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An Exploratory Study

on Electronic Commerce
for Reverse Logistics
A. I. Kokkinaki, R. Dekker E-commerce for reverse logistics is an area of web applications that has
Econometric Institute, been active and progressing aggressively, especially in the US, though it
Erasmus University Rotterdam, The
Netherlands has not been explicitly recognised until now. It has given reverse logistics
in general and especially remanufacturing of parts and re-use of surplus
J. van Nunen
goods an important stimulus. However, existing E-commerce models are
Rotterdam School of Management,
Erasmus University Rotterdam, rather restricted and represent simply the migration of conventionally
The Netherlands
practices over the Web.
C. Pappis
University of Piraeus, Greece
Over the last few decades accelera- of the reverse logistics context,
ting environmental concern which, E-commerce is examined in terms,
in some countries, has already trading of used products and parts,
resulted in legislation, and financial including marketing, purchasing,
interests in the re-use of products, sales and post sales. Also, we
parts or materials, have all examine systems that can facilitate
contributed to reverse logistics data collection for used products at
recent popularity. In a broad sense, the collection stage and IT applica-
reverse logistics stands for all tions to support remanufacturing
operations related to the re-use of and re-distribution activities. It is
products and materials. Reverse worth mentioning that although by
logistic activities include collec- definition E-commerce is inclusive
tion, disassembly and processing of for all electronic networks, the
used products, product parts, focus of our study will be on
and/or materials, in order to ensure Internet-based E-commerce for two
a new use or an environmentally main reasons. First, the penetration
friendly recover y. From a scientific of Internet-based E-commerce
point of view, reverse logistics increases drastically, while a
bringsnew elements in collec- significant portion of EDI users
tion/distributionmanagement, intends to switch over to Internet-
production planning/remanufactu- based applications [EITO99]. In
ring, and inventory control. addition, many of the actors
Besides, there are interesting involved in reverse logistics
relations with business economics, activities may not be able to have
environmental management and access to an EDI infrastructure.
information technology.
Within this context, there are very
In this paper, we focus our few references of E-commerce for
attention on the relation between reverse logistics activities, except
reverse logistics activities and [Lee 1997] who presents a specific
Acknowledgements information technology with the application for the electronic auc-
objective to examine and evaluate tioning of used Japanese cars.
The research presented in this paper
has been supported by the European existing applications of E-commerce Moreover, many researchers exami-
Commission as part of the TMR in this field. At large, E-commerce ned various aspects of electronic
network REVLOG (EBR 4061 PL 97- is defined as sharing business marketplaces [Bakos 1997, Beam
650). This network investigates information, maintaining business 1999, Bichler 1999, Dutta 1998,
Reverse Logistics issues and is a relationships, operating business Gebauer 1995, Klein 1997] in
co-operation of researchers from negotiations, settling and executing which used products are sold along
Erasmus University Rotterdam (NL),
agreements by means of telecom- with new ones, without explicitly
Eindoven University of Technology
(NL), INSEAD (F), University of munication networks, often the considering the reverse logistics
Piraeus (GR), University of Internet, in order to achieve perspective. Thus, it is interesting
Magdeburg (D) and Aristoteles business transactions [adapted to identify what kind of electronic
University of Thessaloniki (GR). from EITO99 and Zwass96]. In light markets are related to reverse

Supply Chain Forum An International Journal N°1 - 2000 10 www.supplychain-forum.com


