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Omega 30 (2002) 325333

www.elsevier.com/locate/dsw

A model for reverse logistics entry by third-party providers

Dennis W. Krumwiedea ;, Chwen Sheub

a College of Business, Idaho State University, Pocatello, ID 83209-8020, USAbCollege of Business, Department of Management, Calvin Hall Room 101, Kansas State University, Manhattan, KS 66506, USA

Received 20 June 2001; accepted 31 August 2002

Abstract

Reverse logistics has become an important entity in the US economy. Nonetheless, many companies are not capable of orare unwilling to enter the reverse logistics market. Such reluctance appears to be attributed to lack of knowledge of reverse

logistics. This paper reviews current industry practices in reverse logistics. Specically, we examine the issues and processes

that an organization has to address to engage in the reverse logistics business. A reverse logistics decision-making model is

developed to guide the process of examining the feasibility of implementing reverse logistics in third-party providers such as

transportation companies. The purpose of this model is to help those companies who would like to pursue reverse logistics as a

new market. A eld study was conducted with a larger US transportation company to validate the proposed model.

? 2002 Elsevier Science Ltd. All rights reserved.

Keywords: Supply chain management; Logistics; Reverse logistics; Disposition; Retrieval; Transportation

1. Introduction

The goal of manufacturing companies is to ship goods

through their plants to their customers. This movement of

goods most often means a prot to all involved. These same

companies, however, do not want products to be returned for

any reason. They do not plan for the backward movement or

return of goods, known as reverse logistics, as these returns

represent a substantial cost rather than a prot. Some CEOs

even perceive returned goods as a failure of their system

[1,2]. Sometimes reverse logistics is regarded as a recyclingprocess involving aluminum cans, papers, plastic and glass.

Reverse logistics is actually very involved and can be

extremely complex. Many companies with limited re-

sources outsource their reverse logistics operation needs to

third-party providers [3]. As an example, many companies

use NetReturn, an Internet system that Federal Express has

developed for reverse logistics management. NetReturn faci-

litates returns for merchants once a customer has requested

Corresponding author. Fax: +1-208-282-3506.

E-mail addresses: [email protected] (D.W. Krumwiede),

[email protected] (C. Sheu).

a return and been provided authorization to return a prod-

uct. These third-party companies such as FedEx, ASTRA

and GENCO, not only aid the return process of goods by

scheduling the pickup and transportation, they also collect

customer information and track the status of returned items.

Over the last decade, reverse logistics has had a signi-

cant economic impact on industry as well as society. This

impact can be seen either as detrimental to a company, and

thus avoided, or as a competitive advantage with potential

for capturing market share. Companies that receive items

back from the customer who try to hide from the signicanceof reverse logistics miss prot-making opportunities [4,5].

On the other hand, companies that use reverse logistics as

an opportunity for enhanced business will prosper by main-

taining customer support, the ultimate issue for protability.

While recognizing the importance of reverse logistics,

companies and especially e-businesses are increasingly

outsourcing their reverse logistics eorts to third-party

providers [3]. Even some major discount stores such as

K-Mart are choosing to outsource their reverse logistics op-

erations to third-party providers like GENCO Distribution

System [6]. Gooley [7] has developed a process for compa-

nies considering the creation of their own reverse logistics

0305-0483/02/$ - see front matter? 2002 Elsevier Science Ltd. All rights reserved.

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326 D.W. Krumwiede, C. Sheu / Omega 30 (2002) 325 333

operations. What has not been dened in the literature,

however, is a process or model for third-party providers

who wish to enter the reverse logistics market. Third-party

providers are recognizing the opportunities associated

with reverse logistics, but do not understand the processes

necessary to embark upon this business in a logical man-

ner. The intent of this paper is to provide a set of steps ora decision-making model for potential implementation of

reverse logistics by these third-party providers.

