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Reverse Logistics in Developing Countries: The case

study of food retail sector in Angola

Leonel Valério Neves

Department of Engineering and Management, Instituto Superior Técnico

Abstract
Reverse Logistics studies have been focused on the manufacturing industry and in developed
countries. Therefore exists a scarcity of Reverse Logistics studies related to developing
countries and other industry sectors as food retailing, which is an important sector in developing
counties.
The present study aims to fulfill the identified gap, by conceptualizing a methodology that will
guide the implementation of Reverse Logistics in the food retail sector in developing countries.
For that purpose, it will be studied the case study of Angola.
The main conclusion to be drawn from the work developed is that the Reverse Logistics is at
the range of food retail chains in developing countries and that its main barrier to be overcome
is the reactive attitude of companies.

Keywords: Reverse logistics, sustainability, developing countries, Angola, food retail.

1. Introduction within developed countries (Adebambo &


In the recent years, Humanity struggles to Adebayo, 2014). Therefore exists a gap
develop in a sustainable way. The Earth’s related to the study of the application of
natural regeneration capacity shows to be reverse logistic in developing countries and
insufficient to cope with the excessive in other sectors. Being the food retail sector
consumptions of natural resources. The an important sector in any economy, where
impacts of such consumption are felt not reverse logistics is an important activity this
only on the environment, but also on sector is taken as the focus of the present
economies and societies, especially in study.
developing countries. This problem The objective of this study is than to
requires that communities, organizations develop a methodology that will guide the
and countries start to implement implementation of Reverse Logistics in the
sustainable practices like Reverse food retail sector in developing countries.
Logistics. For that purpose, and to in order to deal
Its implementation extends to almost all whit the lack of information about the
sectors of industry. However the factors implementations of reverse logistics in
that influence it, vary from sector to sector developing countries, a case study is
and also according to the country of activity carried out, namely in the food retail sector
(Agrawal et al. 2015). The studies of Angola.
conducted to date are focused mainly in the The remain of this paper is structured as
sectors of manufacturing and are consider follows. In the next section is developed a
review of the relevant literature to the study

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of reverse logistics implementation in the 2) Collection – Next, is the process of
food retail sector. In the third section the collection, transport (if necessary) and
case study is presented. The fourth section, delivery for inspection and sorting.
discusses the developed methodology, According Kumar & Putnam (2008) this
main objective of the present study. Finally, process can be done directly from the
section five summarizes the conclusions of client, through retailer, or by
the study and indicates further research outsourcing, and depends on the
needs. quantities and associated costs (Atasu
2. Literature Review et al., 2013).
3) Inspection and sorting – The third
2.1 Reverse Logistic
stage of reverse logistics is the
inspection and sorting. In this process
According to Rogers & Tibben-Lembke
the goods are accepted in the reverse
(1998) Reverse Logistic is "the process of
chain, and usually evaluated and
planning, implementing, and controlling the
separated according to their condition
efficient, cost effective flow of raw
(Brito & Dekker, 2003).
materials, in-process inventory, finished
4) Disposition – The last step of reverse
goods and related information from the
logistic is treatment / final destination of
point of origin to the point of consumption
goods. According to Agrawal et al.
for the purpose of conforming to customer
(2015) literature is full of alternatives
requirements". However, according to Brito
and variants, however five of these
& Dekker (2003) these definitions don’t
alternatives are discussed more often:
include the entire concept because, the
reuse, repair, remanufacturing,
reverse flows of goods can be raised from
recycling and disposal.
excess inventory through the entire supply
chain and not necessarily in the points of 2.2 Implementation
consumption and on the other hand, the Once understood the key processes of
final destination can be a recovery point, reverse logistics, is important to understand
also at an intermediate stage of the supply what influences its application. According
chain, and not necessarily at the source. to Brito & Dekker (2003) it’s important to
take into account, five fundamental
2.2 Reverse Logistic key processes
questions, which are: "Why (return)?";
"Why (receive)?"; "What?"; “How?” and
Based on previously works, the authors
“Who?"
Agrawal et al. (2015) made a detailed
analysis of the reverse logistic and identify  Why (return)? – The actual reasons
their key processes, as shown in Figure 1. for the reverse flows.
 Why (receive)? – The driving forces
behind reverse logistics.
 What? – What is being returned?
Which goods characteristics makes
recovery attractive or compulsory?
 How? – How the value is
recovery? The actual process carried
out in reverse logistics systems.
 Who? – Who are the actors and
their role in the reverse supply chain?