logistic activities and how one can In Section 3, we examine three main In Figure 1, the main concept is that
assess their risks and benefits. We E-commerce models that facilitate products are brought to the market
are also interested to examine the business transactions for reverse through some conventional supply
relationship between E-commerce logistics, we assess them and give a chain. The majority of products is
and the economic aspects of number of illustrative examples. An used in their original functionality:
markets. For example, E-commerce overall view, some directions for i.e. a company buys a state of the
potentials have been very carefully future research and development, art computer for their virtual
examined with respect to certain as well as some speculations about reality project. After a while, the
markets, which traditionally have future deployment of E-commerce product is not useful to the original
not been functioning in a very effi- with respect to reverse logistics are user. In our example, the industry
cient way through the traditional summarized in Section 4. standards have evolved and that
distribution channels [Wrigley computer can no longer support
1997, Klein 1997]. Could, in fact, REVERSE LOGISTICS ACTIVITIES them. Frequently, the product is
E-commerce create a homoge- AND SUPPORTING IT SYSTEMS traded in a marked down price
neous, electronic market for used once or several times. In our figure,
products and parts open to all The main objective of this section this is denoted by the loop between
interested parties? And if so, what is to describe what the main original use and trade. It is worth
would be the critical factors for reverse logistics activities are and to point out that through the
the successful implementation of how Information Technology repetitive changes of ownership,
such an electronic marketplace? In supports and facilitates these the product is still used in
view of such developments and activities. The description is mainly its original functionality. In our
potentials, it is also interesting taken from several overviews on example, the computer might be
to examine how existing Web reverse logistics [Stock 1998, bought for personal use or for
applications and other IT technolo- Fleischmann 1997, 1999 and entertainment, before it actually
gy can promote other reverse Thierry 1997]. reaches the end-of-use return flow.
logistics activities and identify The main idea for reverse logistics
what (if any) E-commerce promi- Description of Reverse is to promote and support alterna-
sing, yet under-deployed potential tive uses for the product. In our
exists. For example, could Web
Logistics and open issues
example, the computer’s keyboard
applications be used to decrease could be directly re-used, its
Figure 1 presents a graphical repre-
some of the uncertainty encounte- motherboard may be remanufactu-
sentation of the activities within a
red in reverse logistic activities red in an electronic toy, whereas
product recovery chain together
in some cases? Are there some other other parts (casing) could be
with traditional supply chain activi-
developments towards this direc- recycled.
ties. The recurrent reverse logistics
tion and how do they compare?
activities include collection, inspec-
tion/separation, re-use, remanufac-
In our study a series of relevant
turing, recycling, re-distribution
sites have been selected and
and disposal.
examined based on specific criteria
Figure 1 - Product Flow in Supply
with the aim to identify how they
and Recovery Chain
function and how efficient they are.
Original Supply Chain
Based on this, an evaluation of the Supply Production wastelby-products
examined case studies is carried
out and some directions for future Manufacturing

research and development have Commercial returns


Distribution
emerged. These are the main
directions of this paper, which is End-of-use
structured as follows. In Section 2, returns
Other Original
we review reverse logistics Use Use
activities and their relation to
Trade
Information Technology. First, we
identify important aspects that End-of-use returns
have not yet been addressed Collection
adequately from the Information Reuse
Technology point of view. Then, we Redistribution
proceed to examine how Internet
technologies can support some Remanufacturing Selection
aspects of reverse logistics,
focusing on those, which although
not directly related to a business Recycling

transaction, are still very important Disposal


for an efficient operation of Reverse Logistics
a reverse logistics network.

Supply Chain Forum An International Journal N°1 - 2000 11 www.supplychain-forum.com