The process of model development is multi-faceted. We

begin by dening logistics and reverse logistics and dis-

cussing the signicance of reverse logistics in supply chain

management. Next we conduct a comprehensive review of

current industry practices in reverse logistics. Finally, we

present and discuss the reverse logistics decision-making

model followed by a eld study to validate the model.

2. Reverse logistics: denition and signicance

Logistics involves the movement of physical goods from

one location to another and third-party transportation com-

panies (such as JB. Hunt) provide a substantial portion of

this service. Some of the earliest documentation of the use of

logistics can be traced to the military. Simpson and Weiner

[8] referenced an article written in 1898 describing logis-

tics as a strategy for handling troops during war, including

the moving and quartering of troops. The military has since

dened logistics as encompassing all activities and meth-

ods connected with supplying the military, including storage

requirements, transport and distribution [9].

Several business groups have recently dened logisticsfor the private sector. American Production and Inventory

Control Society (APICS) denes logistics: In an indus-

trial context, the art and science of obtaining, producing,

and distributing material and product in the proper place

and in proper quantities [10]. The Council of Logistics

Management (CLM) denes logistics as The process of

planning, implementing, and controlling the ecient, cost

eective ow of raw materials, in-process inventory, n-

ished goods and related information from the point of origin

to the point of consumption for the purpose of conforming to

customer requirements [11]. All of these denitions involve

the movement of goods from one point to another. The busi-ness of goods movement or logistics has created the need for

substantial infrastructures such as railroads, highways, river

ports, seaports and airports. Cities and towns have emerged

and grown along active logistics routes, demonstrating the

importance and power of logistics.

Reverse logistics can be dened as the reverse process of

logistics [9]. Traditionally, reverse logistics has been viewed

primarily as the process of recycling products. Today, def-

initions vary depending on what company or segment of

industry is attempting to dene it. Retailers see reverse

logistics as a way to get product that has been returned by

a consumer back to the vendor [12]. Manufacturers tend to

view reverse logistics as the process of receiving defective

products or reusable containers back from the user. CLM

denes reverse logistics as The process of planning, im-

plementing, and controlling the ecient, cost eective ow

of raw materials, in-process inventory, nished goods and

related information from the point of consumption to the

point of origin for the purpose of recapturing value or properdisposal [13].

Fig. 1 illustrates the concept of forward and reverse logis-

tics within the supply chain system. Reverse logistics gen-

erally involves events necessary to retrieve, transport and

dispose of goods. These goods are moved backward from

the consumer and the process includes the information ows

associated with tracking and credit processes.

A complete supply chain system includes both forward

logistics and reverse logistics as shown in Fig. 1. Manage-

ment traditionally concentrated on improving forward logis-

tics operations to enhance a rms competitiveness. Forward

logistics operations subsequently increase reverse logisticsactivities and thus its importance to an organizations suc-

cess. US companies are spending in excess of $35 billion

per year on handling, transportation, and processing of re-

turned goods [2]. These estimated costs do not include the

management of these processes as well as the transformation

process of converting unusable goods into usable goods. On

average reverse logistics activities make up approximately

4% of total logistics costs to a company [15]. Companies

who purchase reverse logistics assistance from third-party

providers could reduce up to 10% of their companys annual

logistics costs [15]. High-tech companies have reduced in-

ventories along with improving eld engineer productivity

by as much as 40% through appropriate handling of reverselogistics [15]. Reverse logistics is obviously emerging as

very important entity in the supply chain.

Internet is credited for increasing the demand of reverse

logistics services due to returns generated by the marketing

strategies of Internet connected companies. Amazon.com

has a marketing strategy that includes a liberal return pol-

icy, which allows its customers to return items for numer-

ous reasons. Reverse logistics can be particularly crucial for

e-commerce as the rate of returns from on-line purchases

can be as much as 50% of goods shipped through normal

logistics channels [16]. A major contributor to the growing

need for ecient reverse logistics processes can be traced toliberal return policies of many retailers such as Wal-Mart,

K-Mart, ShopKo, Fred Myers, etc. These companies have

varied, but liberal, return policies giving customers some

control of the product they purchase by allowing them to

return items for a variety of reasons. Customers rightfully,

and sometimes wrongfully, take advantage of this opportu-

nity. The need for management of returned goods invento-

ries has dramatically increased as customers take advantage

of the various return policies.

