,
etc.
3
37.5%
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D. Das and R. Chaudhari
4.2 Responses collected from organisations based on the number of people
employed
The size of organisations selling consumer electronic goods and doing
repairing/refurbishing functions were categorised based on the number of people
employed in the same. The number of responses from each category was then found out.
Table 3
Frequency of responses based on the size of organisations
No. of people
Frequency of responses
% of responses
25 or fewer
8
26.7%
25 to 50
10
33.3%
50 to 100
10
33.3%
100 to 250
0
0.0%
More than 250
2
6.7%
It is evident that we could manage to collect most of the responses from organisations
with the number of people ranging from 25 to 100.
4.3 Motivating factors of an organisation to pursue RSCM
Review of contemporary literature on RSC, investigation of company white papers and
finally discussion with the experts helped us in finalising 12 motivating factors. The
respondents were asked to give a particular motivating factor rank 1 which is considered
most important from the perspective of the organisation based on its philosophy and the
changing market dynamics. They were further requested to give rank 2 to the second
most important motivating factor. Likewise they were asked to give the least important
motivating factor rank 12. Once the responses from all 30 respondents were collected, we
computed the individual cumulative score of each motivating factor and arranged it in an
ascending order. The lowest total score was assigned rank 1, the second lowest rank 2
and so on.
Table 4
Motivating factors and its relative importance
Motivating factors
Rank
Separate revenue stream
1
Increased profit
2
Improved brand image of the organisation
8
Increased market competitiveness
7
Improved customer service
4
Recapture/reclaim value
3
Better utilisation of assets
6
Maximise reuse
9
Competitive pressures
5
Legal disposal issues
10
Clean channel
11
Minimise landfill/incineration
12
Reverse supply chain management in consumer electronics
359
The study findings suggest that ‘separate revenue stream’, ‘increased profit’ and ‘reclaim
value’ were ranked 1, 2 and 3, respectively. This demonstrates that the consumer
electronics organisations based in Delhi and NCR are primarily motivated by economic
reasons to pursue RSCM functions. This is consistent with the findings of Ritchie et al.
(2000). However, this contradicts the findings of Rogers and Tibben-Lembke (2001), and
Erol et al. (2010). Because their findings have attached highest importance to the
competitive compulsions.
4.4 Facilitating factors and inhibiting factors faced by organisations in doing
RSCM
From the perspective of operationalising RSCM functions in an organisation, we
identified 17 factors through literature review and also by consulting the experts. These
factors, if found conducive, would serve as facilitating factors while the same would act
as barriers to implementing RSCM functions if they are not found favourable. Before
applying appropriate statistical test on these factors, we reversed the scores obtained on
negatively framed statements. We carried out one sample t-test (left-tailed) with a test
value of 3. If the mean value of a particular factor is equal to or greater than 3, the null
hypothesis is not rejected. Otherwise the null hypothesis is rejected. In the present
findings, the failure to reject null hypothesis in respect of a particular factor is analogous
to the same being considered as a facilitating factor in pursuing RSCM functions while
the rejection of null hypothesis with a regard to a factor is equivalent to the same being
treated as an inhibiting factor. These facilitating factors and the inhibiting factors are
shown separately in Tables 5 and 6, respectively.
Table 5
Facilitating factors of RSCM faced by organisations
Factors
Mean value
S.D.
T-value
High level of coordination between retailer and 3PL service
providers for shipping and storage of take-back items
3.47
0.819
3.120
High level of coordination between retailer and the agent
responsible for repairing/refurbishing/remanufacturing of
take-back items
3.47
0.900
2.841
High level of coordination between retailer and the agent
responsible for sale of repaired/refurbished/remanufactured
items
3.67
0.711
5.135
Attitude of people to undertake specific RSCM activities is
positive
3.63
1.098
3.159
Cannibalisation of mainstream products by
repaired/refurbished/remanufactured ones
3.83
1.262
3.618
Notes: Perception scores are based on five-point Likert scale; test value = 3; H0: μ >= 3;
Ha: μ < 3; α = 0.05; 1-tailed test (left-tailed); df = 29; tabled t-value: 1.699.