Figure 0.1 - Reverse Logistic key processes, adapt from Agrawal et al. (2015)

1) Acquisition – Reverse Logistic begins


with the acquisition of goods. This The research carried in this field focus
process is usually done by consumers mainly on the driving forces and barriers.
or retailers (Agrawal et al., 2015), but Noted that they are not mutually exclusive,
according to the definition presented in fact they are highly related and there is
earlier by Brito & Dekker (2003), any sometimes a very thin line between them
other person involved through the (Carter & Ellram, 1998). The absence of a
supply chain can also create a reverse driver is often seen as a barrier to the
flow of goods.

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implementation and development of that motivates reverse logistics. These
reverse logistics (Hung Lau & Wang, 2009). values usually give the company a
"green" image, attractive for many
The drivers and barriers are:
customers (Akdogan & Coşkun, 2012).
 Economic / financial: all economic
benefits obtained, directly or indirectly,
External – General Environment
through reverse logistic (Brito & Dekker,
2003).
 Environmental: environmental drivers  Infrastructure and technology:
are those that lead companies to practice infrastructure and technology
reverse logistic with the direct goal of (technological know-how, monitoring
improving its eco performance and systems etc.) are mainly barriers to the
protect the environment. implementation of reverse logistic,
 Government / legislative: the rules especially when missing (Abdulrahman et
imposed by any legal authority to dictate al, 2014.).
the obligation of a company to do reverse  Management / individual factors: the
logistic. Traditionally this laws obligate drivers of management / individual factors
companies to collect their products or are related to awareness, experience and
packaging after their use (Álvarez-Gil et commitment of workers, especially
al., 2007). These regulations often have managers (Abdulrahman et al., 2014).
an indirect objective of protect the
 Human resources: Lack of skilled labor,
environment.
or labor-skilled workers (Abdulrahman et
 Society and non-governmental
al, 2014).
organizations: those incentives that lead
companies to meet the expectations of Taking into account all factors, companies
the community and society (Shaik & can take two attitudes toward this activity.
Abdul-Kader, 2014). Reactive attitude, when is implemented in
order to comply with the imposed
External – Operational Environment legislation, and is seen as a cost. Hence the
goal in its management is to reduce at most
 Suppliers: the responsibility of the their impact on business results. Proactive
reverse logistic in supply chains should be attitude, the company includes the activity
viewed collectively and not individually, in its long-term strategy, in order to gain
so the relationship with suppliers can competitive advantage. In this case reverse
generate positive or negative logistic is seen as a capacity which adds
counterparts for several companies. For value to the product and not a cost (Zhu et
example the need for materials from al., 2011). Is important to mention that the
suppliers, can be fulfil through above studies were focused in a developed
collaboration and the use of reverse countries context.
logistics (Toffel, 2003).
 Competitors / market and aftermarket: 2.3 The Food Retail Sector
These drivers are concerned whit the
competitive advantages that companies Losses in this sector can be distinguished
can achieve through reverse logistic in two ways, food surplus (when still in the
enterprises (Janse et al., 2010). Reverse conditions suitable for human
logistic also takes a key role in the consumption), and food waste (when no
strategies related to the aftermarket. The longer suitable for human consumption)
company can use it to explore these (Papargyropoulou et al., 2014). The first
secondary markets or to defend from can be recovered through donations.
them. These products can also be treated as food
 Clients / consumers: the use of reverse waste, thus losing part of the value they still
logistic may enhance the access to new have. The food waste have a greater
consumer segments that show greater variety of alternatives to its recovery.
concern for environmental aspects Traditionally they can be recycled into
(Álvarez-Gil et al., 2007) animal feed or fertilizers, or can used for
biofuel and energy production. The inability
Internal
to recover some value in these products
result in their elimination. In figure 2 are
 Social responsibility: social depicted traditional processes in the food
responsibility drivers are set of values and industry waste management.
principles embodied in the organization