Because of this growth in reverse logistics, many com-

panies like Xerox, Home Depot, Mobil and Eastman Ko-

dak have tailored reverse logistics to their industry in an

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D.W. Krumwiede, C. Sheu / Omega 30 (2002) 325 333 327

Legend

* Company owned or third-party providers perform transportation needs.

Suppliers

Supplier

Supplier

Manufacturer

Wholesaler/

Distributor

Retailer

Consumer

Logistics(Transportation)*

Reverse Logistics

(Transportation)*

Information Flow

Supply Chain Nodes

Fig. 1. Consumer supply chain. Source: Lummus et al. [14].

attempt to control the costs associated with it [7]. These

companies have discovered that cost reductions in inventory

carrying costs, transportation, and waste disposal can be sub-

stantial with an ecient reverse logistics program. The same

companies have also recognized the importance of public

image and how reverse logistic policies aect that image.The public generally views companies who eciently and

eectively handle reverse logistics of hazardous materials

as good citizens.

At the same time that the importance of reverse logistics

is increasing, Meyer [2] and Rosen [17] indicate that the pro-

cess of reverse logistics is also becoming increasingly com-

plicated. Many companies are unable to handle the complex

networking necessary to have an ecient reverse logistics

process. These companies are therefore outsourcing all or

part of the reverse logistics process to third-party providers.

Outsourcing has provided many third-party providers with

a unique opportunity to enter the reverse logistics market,

since they have many of the necessary resources to facili-tate reverse logistics. However, the president of manufactur-

ing at GENCO Distribution System, a third-party provider

of reverse logistics, says : : : We often have to convince

companies they have a problem before we can tell them we

have a solution. [2]. Frequently in many organizations, em-

ployees do not know who is in charge of the reverse logis-

tics process. One upper level manager within the third-party

provider industry commented:

Many companies dont even come close to under-

standing how their existing returns process aects

repeat business with their customers. The service as-

pect of the returns process can ultimately determine

the loyalty of customers for additional business and

referrals based on the handling of existing return goods

accounts. Companies must rst accept that returns are

a problem for the customer and that it will impactfuture sales.

In summary, there seems to be a lack of understanding

of reverse logistics in industry, which certainly could re-

duce the eectiveness of supply chain management. The next

section reviews the current practices of reverse logistics,

prior to developing the reverse logistics decision-making

model.

3. Current industry practices for reverse logistics

A comprehensive review of reverse logistics practices was

conducted through literature review, WEB searches and sur-

vey methodologies. The purpose was to determine the needs

of third-party logistics company customers in reverse logis-

tics as well as current strategies of their competitors and the

needs of the competitors customers. In general, the practice

of reverse logistics involves three distinct stages: retrieval,

transportation, and disposition. Table 1 is a list of terms

generally used in all stages. Each stage has a set of people

or organizations involved with the reverse logistics process,

each having their own special interests [7]. Each stage will

be discussed in detail.

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Table 1

Reverse logistics terms with denitions

Term Denition

Product recalls Goods the manufacturer has recalled and must be picked up for return.

Inventory returns Goods returned to reduce inventory at an outlet other than the manufacturer.

Warranty returns Goods a store/distributor/wholesaler knows are in need of warranty return.Core returns Reusable goods, those items that can be remanufactured.

Reusable containers Shipping containers that product was shipped in and must be returned to the manufacturer.

Damaged goods Goods damaged in shipment or damaged on site.

