reverse logistics and the triple bottom line
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Table of Contents INTRODUCTION ............................................................................................................................................. 2
REASONS FOR RETURN ................................................................................................................................. 4
MANUFACTURING RETURNS .................................................................................................................... 4
DISTRIBUTION RETURNS ........................................................................................................................... 4
CUSTOMER RETURNS ................................................................................................................................ 4
DRIVERS OF RL .............................................................................................................................................. 4
CLOSED LOOP SUPPLY CHAIN MANAGEMENT .............................................................................................. 5
SOCIAL RESPONSIBIITY AND REVERSE LOGISTICS ......................................................................................... 6
ECONOMIC PERFORMANCE ...................................................................................................................... 7
SOCIAL PERFORMANCE ............................................................................................................................. 7
ENVIRONMENTAL PERFORMANCE ........................................................................................................... 8
COMPETITIVE ADVANTAGE ........................................................................................................................... 9
TANGIBLE COMPETITIVE ADVATAGES ...................................................................................................... 9
INTANGIBLE COMPETITIVE ADVATAGES ................................................................................................... 9
REFERENCES ............................................................................................................................................ 10
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INTRODUCTION The term “triple bottom line” (TBL) was allegedly coined by John Elkington in
1994 Sarre & Treuren (2001).
Elkington’s consultancy company,SustainAbility,which he founded in
1987,gives a big picture describtion of TBL,as well as an accounting concept.
“The triple bottom line (TBL) focuses corporations not just on the economic
value they add but also on the environment and social value they add-and
destroy. As its narrowest, the term “triple bottom line” is used as a framework
for measuring and reporting corporate performance against economic, social
and environmental parameters. As its broadest, the term is used to capture the
whole set of values, issues and processes that companies must address in
order to minimize any harm resulting from their activities and to create
economic ,social and environmental value. This involves being clear about the
company’s purpose and taking into consideration the needs of all the
company’s stakeholders-share-holders, customer, employees, business
partners, governments, local communities and the public.” (SustainAbility
website 2014)
Fig 1,The triple bottom Line Concept(source; The Triple Bottom Line: Does It All
Add Up)
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Logistics is defined by the Council of logistics Management as, “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 origin to the point of consumption for the purposes conforming to
customer requirements.”
Reverse logistics includes all of the activities that are mentioned in the
definition above. The difference is that reverse logistics encompasses all these
activities as they operate in reverse. Therefore, reverse logistics is “the process
of planning, implementing and controlling the efficient, cost effective flow of
raw materials in the process-inventory, finished goods, and related information
from point of consumption to the point of origion for the purposes of
recapturing value or proper disposal.” Rogers and Tibben-Lembke (1999,pg 2)
The attention to reverse logistics is relatively new in the history of logistics and
supply chain management. The US Army did their first study of reverse
logistics operations in 1998.The US army defined reverse logistics as : “The
return of serviceable supplies that are surplus to the needs of the unit or are
unserviceable or in need of rebuilding or remanufacturing to return the items
to serviceable status” Rommet et al. (2004).The first commercial study of
reverse logistics was conducted the same year by Dr. Dale Rogers and Dr. Ron
Tibben-Lembke
However Blumberg (2005) states that the idea of Reverse logistics has been
around atleast since the industrial age when merchants recognized that old
clothing ,rags and linen could be reproduced and used to produce new textile
products.
The reverse logistics process is illustrated in figure 1.
Fig 1.Representation of a reverse logistics process.Source: Lacenda
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REASONS FOR RETURN According to Blumberg (2005), products are returned or discarded because
either they do not function properly or because their function is no longer
needed. Three groups of returns are manufacturing returns, distribution returns
and customer returns.
MANUFACTURING RETURNS
Manufacturing returns are here defined as all those returns for which the need
for recovery of components or products is identified during the production
phase. Examples include; raw material surplus, quality control returns,
production leftovers.
DISTRIBUTION RETURNS
Distribution/supply returns refers to all those returns that are initiated during
the distribution phase. It refers to product recalls, commercial returns, stock
adjustment and functional returns.
CUSTOMER RETURNS
The third group consist of customer returns i.e those returns initiated once the
product has reached the final customer. Again there are variety of reasons to
return products, viz; end of user returns, warranty returns, service returns
DRIVERS OF RL The motivations of the business community for applying reverse logistics
practices can be divided into two categories: proactive or reactive. Some
proactive incentives for adopting reverse logistics management practices by
manufactures would be cost savings, a better profile, to gain competitive
advantage and improve environmental performance; reactive motivations would
be legislative factors that also explain business’ decision to adopt reverse
logistics practices in their daily operations. Gonzalez-Torre et al.(2004)
According to surveys done by Rogers and Tibben-Lembke (2001) and Carbone
and Moatti (2008),the first motivation for establishing reverse logistics is the
desire to improve customer service and satisfaction. A second main
motivation concerns the existing environmental regulations and the need for
manufactures to comply with the growing number of take-back policies
Carbone & Moatti,(2008);Dowlatshahi,(2005);Kumar & Putnam,(2008).However
some authors believe that legal constraints might not be the only
environmental driver of reverse logistics implementation Schatterman (2010)
argued that some “companies have already adopted a ‘green attitude’ and thus
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see in reverse logistics a means to reduce their environmental foot print.”