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lead to the implementation of the reverse
logistic in these countries are the
economic/financial gains, and the resource
scarcity (Eltayeb et al, 2011; Kannan et al.,
2010; Kannan et al, 2014). Studies relating
to other developing countries, like Brazil
(Bouzon et al., 2015) and Nigeria
(Adebambo & Adebayo, 2014) confirm this
trend in developing countries.
3. Case Study – Food Retail Angola
Figure 2 – Food waste management adpat from Papargyropoulou et al., (2014)
Angola is a developing country that
presents a wide range of opportunities,
2.4 Developing Countries but also high risks and difficulties. Currently
is going through a difficult period marked by
In recent decades, globalization has
the economic crisis, resulted from low oil
brought to the least developed countries,
prices. Thus the Angolan market in the
access to capital, technology and
coming years will not be as attractive
knowledge. As consequence many of these
compared to the years that preceded it. The
countries have shown great economic
investment will be reduced, and the
growths. However, the development of
triggering of events can lead companies to
reverse logistic in these countries is at an
focus on strategies and solutions to
early stage of maturity (Hung Lau & Wang,
improve the efficiency of their operations in
2009). The literature in this area is also
order to reduce costs.
limited, and the study focuses mainly in the
manufacturing industry as a whole, and in The food retail in particular, has enormous
particular in the electronic industry and growth potential, however, given the
automotive (Adebambo & Adebayo, 2014). slowdown of the economy, it has also been
Only a reduced percentage of developing a period of lower growth. Since this is a
countries have these sectors evolved, so market where profit margins are
the study of implementation of reverse considerably low, the focus on logistics and
logistic in developing countries, is focus sustainable development, as has
mainly in China, India or Malaysia (Sharma happened in other economies, can take
et al., 2011). great relevance.
Other important issue is that usual drivers 3.1 Reverse Logistics in the food retail
and barriers associated with developed sector of Angola
countries do not occur in these less
developed economies. Government bonds A detail study about reverse logistics in
/ laws that obligate companies in developed food retail in Angola, was conducted based
countries don’t occur in most developing on questionnaires and aimed to identify the
countries (Sharma et al, 2011; Vijayan et al, activity level of development in the market,
2014; Bouzon et al, 2015; Shaharudin et al, characterize the attitude of the key players
2015; Kannan et al, 2014). In fact, in most in the industry and also sought to identify
of developing countries the legislation is clearly what the main drivers and barriers.
still in a preliminary state due to poor The study concluded that the activity is
governance and lack of resources for already present in some companies in the
monitoring (Kannan et al., 2014). Another food retail sector in Angola, but is not
factor common to developed countries that assumed as an independent activity. It
encourages the implementation of the conclude that there is widespread interest
reverse logistic, and also not present in the in the subject, confirming the trend for
countries studied is the public awareness of companies to seek more sustainable
environmental issues (Kannan et al, 2014; solutions. With regard to drivers and
Vijayan et al, 2014; Shaharudin et al, 2015). barriers, it was concluded that the main
Added to this factor, the private sector in limiting factors found in the literature
most of these countries also don’t review, for developing countries, there are
recognize the importance of environmental also in this market, they are the absence of
issues, for example much of Malaysia's legislation and societal pressure. However,
manufacturing industry sees environmental it was found others limiting factors with
activities as expensive (Shaharudin et al., great importance such as the absence of
2015). On the other and, factors that may pressure from suppliers and customers /