Seasonal items Items returned due to the end of a season, which causes the item to have no retail value in the next season (s).

Hazardous materials Items considered hazardous and yet must be returned. Also known as HAZMAT.

Stock adjustments Goods transported to correct a situation where there is an abundance of items at one location and lacking in

another location.

3.1. Stage 1Retrieval

Retrieval can best be described as the process of col-

lecting and removing goods from a customer. This stage

is aected by the type of product picked up and who does

the retrieval from the customer. There are several dier-

ent operations of the retrieval process. These operations

include:

(a) Store level returns retrievalsStore level returns

are those returns that are retrieved from any type of

store/outlet. This type of return is made up of prod-

uct recalls, inventory returns, warranty returns, core

returns, reusable containers, damaged goods, seasonal

items, hazardous materials (HAZMAT) and stock

adjustments.(b) Consumer returns retrievalsConsumer returns are

collected from the ultimate consumer. These returns

include product recalls, warranty returns and damaged

goods.

(c) Collection center retrievalsThese retrievals involve

product recalls, warranty returns, inventory returns,

core returns, reusable container returns, damaged

goods, seasonal items and hazardous materials.

3.2. Stage 2Transportation

The transportation stage of the reverse logistics process

is considered to be the actual movement of goods from

one location back to another location. The transportation

stage is extensively involved in all aspects of reverse lo-

gistics, since manufacturers are often unwilling to be the

nal destination of their returned goods. Instead, they

prefer to have an outside source or third-party logistics

company dispose of these goods. As a result, transporta-

tion companies are often left holding the goods waiting for

disposition information. These companies are recognizing

the protable situation of handling otherwise unwanted

returned goods.

3.3. Stage 3Disposition

The disposition process involves decisions and actions

associated with the fate of a product once a customer

demonstrates product dissatisfaction. There are two types

of disposition, on-site and o-site. On-site disposition in-

volves activities that take place at the customers facility

to handle issues related to product concerns. The product

may be repaired or replaced on-site. O-site disposition

involves shipping the defective product to a dierent

facility for repair, replacement, or disposal. A basic ow

of the disposition process can be seen in Fig. 2. This g-

ure illustrates the forward movement of goods, or forward

logistics, in the supply chain by the use of narrow arrows.

Bold arrows illustrate possible reverse logistics ow at all

nodes in a products forward logistics path. At every node,there is potential need for on-site or o-site disposition. The

forward movement of goods represents the normal ow of

material from raw material to nished goods to the ultimate

consumer. Corporate-owned transportation systems, such

as Wal-Mart, or third-party logistics companies, such as

Consolidated Freight Inc., perform this process. The reverse

logistics ow is more complicated as the product being

dispositioned can be handled in many dierent ways. As

Fig. 2 illustrates, the returned product can be serviced at the

customers facility (on-site disposition) or sent o-site for

further considerations. The product would be shipped once

again using either corporate-owned transportation systemsor third-party providers to o-site facilities (o-site dispo-

sition). The o-site disposition can include product repair,

replacement, disassembly, liquidation sales, or even landll

disposal.

Companies such as Wal-Mart use dedicated redis-

tribution or processing centers for their o-site pro-

cessing eorts. A processing center can be responsible

for many aspects of the reverse logistics eort which

include:

(a) RepairsGoods that have been returned and are in

need of repair at a processing center.

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Processing

Center

Liquidation

Outlets(Secondary

Market)(Brick and / or

Click)

Raw

Reverse Logistics Forward Logistics

Materials

Manufacturer

Distributor/

Wholesaler

Retailer

Consumer

Supplier

On Site

Disposition

Off Site

Disposition

Disposal

Landfill

Fig. 2. On-site and o-site disposition processes.

(b) Replacement part return to customerItems that have

been collected from the end user upon delivering the

replacement part to the consumer.

(c) InspectionReturned goods shipped to a processing

center that require inspection, which may include

visual, mechanical or electrical testing.