Finally the last main driver that emerged from the literature concerns economic
perspectives.(Leite,2003) asserts; many companies use reverse logistics to
recapture economic value to increase competitiveness.
According to the RevLog Group (an international working group for the study of
reverse logistics, involving researchers at various universities worldwide under
the coordination of Erasmus University of Rotterdam, Holland),the main
reasons causing firms to make bigger efforts to improve reverse logistics are;
1) Environmental legislation, which forces companies to take back their
products and take proper care in their treatment
2) Economic benefits of using products that return to the production
process, instead of the high costs of correct disposal of trash.
3) Growing public environmental awareness.
Figure 2; Driving forces of RL implementation: adapted from De Brito and
Dekker (2002)
CLOSED LOOP SUPPLY CHAIN MANAGEMENT Closed-loop supply chain management embraces both forward and backwards
supply chain management actions. Krikke(2003). Closed-loop supply chain
management embedding reverse logistics principles, developed in the 1980’s,it
was first implemented in the electronics industry. Until this time the typical
process for repair of a product or a piece of equipment was to make corrections
in the field.,i.e (fix and replace)
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CLSCs concept is a single system derived from the combination of traditional
forward supply chain activities and reverse supply chain activities. The
advantage of CLSC is the potential to increase the environmental performance
of industrial operations to new standards.
Figure 3; A basic model of a closed loop supply chain management (The Triple
Bottom Line: Does It All Add Up,2004)
SOCIAL RESPONSIBIITY AND REVERSE LOGISTICS Corporate Social Responsibility (CSR), comprises actions required by law but
furthering social good and extending beyond the explicit, transactional interest
of an organization (M.E Williams and Segal,2001).CSR is often to frame
company attitudes, strategies and relationships with stakeholders(Jenkins
2004),while addressing ethical values, economic wellbeing and compliance.
Social accounting aims to access the impact of an organization on company on
people both inside and outside. Issues often covered are community relations,
product safety, training and education initiatives, sponsorships, charitable
donations of money and the employment of the disadvantaged groups.
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ECONOMIC PERFORMANCE
The financial aspect of social responsibility, under the TBL approach, is one of
the three basic aspects. To measure this aspect various indicators have been
proposed regarding reverse logistics. For example, Weeks et al.(2010).
Economies with the use of returnable packaging or recycling of materials for
production have brought increasingly gains that stimulate new initiatives.
Blumberg (2005).Better value of products could be captured,i.e products that
have failed in primary markets could be sold in secondary markets to help
recover the costs. Through integration of forward and backward logistics;
Closed loop supply chain management companies are able to cut on
transportation cost
SOCIAL PERFORMANCE
Social impact of a company can be measured by the employee and customer
satisfaction (Markley and Dans,2007 pg 764) and also labour practices,
community impacts, human rights and product responsibility(Suits and
Webber 2006,pg 13).In essence a sustainable enterprise will make decisions
with regard to the community and their workers with the intention of
contributing towards the growth of the society. Social accounting aims to
access the impact of an organization on people both internally and externally.
In their study, Helms & Hervani (2010) concluded RL can benefit health and
safety when it is combined with process modifications and material
substitutions that generate environmental improvements. For example, the
development of returns process in reverse logistics can be supported through
the use of reusable containers. Reusable containers offer significant safety
advantages, such as elimination of box cutting, staples and broken pallets,
reduces injuries: standardized sizes and weights of packaging components
reduce back injuries. Sarkis and Persely (2007) asserts Motorola had a 58%
reduction in pallet-related injuries due to use of reusable container
Connet (2006) added that a practical example of the role of community
advantages from reverse logistics occurs in various communities throughout
the world that have implemented zero-waste programs. These programs require
recycling and RL networks to keep materials within the consumer cycle.
Similarly RL activities can greatly benefit charities with used products sales.
Shah and Sarkis (2003).
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ENVIRONMENTAL PERFORMANCE
Environmental indicators are based on waste management reduction,
elimination of influences on biodiversity and emissions impact minimization.
Dixon et al.(2005).Every human enterprise generates environmental impact to
a greater or lesser extent in its implementation and in its operation. Among the
environmental impacts,some are:
Urbanistics projects
Landfills, processing and disposal of toxic residues
Transmission lines for electricity
Roads, railways, ports, airports etc
A sustainable supply Chain meets the needs of the present without
compromising the ability of future generations to meet their own needs
Brundtland (2011).Sustainable development is about ensuring a better quality
of life for everyone, now and for generations to come.