Inany event, with new or old func- used products need to be collected, third party is involved at this stage,
tionality the product (or parts of it) their quantity and timing. in-depth information about a
enters the market again where These pose severe difficulties in product can be easily gathered. In
it may also go through several planing and controlling collection this respect this process is very
trading cycles. This concept is processes. Furthermore, these similar to reverse engineering.
denoted by the closed loop uncertainty factors are detrimental Thus, it is possible to provide
between other use and trade in to the integration of forward and grounds to product pirating,
Figure 1. Certainly, at some future reverse distribution networks, namely, to develop a new product
point in time, the product will reach which is a very important issue if based on the technical specifica-
again the end-of-use return in the we consider that the additional tions derived from re-manufactured
reverse logistics network. transportation induced by return products.
flows is a negative element in the
Supply, manufacturing, distribution overall ecological assessment of Re-use refers to cases where
and their cascading flows represent industrial re-use activities. returned products have such a
the traditional supply chain. good quality that they can be re-
From the reverse perspective, the Another major issue for products used almost immediately in the
flows for production waste and entering the reverse logistic chain same or an alternative market. This
commercial returns are very is that of their quality. This issue is happens for re-usable bottles,
important, because these two com- central at the stage of selection, containers and most leased or
bined with the end-of-use return where a decision must be rented equipment. It may also
flow are all input flows in the reached as to whether a product happen for surplus goods, e.g.
recovery chain. Production waste (or parts of it) will be re- spare parts which are left over after
includes the remains of raw used, remanufactured, recycled or discarding the original equipment.
materials / intermediates that is disposed. Physical inspection is
lost in the production, i.e. a part of necessary fordetermining further Finally, re-distribution refers to
steel sheet that is too small to be processing for most commercial the logistics activities required to
used in the manufacturing of a products. The alternative of introduce a product into a market-
product, and the side products that remote monitoring and control, place and transfer it to the
come free during production. A that are currently available customer. Obviously, this entails
commercial return would be any for certain products (such as storage, sales and transportation.
unsold product that a supplier has computing equipment and electro- Moreover, efficient marketing of
agreed to take back from the retail nics) have not yet been employed re-usable products requires
customer. Warranty returns of to improve the reverse logistics protocols that support clear and
failed products were not explicitly operations. concise communication between
mentioned in the picture, but interested parties and mechanisms
should be added to the commercial Remanufacturing is a series of to facilitate matching offers with
return stream if the products can steps necessary to transform a part requests.
no longer be repaired. The same or product that has been used into
holds for all perishable products one that is usable again. Some Information Technology for
which can no longer be sold. An typical activities in remanufactu-
end-of-use return, as explained in ring include cleaning, disassembly,
Reverse Logistics
our example, is either the turn-in of replacement and re-assembly.
a product to the seller/OEM, becau- However, remanufacturing is so Based on Figure 1, one can observe
se its use has been terminated and product dependent that it can that information flows between
the seller is forced to take it back, barely be characterized by typical business partners are complemen-
or the collection of the product by activities. For example, restoration tary to the actual product flow
a waste collector. for a piece of old furniture may through supply and reverse
require artistic skill, whereas networks. This observation could
The first stage in the reverse remanufacturing of a piece of heavy lead to the suggestion that informa-
logistic process is collection, that equipment requires advanced tion technology systems for
is, all those activities that are industrial infrastructure. reverse logistics can be prototyped
necessary for reclaiming returned based on the systems developed
products, surplus or by-products For remanufacturing an unresolved for the traditional supply chain.
and transporting them to a place, issue is centered on decision However, there is a fundamental
where they will be subjected to making for dismantling or dis- difference between forward and
further examination and proces- assembling a product. In general, reverse logistics, namely reverse
sing. Locating such products, dismantling everything up front is a logistics is in many situations
purchasing, transporting them labor-intensive task, while on the an exception-driven process. In
and storing them at a collection other end, on-demand dismantling addition, data for the items
point, are all activities related to requires extensive storage capaci- entering the recovery chain are
collection. ty, has uncertain yields and often of poor quality. Thus, a
variable throughput times. For different overall perspective is
A major issue in collection is the many companies remanufacturing required for developing reverse
encountered high uncertainty is a very sensitive issue. Re-proces- logistics IT systems, as it was
regarding the locations from where sing is so product specific that if a noted in Rogers 1998. However, it

Supply Chain Forum An International Journal N°1 - 2000 12 www.supplychain-forum.com