(d) SalvageGoods that are either physically destroyed,

disposed of (such as delivered to a landll), or disman-

tled.

(e) ReworksGoods that need to be modied such as up-

grades (putting a new module in a system per upgrade

instructions), refurbishments and repackaging.

In practice, the o-site disposition stage can also involveliquidation centers and secondary market outlets. Liquida-

tion outlets resell returned goods either through a WEB site

(click) consignment process or a brick and mortar (brick)

consignment process. Returned goods processed in this man-

ner are auctioned o to the highest bidder. This liquidation

process is usually called the secondary market and is broken

down into its own primary and secondary markets. Based

on industry practice this primary market consists of major

discount retail brick chains such as K-Mart, and the sec-

ondary market consists of second level discount stores such

as Dollar General as well as Mom & Pop operations. In re-

lation to click operations, online auctions like Ubid.com

and Ebay.com sell everything from computers to cameras to

household products and appliances on the WEB. Ebay even

goes further with the sales of automobiles, car parts, furni-

ture, and other such diverse items. Some of these items are

refurbished returns, others are overstocks and out of date

products. Many of which are returned to a central point or

consolidation points for resale.

With the knowledge of current industry practices, we

developed a model that would serve as a guideline for

implementing reverse logistics. The model is discussed in

detail in the following section.

4. Reverse logistics decision-making model

We developed a reverse logistics decision-making model

for strategic reverse logistics decision-making (Fig. 3). The

model was based on literature review and interviews with

ve logistics managers at prominent third-party logistics

companies headquartered in the United States. The inter-

views were informal with conversation directed around their

perceptions of issues that would aect their desire to enter

the reverse logistics market. A common pattern emerged

that lead to the model. The purpose of this model is to help

third-party logistics companies desiring to pursue reverse lo-

gistics as a potential new market. The model depicts several

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(1a) Research existing

reverse logistics issues

(2) Survey existingrepeat customer needs

(Existing and potential)

(4) Conduct gap analysis

(5) Perform feasibility

study

(1b) Identify reverse

logistics customers

(Existing and potential)

(3a) Survey

competitors reverse

logistics practices

(3b) Survey

competitors customer

needs

(6) Develop positioning

strategy

Fig. 3. Reverse logistics strategic decision-making model.

key steps necessary for a company to take in determining its

current and future potential in the reverse logistics market.

The steps of this process of evaluation are discussed below.

(1) Research existing reverse logistics issues and identify

customers. A third-party logistics company that is consider-

ing entering the reverse logistics market must rst research

current issues pertaining to reverse logistics. The company

should conduct market research involving literature review

of current academic ndings in reverse logistics in conjunc-

tion with WEB-based research. The knowledge gained will

provide the company with current best practices allowingfor educated decisions to be made in their reverse logistics

endeavor. This step is especially important as the reverse

logistics market is expanding and changing so rapidly that

even a month of lapsed time can make a substantial dier-

ence in the needs of the reverse logistics customer base.

In parallel to literature review, the third-party logistics

company should identify and study existing customers who

have had the company return goods for them. If for some

reason their existing customer base has not utilized the

third-party logistics company for reverse logistics eorts,

these potential customer needs should be investigated. If the

company currently has reverse logistics customers, it should

investigate frequency of use and protability from each cus-

tomer. All knowledge gained in this stage is used later to

develop the survey for collecting more information from

potential customers.

(2) Survey existing repeat customer needs. Once poten-

tial customers are identied, the third-party logistics com-

pany should survey their existing and potential needs forreverse logistics service. Table 2 provides a sample set of

questions for this survey. The sample survey mentioned in

this paper is to be conducted via telephone interview with

appropriate logistics personnel on both ends.