Tables 4 and 5 reveal that the co-ordination amongst different agents responsible for
carrying out RSCM functions is quite satisfactory. There is hardly any chance of
cannibalisation of main products by the repaired or refurbished products. This probably
indicates that there exist separate customer segments for both new products and
refurbished ones. Further attitude of the people undertaking RSCM functions indicates
that they are ready to adopt RSCM functions. However, the skill level of people, being
360
D. Das and R. Chaudhari
inadequate, suggests that the top management needs to impart proper training to these
people. The most important barrier in pursuing RSCM function turns out to be the lack of
commitment of the top management. The support of the middle level managers, as shown
in Table 6, is far from satisfactory. Physical infrastructure, technology and IT
infrastructure and financial resources required to support RSCM activities pose hindrance
to implementing RSCM functions. In addition, the management hardly pays any attention
to the environmental management system. Other important barriers in adopting RSCM
functions are in respect of uncertainty in the volume and the quality of returned goods.
This indicates that a suitable mechanism needs to be created by the electronic goods
manufacturers and retailers to motivate the customers to return the EOL, EOU electronic
goods in a uniform manner.
Table 6
Inhibiting factors of RSCM faced by organisations
Factors
Commitment of the top management towards
implementation of RSCM
Support of middle level managers for RSCM activities is
available for implementation of RSCM activities
Environmental management systems are in place
Technology and sound physical infrastructure is available to
support RSCM activities
Sound IT infrastructure is available to support RSCM
activities
Adequate financial resources are available to support
RSCM activities
Skill level of people to undertake specific RSCM activities
is adequate
Volume of returned goods from customers has been
consistently high
Uncertainty in the volume/quantity of returned goods
Uncertainty in the quality (usability) of returned goods
Uncertainty in the quality (recency) of returned goods
Uncertainty in the quality (recovery value) of returned
goods
Mean value
S.D.
T-value
2.33
1.213
–3.01
2.20
1.297
–3.378
1.60
2.37
1.221
1.159
–6.283
–2.993
2.20
1.297
–3.378
2.17
1.44
–3.169
2.07
1.311
–3.898
2.33
1.47
–2.484
1.77
1.83
2.03
1.97
0.898
0.874
1.066
0.964
–7.526
–7.309
–4.966
–5.869
Notes: Perception scores are based on five-point Likert scale; test value = 3; H0: μ >= 3;
Ha: μ < 3; α = 0.05; 1-tailed test (left-tailed); df = 29; tabled t-value: 1.699.
4.5 Returned consumer electronic goods from recency perspective
We asked the respondents to provide us an idea about the percentage of returned
consumer electronic goods in terms of how old or how new the same is based on his or
her experience. We requested them to furnish the approximate percentage figures on five
categories namely ‘very old (> 5 years)’, ‘considerably old (3–5 years)’, ‘somewhat old
(2–3 years)’, ‘recent (1 1/2–2 years)’ and ‘very recent (< 1 1/2 years)’ and also told them
that the sum of individual percentage figures assigned to five categories by one particular
respondent should be 100%. We computed the percentage figures of each individual
category of returned products by taking the geometric mean of percentage scores across
30 respondents. The percentage figures are shown in a pie chart as given in Figure 1.
Reverse supply chain management in consumer electronics
Figure 1
361
Percentage of returned electronic goods in terms of recency (see online version
for colours)
The percentage figures shown in Figure 1 suggest that significant percentage of returned
goods (almost half) is accounted for by ‘considerably old’ items which are followed by
‘somewhat old’ items.
4.6 Returned consumer electronic goods from usability perspective
We asked the respondents to provide us an idea about the extent of usable returned
consumer electronic goods in percentage terms. We requested them to furnish the
approximate percentage figures on five categories namely ‘absolutely usable’,
‘considerably usable’, ‘somewhat usable’, ‘scarcely usable’ and ‘not at all usable’ and
also told them that the sum of individual percentage figures assigned to five categories by
one particular respondent should be 100%. We followed the same procedure for finding
out the percentage figure of each individual category as explained in Section 4.5. The
percentage figures are shown in a pie chart as given in Figure 2.
Figure 2
Percentage of returned electronic goods in terms of usability (see online version
for colours)
Figure 2 reveals that quite a significant percentage of returned consumer electronic goods
constitute usable items.
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D. Das and R. Chaudhari
4.7 Returned consumer electronic goods from recovery (residual) value
perspective
We further requested the respondents to give us an idea pertaining to the reclamation of
residual value of returned electronic goods in percentage terms. We requested them to
provide us the percentage figures in six category namely ‘resold as is’, ‘repackaged and
sold as ‘new’, ‘repaired and sold’, ‘refurbished/remanufactured’, ‘recycled’ and
‘landfill/disposal’. We also told them that the sum of individual percentage figures
assigned to six categories by one particular respondent should be 100%. We followed the
same procedure for finding out the percentage figure of each individual category as
explained in Section 4.5. The percentage figures are shown in a pie chart as given in
Figure 3.