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consumers and the lack of infrastructure The affirmative answer to any of these
and technology. On the other hand it was questions may indicate that the company
found that the main motivating factor in already practices reverse logistics
developing economies, the creation of activities. In this situation the proposed
economic / financial benefits, takes a less methodology should be used as a tool of
important role in this situation, showing improvement for the identified activities.
reactive attitude toward reverse logistics. Each of the issues is associated with a type
of good to be incorporates in the reverse
4. Methodology – Implementations of flow of the supply chain. If the answer to
Reverse Logistics in food retail sector in correspondent question is affirmative the
developing countries company should realize if their processes
are being developed in the best way and
The implementation of reverse logistics look up for other measures presented in
activities in the food retail sector, in this paper that, can improve their
developing countries should taken as basis operations.
the framework developed by Brito & Dekker
If the answer to all the questions is
(2003). However there are some points of
negative, the company should follow the
this framework that need to be analyzed in
implementation priority suggested in the
detail given the context of developing
methodology, and detailed below.
countries, such as:
1) Identify the goods that should be
incorporated into the reverse logistics.
2) Develop the necessary guidance for
companies to do so. Figure 3 – Priority of reverse logistic implementation
As mentioned above, the goods to be
4.1 Transport accessories
incorporated in the reverse flow of this
companies are the same as in developed The earlier study suggests that transport
countries: perishable food, non-perishable accessories should be the priority in the
goods, recyclable waste and transport implementation of the reverse logistics.
accessories. Thus the important thing is not
There is no ideal implementation process
identifing the goods to be incorporated, but
that companies in the market should adopt,
define to them a priority.
but there are important factors to keep in
Based on the work developed it was mind. Given the differences found in
concluded that the implantation should developing countries, the implementation
follow the priority suggested in figure 3. of transport accessories reverse logistics,
This should start by analyzing the transport should focus initially, on the operations that
of accessories and end up in perishable occur within the retail chain.
products, however this priority is not
The retail chains should ensure that all
constrained and should be adjusted to the
products have the right transport
reality of each situation.
accessories in order to optimize the direct
Nonetheless, the study conducted shows distribution operations. It should also
that many companies practice this activity ensure a high control over the inventory of
subconsciously. So, it’s suggested for such goods, being constantly aware of the
companies to answer the following unused inventory and losses.
questions before the implementation:
When the transport accessory fulfills its
 "The company reuses some sort of purpose, it must be collected for reuse. The
transportation accessories such as collection process should take advantage
pallets, plastic boxes, etc.?" of the return of vehicles, responsible for
 "The company practices return direct distribution. In the distribution center
activities to the supplier or returns from should be an area dedicated to the
the store to distribution center?" treatment and reuse of this goods. The area
 "The company reuses or recycles any should be installed close to the direct
type of waste produced?" distribution operations, given that its main
 "The company donates part of the function is the provision of accessories to
food products not sold?" direct distribution. Its facilities should
include one or more arrival docks,

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depending on the volume handled, a more, in order to avoid exceed the pre-
storage area and an operation zone. agreed amount of returned goods. At the
same time the risk that the supplier incurs
Consequence of its size and importance,
decreases.
this particular operation will require more
human resources and capacity than the The development of return policies for
remaining reverse logistic activities. unsold goods could stimulate the return
volume and in addition create value from it.
5.2 Non-perishable goods However, this is not the only driver to the
The reverse logistic of non-perishable development of reverse logistic of non-
goods is a common practice in the food perishable goods. It’s important to study
retail chains, in developed countries. These other drivers found in the market and
goods, if not sold in the pre-specified time distinguish the different reverse flow of non-
period, may preserve a considerable value perishable goods.
to be recovered. The reverse logistic of
non-perishable goods should play a 5.2.2 Types of reverse flow
primary role in the implementation of the The process reverse logistic for non-
activity in food retail sector of developing perishable goods, which will be explained
countries. Its process should include the in the following section, must fit the needs
following steps: and characteristics of the each type of
1. Negotiation of contracts with suppliers reverse flow. So it’s important to distinguish
and definition of return policies. the traditional reverse flows in food retail
2. Identification of the reverse flows based companies
on their return reasons and the final
The reverse flows of non-perishable goods
destinations.
are generated for various reasons, namely
3. Development of the reverse logistic
the seasonality of demand, the amount of
process.
returns, quality issues and the existence of
4. Monitoring and continuous improvement.
devolution agreements. The different
5.2.1 Suppliers contracts reasons that trigger this reverse flow also
dictate different destinations for each type
The development of return policies is a key
of goods. The most common destinations
incentive to the implementation of the
are return to the supplier or reinsertion in
reverse logistic for non-perishable. But
the direct chain of distribution. The
what policies should the company
company must therefore group the reverse
negotiate with its suppliers in order to
flows depending on the return reasons and
create value for the company?
final destinations.
Based on the work developed by Simchi-
In the scheme of Figure 35 are identified
Levi et al. (2008), the following contracts
the traditional reverse flows of non-
are suggested:
perishable goods found in food retail.
Buy-Back Agreement - In this type of Companies must analyze each of these
contract the supplier agrees to buy back streams individually and see if there is the
unsold goods at a pre-agreed price, higher need to integrate into its inverse chain and
than the residual value. This agreement most important how to do it.
encourages the retail chain to make larger
orders, since the risk associated with
products not sold decreases. On the other
hand, the supplier risk increases, but also
increases the quantity sold to the retail
chain. In the case of non-perishable goods
supplier ends up, with the unsold goods
that can be resold to other customers. This
agreement aims to increase the quantity
ordered by the buyer, reducing his
Figure 4 – Traditional reverse flows in food retail
probability of stock out.
Contract Quantity, Flexibility – In this Quality - Contract The first identified
type of contract the supplier agrees to pay reverse flow, is concern whit the goods that
back the full price for returned goods to a are removed from store, or returned by
certain, pre-agreed amount. This quality issues. These goods, if don’t have a
agreement motivates the retail chain to sell return contract concern whit quality issues,