With the understanding of current reverse logistics is-

sues, this survey would obtain information related to exist-

ing or potential reverse logistics needs that their customers

may have. This information is invaluable when determining

the companys current position regarding reverse logistics

and establishing direction for the future of the companys

reverse logistics involvement. The company can also use

this information to design a survey for understanding com-petitors and their customers in the reverse logistics business,

discussed in Step (3). Refer to Table 2 for survey questions

asked of competitors and competitors customers.

(3) Survey competitors and competitors customers.

Viable competitors of the third-party logistics company

should be identied to assess their capabilities in reverse

logistics capabilities. WEB usage and other research prove

to be very eective in this step. A survey developed to

understand competitors should be conducted to further

understand the strength of competitors. Another source

of information that must be studied is the competitors

customers. The same process that is used to understand

competitors is applied. A customer survey derived fromknowledge gained in Step 1 can assess the needs of the

competitors customers and their perception of the service.

Table 2 provides a list of sample survey questions for this

survey.

(4) Conduct gap analysis. Based on the needs of exist-

ing customers and competitors customers, the third-party

logistics company can then perform a gap analysis. The gap

analysis evaluates and compares the company and its com-

petitors current reverse logistics position in the market with

the needs of current and future customers. The analysis will

provide the company with necessary information to make

decisions on its strategic positioning in the reverse logisticsmarket.

(5) Perform feasibility study. In this stage the third-party

logistics company should utilize all information gained from

previous eorts to conduct a feasibility study, which in-

volves analysis of its current nancial position and the feasi-

bility of entering the reverse logistics market. The company

should compute the costs of obtaining the necessary addi-

tional resources to provide the extended service identied

through the gap analysis. The company must also revisit its

existing customers to determine if reverse logistics would

benet these customers using existing resources. These ben-

ets could be realized through a more planned and eective

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Table 2

Sample survey questions for a third-party logistics analysis

Topic Sample question Type of survey

Customer Competitor Competitors

customer

Product

recall

Are you using our company for third-party logistics service for product

recall?

X

Do you provide third-party logistics service for product recall? X

Do you receive third-party logistics services from a vendor for product

recall?

X

Reusable

containers

Are you using our company for third-party logistics service for reusable

containers?

X

Do you provide third-party logistics service for reusable containers? X

Do you receive third-party logistics services from a vendor for reusable

containers?

X

On-site

disposition

Are you using our company for third-party logistics service for on-site

disposition?

X

Do you provide third-party logistics service for on-site disposition? X

Do you receive third-party logistics services from a vendor for on-site

disposition?

X

Reworks Are you using our company for third-party logistics service for on-site

disposition?

X

Do you provide third-party logistics service for on-site disposition? X

Do you receive third-party logistics services from a vendor for on-site

disposition?

X

Liquidation Are you using our company for third-party logistics service for liquidation? X

Do you provide third-party logistics service for liquidation? X

Do you receive third-party logistics services from a vendor for liquidation? X

return operation gained from a fuller implementation of

reverse logistics.

To fully implement a reverse logistics operation, legacy

systems within the company have to be scrutinized. A deci-

sion to enter the reverse logistics market would probably re-

sult either in a substantial programming eort within legacy

systems or the desire to purchase a canned system from

a reputable vendor. Such a decision would be costly, since

it would require pilot runs to ensure the system is function-

ally capable of meeting the needs of the reverse logisticsoperation.

(6) Develop a positioning strategy. All of the previous

steps of the model were developed to aid in making the

third-party logistics companys nal decision, What will

their position in the reverse logistics market consist of? If

the feasibility study indicated the company could enter the

reverse logistics market with reasonable expectation of mak-

ing a prot and if the resources are available, the company

should decide to proceed. With this information, manage-

ment could then strategically position reverse logistics in

the companys long-term plans. For instance, the company

may decide that it will oer a full reverse logistics service.

This decision would probably involve the construction of

redistribution centers strategically located in its customer

network, the purchase of an extensive software management

system, training of personnel, rescheduling of transportation

resources and other pertinent reverse logistics issues.