Figure 3
Percentage of returned goods in terms of residual value (see online version for colours)
Figure 3 reveals that a substantial percentage of returned consumer electronic goods are
repaired and sold. This is followed by the categories of returned items which are
refurbished and or remanufactured.
4.8 Categories of returned consumer electronic goods in terms of volume
We identified different categories of returned consumer electronic goods from literature
and also by talking to few retailers. At the same time, we took inputs from the panel of
experts and incorporated their expert opinions into the questionnaire. Accordingly, we
finalised nine categories of returned consumer electronic goods. The respondents were
asked to give a particular return stream rank 1 which is considered to have the highest
return flow in terms of volume. They were further requested to assign rank 2 to the return
stream with the second highest return volume. Likewise they were asked to rank 9 the
return stream with the least return volume. Once the responses from all 30 respondents
were collected, we computed the individual cumulative score of each return stream and
arranged it in an ascending order. The lowest total score was assigned rank 1, the second
lowest rank 2 and so on.
Reverse supply chain management in consumer electronics
Table 7
363
Ranking of return streams in terms of volume
Return streams
Rank
End of life (EOL) returns
1
End of use (EOU) returns (e.g. leasing)
4
Commercial returns from customers (e.g. convenience returns, exchange offers)
2
Commercial returns from channel partners (e.g. overstocks, channel clearance)
8
Warranty returns
3
Maintenance, repair and overhaul (MRO) returns
6
Product recalls
7
Distribution related returns (wrong/damaged deliveries)
5
Others
9
Table 7 reveals that the EOL return streams constitute the largest return flow in terms of
volume which is followed by the commercial returns from customers. Warranty returns
come third in the order.
4.9 Categories of returned consumer electronic goods in terms of residual
value
The above nine categories of return streams were further evaluated in terms of their
respective residual value through ranks. The respondents were asked to follow the same
procedure explained in Section 4.8 while ranking a particular return stream in terms of its
residual value. Subsequently, we found out the overall rank of each individual return
stream in terms of its residual value by following the same method explained in
Section 4.8.
Table 8
Ranking of return streams in terms of residual value
Return streams
Rank
End of life (EOL)returns
1
End of use (EOU) returns (e.g., leasing)
4
Commercial returns from customers (e.g., convenience returns, exchange offers)
2
Commercial returns from channel partners (e.g., overstocks, channel clearance)
8
Warranty returns
3
Maintenance, repair and overhaul (MRO) returns
6
Product recalls
7
Distribution related returns (wrong/damaged deliveries)
5
Others
9
364
4.10
D. Das and R. Chaudhari
Elements of RSC cost in percentage terms
Once the EOL, EOU or other types of goods are received from the customers, a number
of elemental activities need to be performed in order to reclaim value from these returned
goods and also to dispose it off in an environmentally-friendly manner. Each
activity involves certain amount of cost. The purpose of analysing this exercise is to
identify as to which particular element of RSCM accounts for the maximum share of cost
incurred in carrying out RSCM functions. We requested the respondents to
furnish the approximate cost of elemental RSCM functions namely ‘collection and
customs clearance’, ‘inspection and sorting’, ‘shipping and storage’, ‘repairing’,
‘refurbishing/remanufacturing’, ‘recycling’, ‘disposal/landfill’ in percentage terms. We
also told them that the sum of individual percentage figures assigned to these seven
elemental functions by one particular respondent should be 100%. We computed the
percentage figures of elemental RSC cost by following the same procedure already
explained in Section 4.5.
Figure 4
Elements of RSC cost in % terms (see online version for colours)
It is evident from Figure 4 pie diagram that refurbishing/remanufacturing cost accounts
for maximum share of the cost of RSC functions which is followed by repairing cost.
4.11
Elemental time of RSC functions in percentage terms
It is a well-known fact that the value of the returned consumer electronic goods falls
rapidly with the passage of time as the MVT of these products is very high. Therefore,
the purpose of doing this exercise is to identify as to which particular element of RSC
consumes maximum amount of time. We followed the same procedure for finding out the
percentage of time consumed by each element of RSC as explained in Section 4.5.