is important to see what the infor- product information as well as The Interactivity Issue between
mation dependencies between retrieval, classification services Forward and Reverse Logistics
forward and reverse chains are and instructions for handling up
and how IT systems can give on a return. Another alternative IT systems
support. Summarized, in order to will be for that information to be
handle reverse logistics efficiently, embedded in the product. In fact, The need for co-ordination among
accurate and sufficient information technologies such as two-dimensio- processes between forward and
is required in addition to informa- nal bar codes and radio frequency reverse logistics system also
tion systems that satisfy specific identification systems may be used imposes a requirement for interac-
reverse logistics requirements. to support this feature. Two-dimen- tivity between the supporting
sional bar coding allows the user to IT systems. Business processes
Therefore, we examine three inter- embed much more information in a between trading partners in
related issues in the following bar code than one-dimensional the forward supply chain have
subsections. First, it is important systems such as UPC. It supports been supported by legacy EDI
to examine technologies that the registration not only of a code systems and Value-Added Networks
permit the collection of quality data but also a description and other (VAN) for electronic transactions
regarding a product entering the textual data of significant capacity. and network configuration, respec-
reverse logistics network. Secondly, Similar in concept, Radio tively. This relationship, often
it is interesting to address the issue Frequency Identification (RFID) described as business-to-business
of interaction and information uses small, very low powered radio E-commerce and networking
exchange between forward and transmitter that is installed in each infrastructure, is also known as
reverse logistics systems. Finally, product. This tag can have some Extranet.
some emerging Web applications, memory capacity for data storage
although not directly applicable at but it also broadcasts a signal in Electronic Data Interchange (EDI)
present, but which can have great 10M combinations, that is, it is allows trading partners to exchan-
potentials for reverse logistics practically unique. The battery is ge information electronically in a
systems will be indicated as subject strong enough to send out a signal very compact, concise and precise
for future research. for years and the signal is strong way and it provides different tran-
enough to be picked up by saction sets for various types
Data Collection on Items receivers in a warehouse. of business activities. The "180
Entering the Reverse Logistics transaction set" is, in principle, the
Information about end-of-use ret- transaction set that supports some
Chain urns can be improved by keeping aspects of reverse logistics.
track of the installed base. Leasing However, in practice, it is seldom
In general it is important to know
forces the manufacturer to keep used. [Rogers 1998] contains a very
what product will be returned at
detailed information about the detailed presentation on this topic.
which point in time at which place,
state of products. Hence following EDI applications are based on
in which conditions and under
the product after its sale also structured protocols, pre-establi-
what grounds. More specifically,
provides marketing opportunities shed arrangements and bilateral
for commercial returns one should
know the as-perfect condition of to influence the return of the information exchange; thus, a
a product or part and how the products. transaction supporting software
returned product measures to that. Table 1 - E-Commerce relation to Reverse Logistics
Also, for certain products that have
E-Commerce
high value and short life-cycle, it is Reserve Logistics Tasks
very important to examine whether Applications
a product returned to the point of Marketing Advertisement of available used products,
sale (POS) meets the allowed time parts or material.
frame requirements. Finally, an Notification of used products, parts or
accurate explanation of the reason material, currently sought
why this particular product enters Purchasing Search for suppliers/customers
the reverse logistics network can Making purchasing commitments
facilitate the selection/inspection Receive information of expected delivery
phase. Respond to request for sought used
products, parts or materials
Conventionally, product related Sales Price setting (i.e. fixed, negotiations,
information is recorded in paper- auction)
based catalogs, which present Order processing
certain constraints: they are Tracking and tracing orders
neither easily retrieved, frequently Customer invoicing, collection and
updated nor can they be searched payment
in a speedy way. An alternative
will be the Electronic Product
Post Sales/ Product tracking
Service Customer support
Catalogues that can offer a
Customer/product monitoring
multimedia representation of

Supply Chain Forum An International Journal N°1 - 2000 13 www.supplychain-forum.com


application regarding current
customers' needs on specialized,
high-value products and their
future influence on the reverse
supply chain; albeit privacy protec-
ting should also be secured.