Sustainable supply chain management refers to all forward process in the
chain, like procurement of materials, production and distribution, as well as
the reverse process to collect and process returned used or unused products
and/or parts of products in order to ensure a socio-economically and
ecologically sustainable recovery. The World Business Council for Sustainable
Development (2000).
RL eases pressure on the harvest of raw materials and reduces the related
environmental degradation associated with raw materials extraction and
processing. In addition, the lack of landfilling availability and the rising landfill
tipping fees and trash collection fees to households, may initiate a movement
by consumers away from products that cannot be recycled, further aiding
community economic and environmental development.()
RL is necessary for the completion of the industrial eco-cycle, product
stewardship, and the extension of products’ and materials’ life, or “closing-the-
loop”. RL from the environment perspective supports environmentally sound
practices such as recycling, remanufacturing and reclamation. The basic
principle is that lengthening of a product’s or material’s life typically has
environmental benefits.(Murphy and Poist 2010,Richey et al. 2005)
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COMPETITIVE ADVANTAGE The constant changes in consumer behavior and the arrival of new competitors
constitute a major threat to organizations. The global competition forces
companies to develop strategies to maintain their competitive
advantages.(Porter,2012).For companies to remain competitive it is necessary
to embrace tools and activities that distinguish them from their competitors.
Reverse logistics could be one of such cases.
According to Souza(2009),reverse logistics has a strategic importance for the
competitive cost saving in organizations. Properly and thoroughly executed
reverse logistics programs can significantly improve a firms bottom-line
performance. Jayaraman and Luo (2007).Companies that treat reverse logistics
as an important strategic agenda and have well developed reverse logistics
systems in play, may gain tangible and intangible competitive advantages.
Jayaraman and Lou (2007).
TANGIBLE COMPETITIVE ADVATAGES
Indeed, for many firms, the recovery of value from used products provides a
good return on investment. For example, producing greener products could
lower future liabilities, insurance rates, and customer disposal costs. By
offering “green” products, companies can attract and retain environmentally
conscious customers and employees. Proactive companies could influence the
formation of new legislation and avoid taking costly last-minute actions.
Jayaraman and Lou (2007).
INTANGIBLE COMPETITIVE ADVATAGES
Intangible benefits include the growing perception of physical products as part
of physical products as part of a service package that would enhance the
pleasure and comfort of using the products. Philanthropy and goodwill returns
can significantly improve a corporate image and increase and increase market
share.
Capital accessibility, when considering investments in a company, investors
increasingly are focused on its accomplishments regarding to the society and
environment. Thus an increasingly number of investment funds are managed
according to the principles of socially responsible investments. Agnes Boljevic
(2010),so socio-environmental friendly companies place themselves at a great
competitive advantage in as far as capital accessibility goes
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REFERENCES
Jayaraman, V., & Luo, Y. (2007). Creating competitive advantages through new
value creation: a reverse logistics perspective. The Academy of Management
Perspectives, 21(2), 56-73.
McGonagle, J. J., & Vella, C. M. (2002). Bottom line competitive intelligence.
Greenwood Publishing Group.
Meade, L., Sarkis, J., & Presley, A. (2007). The theory and practice of reverse
logistics. International Journal of Logistics Systems and Management, 3(1), 56-
84.
Sarkis, J., Helms, M. M., & Hervani, A. A. (2010). Reverse logistics and social
sustainability. Corporate Social Responsibility and Environmental
Management,17(6), 337-354.
Kumar, S., & Putnam, V. (2008). Cradle to cradle: Reverse logistics strategies
and opportunities across three industry sectors. International Journal of
Production Economics, 115(2), 305-315.
Carbone, V., & Moatti, V. (2008). Greening the supply chain: preliminary
results of a global survey. In Supply Chain Forum: An International Journal (Vol.
9, No. 2, pp. 66-76). KEDGE Business School.
Blumberg, D. (2005). Introduction to management of reverse logistics and closed
loop supply chain processes. Boca Raton: CRC Press.
Talbot, S., Lefebvre, É., & Lefebvre, L. A. (2007). Closed-loop supply chain
activities and derived benefits in manufacturing SMEs. Journal of
Manufacturing Technology Management, 18(6), 627-658.
De Brito, M. P., Dekker, R., & Flapper, S. D. P. (2005). Reverse logistics: a
review of case studies (pp. 243-281). Springer Berlin Heidelberg.
Nikolaou, I. E., Evangelinos, K. I., & Allan, S. (2013). A reverse logistics social
responsibility evaluation framework based on the triple bottom line
approach.Journal of Cleaner Production, 56, 173-184.
Henriques, A. (2004). The triple bottom line, does it all add up?: Assessing the
sustainability of business and CSR. London: Earthscan.
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