Figure 5 suggests that maximum time is consumed by refurbishing/remanufacturing
function of RSC which is closely followed by repairing function.
Reverse supply chain management in consumer electronics
Figure 5
5
365
Elemental time of RSC functions in % terms (see online version for colours)
Conclusions and managerial implications
The present study has attempted to find out the motivating factors of consumer
electronics firms based in Delhi and NCR of India to pursue RSCM functions which are
involved in retailing consumer electronic goods, accepting EOL, EOU returned goods
and repairing/refurbishing those returned goods by collecting responses from 30 firms.
Motivating factors may be considered to be the strategic drivers of a firm to carry out
RSCM functions. Findings of the study have revealed that the economic reason rather
than the competitive pressure is the prime motive of a consumer electronics firm to do
RSCM functions. This has great positive impact on the RSC functions of consumer
electronics firms. The study has also determined the facilitating factors and the inhibiting
factors faced by the firms in pursuing RSCM functions. Facilitating factors are
considered to be the operational enablers while inhibiting factors are deemed to be the
operational hurdles of RSC functions. The findings reveal that there are five facilitating
factors and 12 inhibiting factors towards RSCM implementation in consumer electronics
firms. Commitment of the top management and the support of the middle-level managers
are the primary pre-requisites for successful implementation of RSCM. Further, the
management should make adequate financial resources available and also commit
resources in terms of IT infrastructure, physical infrastructure and environmental
management system.
The present work has evaluated the incoming quality of returned goods in terms of
recency, usability and residual value. Recency statistics of returned goods reveal that
most of the items returned by the consumers are either ‘considerably old’ or ‘somewhat
old’. Taken together they account for 82% of the incoming electronic goods. A minor
percentage of the incoming quality constitutes items of ‘recent’ or ‘very recent’ category.
This gives an insight to the management that most of the Indian electronic goods
consumers continue to use electronic goods for reasonably sufficient period. This needs
to be sustained and customers should be encouraged to use the existing electronic items
till the end of its useful economic life with a view to generating less electronic waste.
Usage quality of the incoming items suggests that a substantial percentage (around 75%)
of the electronic goods is either ‘considerably usable’ or ‘somewhat usable’. This
366
D. Das and R. Chaudhari
revelation of usability data demonstrates that there exists tremendous business potential
in creating a separate segment of customers for used electronic products. The quality of
incoming items in terms of residual value suggests that a significant share (approx. 79%)
of the goods come under ‘repaired’ and ‘refurbished/remanufactured’ category. This also
provides an important managerial insight to the management in terms of its potential in
reclaiming value from the returned electronic items.
Considering different categories of return streams, the study findings present that
‘EOL return stream’ is ranked 1 in terms of volume which is followed by ‘Commercial
returns from customers’. This is again followed by ‘Warranty returns’. Further from the
perspective of residual value, the findings on different categories of return streams
surprisingly reveal the same ranking of return streams. This has an important managerial
implication in terms of improving the operational efficiency of the processing of returned
items and at the same time recovering significant value from the same by focusing
maximum resource of an organisation on few dominant return streams. The main return
streams are EOL returns, commercial returns, warranty returns and EOU returns which
are ranked 1, 2, 3 and 4, respectively in terms of both volume and residual value.
The present study has also found out the percentage of cost incurred in doing
elemental RSC functions and also the percentage of time required in performing those
elements of RSC function. The findings suggest that refurbishing/remanufacturing
accounts for the major share of RSC cost which is followed by repairing cost of RSC.
Further ‘refurbishing/remanufacturing’ and ‘repairing’ consume the major percentage of
time in carrying out RSC functions and these two require nearly the same percentage of
time of the total available time. This gives an idea to the managers as to which elemental
functions of RSC should be given more emphasis for minimising cost and time in
carrying out RSCM functions.
The study suffers from several limitations. The first and foremost limitation is the
inadequate size of the sample. Generalisation has been drawn based on this small sample
which is fraught with inherent risk. Further, the survey was carried out mostly within
unorganised sectors. Only few organised RSC companies were interviewed which did not
allow us to do a comparative study of RSC practices between organised and unorganised
sectors. Future study should take care of the issues relating to the sample size, size of
organised and unorganised sectors within the sample, etc. so that the study findings
become generalisable across consumer electronic goods. The findings would be more
enriching if the responses are collected from almost all major parts of the country.
Similar kind of study could also be undertaken in automobile sector, telecom sector,
fashion goods, etc.
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