Moreover, there is a class of


existing Internet-based applica-
tions (i.e. www.firefly.com) that
capture data on their members'
behavior to classify their clientele
into groups of customers with
similar preferences. Upon an event
of interest (i.e. purchase of certain
products by any member of a
group), the relevant data may also
be used to promote the same items
to the rest of the group with
Figure 2 - IT systems for forward and reverse logistics
an expected high degree of accep-
tance. From a reverse logistics
proves necessary. Conventional EDI Emerging IT Paradigms for perspective, such mechanisms
has been criticized for being expen- Reverse Logistics enable interested parties to capture
sive in terms of initial investment
accurate information on different
on infrastructure, software and
It is noteworthy that some existing fragments of the market and identify
training. Furthermore, because
Internet applications, although not possible trends or price changes.
of its structure, this arrang-
directly related to reverse logistics,
ement establishes and supports
continuous relationships between
have quite promising potentials for E-COMMERCE AND REVERSE
this area, as well. For example, LOGISTICS
known trading partners, thus
several Internet-based applications
creating a closed-club kind of
support aspects of mass-customi-
electronic marketplace. The general aspects of E-commerce
zation in the sense that they
for Reverse Logistics are summari-
provide interactivity to potential
Addressing these technical impedi- sed in Table 1, but not all of these
customers who are interested in
ments, the emerging standard are equally represented.
purchasing products that are
XML/EDI provides the means for
configured on the basis of their
integrating EDI applications with So far, we have identified three
the Web. Benefits resulting from own specifications (i.e. buying a
prominent e-commerce models for
this arrangement include lower computer from www.dell.com).
the support of reverse logistics
costs, easier introduction of new From a reverse logistics point
activities. At present, the most
trading partners and increasing of view, it is worth noticing how
popular model for E-commerce for
commercial activity. From a reverse easily accurate information can be
reverse logistics is Electronic
logistics viewpoint, there is the collected from an E-commerce
Marketplaces, which are used for
added benefit that XML/EDI can be
the tool for interacting IT systems Figure 3 E-commerce models
specifically designed for reverse for reverse logistics A Returns
logistics and legacy EDI systems B Supply
that are still in use in the forward
supply chain. Concluding, many
different types and platforms of Other Original
Use Use A
systems may co-exist to serve
different business needs, as shown Trade
in Figure 2.
Collection
Figure 2 presents three levels
of networking infrastructure. Reuse
Firewalls may be implemented to Redistribution
Selection
provide secure systems. Access
originating from an organization
outside the protected area can
be denied if it violates security
Disposal
authorizations, whereas communi- Electronic Marketplaces Remanufacturing

cation with trading partners Supply of used parts


(organizations that are located
Complete RL solutions B Recycling
in the same ring) is supported
through the networking structure.

Supply Chain Forum An International Journal N°1 - 2000 14 www.supplychain-forum.com


both new and used products. Then, structured, that is, they are E-commerce model for
there are sites that use the Web to dedicated to a specific product like the supply of used or
offer used parts or remanufactured used cars (AUCNET) [Lee 1997]
equipment. Finally, there is also or used industrial equipment remanufactured parts or
a Web based paradigm that incor- (w w w. b e rg e r a t - m o n n o y e u r- t p . f r) . equipment
porates collection, selection, re-use Further, there is a significant
and redistribution. These E-com- number of on-line marketplaces The main difference between sites
merce models are presented in representing all three types of for promotion of remanufactured
Figure 3, which relates closely to Figure flows entering the reverse logistics parts or equipment and those for
1, but it concentrates on the reverse chain, namely production waste newly produced goods seems to
logistics part, for simplicity reasons. (www.metalsite.com), commercial lie in the fact that the first are
returns (www. qxl.com) and end-of- customer driven whereas the
Electronic Marketplaces use products (www.ebay. com). latter are normally supplier driven.
In the first case a potential custome
A common feature of electronic There are some trading communi- provides details for the items
marketplaces is the fact that they ties open only to partners who in request and the supplier
are product-focused. Various used have established relations through performs a search and provides the
products are for sale in these sites conventional interaction or where procurement details. Based on this
and potential customers have a new members are introduced after orientation, two main characteris-
chance to get relevant information some member's recommendation. tics emerge for this model. First,
on them, declare their interest and However, for most electronic E-commerce for supply of used
possibly buy them. The concept auctions, access is open to parts is region bounded, that is,
and the design of an electronic all buyers, whereas sellers have suppliers usually serve a range of
marketplace may vary greatly to register and pay fees. A parts or equipment over a more or
depending on a number of factors. price setting mechanism can be less defined geographical region.
We have examined sites based on available online like in the case of As a case in point, Sears
geographical location of their electronic auctions(www.onsale. (www3.sears.com) covers only the
servers, sectors represented in the com, www.qxl.com) or be subject US territory.
site, access rights, price determi- to interpersonal communication
ning mechanisms, logistics aspects, through conven-tional means Identification of the part in request
and guarantees for customer (www.particulier.nl, www.classi- is a central issue to the success of
satisfaction. fieds2000.com).
this business process and it implies
that both interesting parties
Geographical location of the WWW Logistics aspects of electronic
manage to get in contact with each
server and its target market varies marketplaces cover a great variety
other and then use a common,
but they have a high density over of services including inventory
unique and unambiguous frame-
USA sites, as expected. Although management, virtual warehousing,
work to describe requested
US-based electronic marketplaces transportation, scheduling and
products or parts. Nowadays,
(like www.ebay.com and www.onsa- routing, location identification, set
search engines on the Web may
le.com) have significant visibility up and operational specifications.
be used to locate potential
and coverage, they do not yet To simplify the logistics operations
suppliers (www.find-a-part.com),
appear to be worldwide oriented; of the electronic marketplace,
subcontracting third parties to do while catalogues of spare parts
rather, they concentrate within
some or all of the described logistic offer a unique coding system.
the north American market due
functions is a common tactic in Identification of a part can
to their demographics or to a
many electronic marketplaces be enhanced through oral commu-
managerial decision to simplifying
nication or through the use of
their logistics operations. In EU,
To address customer satisfaction, a web-accessible search engines that
electronic marketplaces may be
even more localized (www.partiku- regulatory infrastructure or legisla- are based on some prominent fea-
lier.nl) having to overcome cultural, tion may apply. For example, the tures of the part (brand, descrip-
logistic, linguistic and monetary AucNet system [Lee 1997] provides tion, code etc). However, the web
barriers between different member a standardized rating system for the sites for supply of remanufactured
states of the EU. In view of quality of items featured in this parts or equipment are mostly used
these, www.qxl.com offers different marketplace. Thrusted Third for information dissemination and
contents in its site for UK, France, Parties (TTP’s) play important as such, they only address the
Netherlands, Germany and Italy intermediate roles in case of marketing aspect of electronic
residents. conflict between buyer and seller commerce.
(e.g. if the goods delivered do not
A wide variety of products that meet the specifications). Other It is also interesting to note that
have entered the reverse logistics policies for customer satisfaction demand driven dis-assembly may
chain are traded, but some sectors include posting the seller's physical be possible, if a requested part
like computer, electronics and address, insurance coverage for is not directly available, but rather,
hi-tech equipment are particularly damaged goods, guarantee of it is included as a subassembly
popular. Nonetheless, some elec- returns in case of unsatisfactory in a unit. Demand driven dis-assem-
tronic marketplaces are vertically items etc. bly requires a sufficiently large