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they don’t represent value for the company, warehouse operations should resemble the
as such, they must be destroyed. If they flow quality-contract.
hold back a contract, they must be collected
Quantity - No Contract Non-perishable
and returned to the supplier. Usually this
goods collected by number of reasons but
type of return occurs sporadically and
have no contract can also be used.
under uncertain quantities. Therefore, it
Demand in stores may differ from store to
requires some flexibility by the part of those
store and also at different periods of time.
who collect the products. Some retail
Excess inventory in a particular store can
chains choose so impute the responsibility
be used to address the lack of inventory in
of collecting to the supplier. If the company
other stores across the IL. This process
take over the operations of this reverse flow
reduces the amount of goods ordered
should adopt a system in warehouse pick-
through the use of stock accumulation in
by-line type, to avoid create stock. The
some stores. When they reach the pallets
goods are received by store, pallets, pallets
of the goods must be broken and must be
are broken and used to create new pallets
created new pallets per product. These
per vendor.
new pallets, depending on the need for
Seasonality - Contract The second type of direct distribution chain can create stock or
non-perishable good identified are directly to reintegrate direct distribution.
seasonal goods that have returned
contracts. The collection of this type of 5.2.3 Reverse Logistic process
merchandise may require additional efforts The reverse logistic process of non-
in certain periods of time. In the warehouse perishable goods depends on the
the goods should take a pick-by-line previously identified streams. There are
system similar to the goods quality-contract common steps for all streams and
to avoid stock. depending on their quantities and
Seasonality - No Contract The seasonal destinations, may exist flows that can be
goods that do not have contracts must be handled together.
collected by the company and stored during The process, regardless of the type of flow
times of lower demand. This type of goods begins with the return order. The order, can
requires a dedicated area in the warehouse be done by various entities. The most
and as well as seasonal goods with common case and applies to all goods
contracts, may require additional efforts to except those returned for quality reasons,
collect in certain periods of time. The is given by the entity responsible for
operation in warehouse is quite simple. The defining the range of products on sale and
goods are received, separated by product the stock management. In the particular
and stored in a dedicated area. Then, when case quality returns, the order may come
demand is up again, the products must be from the supplier, quality department or the
reinserted in the direct chain of distribution. store itself in agreement with the other
Quantity - Contract The quantity is a factor departments.
behind any reason to return. If the amount When received the order to return, the store
of discards not justify the collection, then must prepare the goods on pallets to be
whatever the goods shall be, the reverse picked up. They should be used the
logistic is not justified. However, in certain minimum number of pallets to optimize the
goods, the amount of discards is a reason resources and the same pallet may get
enough for your collection. The amount of different types of reverse flow properly
discard may result from commercial identified. Besides organized by flow,
business strategy, it can be seen that a products must still be arranged by the
strong promotional strategy results in supplier in order to facilitate the process in
increasing returns. The existence of the warehouse. It is suggested to shops
devolution agreements they shall be that reuse the cardboard boxes that are no
collected and returned. The process of longer used to accommodate the returned
collection may be made by the supplier in goods. The pallets must be accompanied
exceptional occasions, but normally should by the store identification and collection
be made by the retail company. This is a orders for the right control of the collected
constant reverse flow that requires good products and to able be track them
coordination with suppliers and a high throughout the supply chain.
control over the various inventories of
goods in store and warehouse. In Then follows the collection process, this
should use the empty trucks on their return