5. Field study

We performed a eld study with a larger US third-partytransportation rm to validate this decision-making model.

The transportation company chosen was very interested

in entering the reverse logistics market. The companys

primary service was the movement of goods between facil-

ities for other companies in the United States. Similar to

many such companies in the US, this transportation rm pro-

vided a limited level of reverse logistics services for its cus-

tomers. The company recognized opportunities associated

with more aggressively entering the reverse logistics market

as a competitive advantage and chose to perform a feasibil-

ity study. This study was performed following the reverse

logistics decision-making model. Based on this model, the

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transportation company researched current reverse logistics

issues. The company then identied their existing reverse

logistics customers. Over 50 existing customers were then

contacted by telephone. Thirty-six customers were willing

to respond to survey questions over the telephone. Table 2

depicts sample questions that were asked of these cus-

tomers. Next, 15 leading potential competitors were iden-tied to determine their reverse logistics services. Seven

companies were willing to respond to survey questions

such as those in Table 2. The competitors customers were

found by searching the web sites of the competitors. Over

35 customers were contacted using the telephone with 15

responding, see Table 2 once again for sample questions.

The surveys provided the transportation company with in-

formation that helped determine a gap in their service com-

pared to their competitors service. This gap was based on

the needs of the competitors customers as well as the trans-

portation companys customers needs.

The company conducted a feasibility study based on thegap analysis. This analysis revealed the need for processing

centers, which were not in existence. The feasibility study

indicated that such an expense could not be justied based

on the companys existing customer base. If they chose to

become involved in all reverse logistics stages, they would

have to signicantly expand their customer base and move

into market segments that would require substantial invest-

ment. The company considered their situation and decided

that their best strategic position was to stay in their current

position while attempting to develop a richer reverse logis-

tics customer base.

6. Conclusions

Reverse logistics has become an important segment in the

US economy. Increasingly, customers are demanding reso-

lution for products that are considered to be defective. They

are returning items more frequently as companies are driven

to loosen return policies due to competition. Many of these

companies having items returned to them will not be able

to aord the resources necessary to eectively handle the

processes required for appropriately handling increasing vol-

umes of returned goods. The need for third-party compa-

nies providing partial or full reverse logistics services forcompanies receiving returned goods will increase as policies

aecting returned products continues to favor the customer.

Unfortunately, many third-party companies desiring to en-

ter the reverse logistics service market are not prepared to

eectively address these service needs due to the lack of

knowledge of reverse logistics [1]. They are either not capa-

ble or unsure of the process of entering the reverse logistics

market. All of these third-party companies would benet

from a framework for decision making to determine if entry

into this market is feasible for them.

In this study we investigated and summarized the cur-

rent status of reverse logistics. We then developed a reverse

logistics decision-making model. We also conducted a eld

study using the reverse logistics decision-making model to

evaluate its use by a third-party logistics company consid-

ering expanding its reverse logistics business. The model

helped the third-party logistics company in making the de-

cision to more aggressively enter the reverse logistics busi-

ness or to decline. The model provided structure to thedecision and gave the company the guidance needed for such

a decision.

Based on the results of the eld study conducted, the

model proposed will guide third-party providers through

the process of deciding if they should enter the logistics

market. If they decide to enter, they should gain enough

pertinent information to provide a sound basis for decisions

related to the depth of their involvement. Those companies

who decide not to enter after following the model should

also have gained enough information to help them decide

to take a do nothing stance. Naturally, these third-party

logistics companies should continue to evaluate the market,their customers, and the competitors and their customers

to determine if their status has changed. Future research

should be performed to further validate the reverse logis-

tics decision-making model. A eld study using the model

provided invaluable information for the company involved.

However, additional eld studies would provide further

evidence of the models value.

References

[1] Dowlatshahi S. Developing a theory of reverse logistics.

Interfaces 2000;30(3):14355.

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