Supply Chain Forum An International Journal N°1 - 2000 15 www.supplychain-forum.com


inventory of used products to E-commerce model for complete Clemons, E. K., Communications of the
satisfy demand and this is often reverse logistics solutions that ACM, January 1991.
perceived as costly. could offer a combination of all
reverse logistics activities could be Clemons 1999 "The Impact of Information
A special case of remanufacturing Technology on the Organization of
a niche market by itself.
Economic Activity: The "Move to the
refers to preventive or reactive
Middle" Hypothesis", Clemons, E. K.,
maintenance for heavy industrial CONCLUSIVE REMARKS Reddi, P. S., and Row, C. M., Journal of
equipment, which may operate Management Information Systems, vol.
in geographically remote places E-commerce for reverse logistics is 10, no. 2, pp. 9-35, 1999.
and under very stressful condi- an area of web applications that
tions. Remanufacturing industrial has been active and progressing Dutta 1998 "Business Transformation in
equipment is often a closed loop aggressively, especially in the US, Electronic Commerce: A Study of Sectoral
process, in the sense that, users though it has not been explicitly
and Regional Trends", Dutta, S., A. Segev
give in a piece of their equipment and S. Kwan, European Management
recognised until now. It has given
and some time later they get it back Journal, 1998: pp. forthcoming.
reverse logistics in general and EITO99 European Information
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completion of the required process area and we believe there are many
Fleischmann 1997 "Quantitative models
and logistics are very important for reverse logistics: A review",
interesting research issues in this
factors for customer satisfaction in Fleischmann, M., Bloemhof-Ruwaard, J.
respect. M., Dekker, R., van der Laan, E., Van
this trade. E-commerce thus plays
Nunen, J. A. E. E., Van Wassenhove, L. N.,
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European Journal of Operational
re-use and remanufacturing of parts
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