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journeys. The collection process is the initial contract, in order to avoid any
same as in the direct distribution. disagreement between retail chains and
suppliers.
When the goods arrive at the warehouse,
the pallets should checked and the 5.3 Recycle waste
products teared in order to realize if the
order of return was well done. The goods of Municipal waste management systems in
the type quantity-contract, seasonal- developing countries lack the means
contract and quality-contract should follow necessary for the right management of the
to pick-by-line operation. The objective of various types of waste, especially
this operation is to create pallets per recyclable waste.
supplier with various returns, avoiding The municipal waste recycling process
creation of stock. Seasonal – no contract involves several steps, starting with the
goods must be stored in pallets per product. disposal of waste, followed by the
Finally the goods quantity- no contract, collection, sorting and finally recycling
should also form new pallets, by product which results recycled materials. The step
and next there are sent to the stock of direct of collecting is, in most cases, where
distribution. operating costs are higher. This step is
The last step is the collection of goods by traditionally performed in two ways, by
the supplier. This may require a new collecting door-to-door or Eco points, which
conference to check the condition of the requires high transport means and costs or
goods or accept their return without by depositing the waste in centralized
checking their condition. The first option voluntary delivery points. This second
requires the presence of an operator to process minimizes the need for means and
check the quality of the goods to the cost but also has a lower adhesion.
supplier. The food retail chains, present ideal
The process described should require a conditions for the establishment of
dedicated area or warehouse, nearby the voluntary centralized collection points.
distribution center. This proximity becomes Their facilities already are responsible for
important when there is reinsertion of producing high amounts of waste.
goods into the direct distribution. This Furthermore they have direct contact with
process also requires one or more loading the consumer, who goes regularly to the
(depending on the amount of returns), a food retail stores to stock up on food.
temporary storage area for seasonal The implementation of centralized
merchandising, and a working area for the voluntary collection points can generate
pick-by-line operation. several direct benefits to sector. First, the
This study concludes that the creation of these point avoid inadequate
implementation of the reverse logistics for disposal of waste nearby the facilities.
non-perishable is a simple process and These cooperative systems can also create
does not require significant human a secondary business. The recycled
resources, infrastructure or technology. materials can be sold in the market so they
have economic value.
5.2.3 Monitoring and continuous
As mentioned, the main drawback of the
improvement
collection method through voluntary
Once implemented the process of reverse collection points centralized is the
logistic for non-perishables, companies adherence by the population. In addition to
must take into account some factors that awareness campaigns, there are recycling
can compromise the activity. programs that provided monetary rewards
to the costumer for waste disposal. The
It’s important to have a good control over
companies can choose to pay monetarily or
the merchandise along the supply chain. All
provide discounts on their next purchase,
departments involved in the direct and
thereby encouraging consumers to buy
reverse chains must have a good
more
coordination. It is important to be able to
trace back any goods and know, in real time 5.4 Perishable goods
where they are. One of the main obstacles The inverse flow of perishable goods (food)
is related to the condition that the goods are is divided into two major groups: food
returned to the supplier. The criteria of surpluses, while still suitable for human
acceptation must be clearly denied in the

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consumption and food waste when no Although the present study has an
longer suitable for human consumption. exploratory nature, the work developed
should be further developed. The use of a
The reverse logistic of food waste is an
case study to generalize the reality found in
activity associated to highly developed
developing countries limits the application
retail chains. Those, independently or by
of the developed methodology. It is
way of cooperation, use the food waste for
therefore necessary, in a further
the production of fertilizers, biofuels,
development, to study the application of the
energy production or animal feed
proposed methodology to other developing
production. The implementation of these
countries.This action will help to validate
activities in developing countries should not
the methodology in the context in which it
be a priority. The investment is high as well
was proposed. The study also reveals that
as the required resources. However, in
there is a high need to develop the
countries where there is a high growth of
awareness of companies and firms for the
the agriculture and livestock sectors, there
reverse logistic problematic. The reactive
is opportunity to be created support
attitude of companies is critical and must be
industry, like the production of fertilizers or
overcome.
animal feed production. The food retail
market should therefore be alert to the 6. References
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