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Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381

The 2012 International (Spring) Conference on

Asia Pacific Business Innovation and Technology Management

Consideration Factors of Reverse Logistics Implementation

-A Case Study of Taiwan’s Electronics Industry
Cherng Ying Chiou a, Hui Chiu Chen,a* Cheng Tao Yub, Chun Yuan Yeha
a
Department of International Trade & Logistics, Overseas Chinese University, Taichung 407, Taiwan
b
Department of Industrial and Management, National Yunlin University of Science and Technology, Taiwan

Abstract

This paper focuses on explore the consideration factors of reverse logistics implementation based on survey
questionnaires for Taiwan’s electronics industry. Fuzzy Analytic Hierarchy Process (FAHP) was used to select
important criteria from different companies’ experts of information and electronics firms who are in charge of
related environmental management work. The priorities and ranking of each factor was obtained. The results of
this research have shown the overall weights and performance ranking of the evaluation criteria with respect to the
reverse logistics implementation.

© 2012
© 2012 Published
Published by
by Elsevier
Elsevier Ltd.
Ltd. Selection
Selection and/or
and/orpeer-review
peer-reviewunder
underresponsibility
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theAsia
Asia Pacific
PacificInnovation
Business Business Innovation and Technology
and Technology Society Open
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Society under CC BY-NC-ND license.
(APBITM).”

Keywords: Reverse Logistics, Electronics industry, Fuzzy Analytic Hierarchy Process (FAHP)

1. Introduction

Reverse logistics has become an important source of opportunity for companies to improve
visibility and profitability and lower costs across supply chain. Therefore, environmental issues are also
increasing awareness of the importance of reverse logistics [1]. More and more companies are now
regarding reverse logistics as a strategic activity because it can create value. By conducting in-depth
interviews with seven companies, [2] proved the point that companies can well manage the flow of
goods back through their supply chain and will have many more benefits, such as creating additional
revenue, reducing operating costs, and minimizing the opportunity costs of defective or out-of-date
products. Another main reason why businesses are showing much more interest in reverse logistics is
that the EU (European Union), Japan, and the US set up some directives and regulations and are
tightening up on product disposal and waste management. From this research, there are five valuable
lessons for supply chain managers. First, they recognize and measure the financial impact of reverse
logistics on company performance; second, each company now uses its reverse logistics capability to
strengthen its competitive advantage; third, for a successful reverse logistics system, top management
must support and guide the practices; fourth, company must integrate all the functional areas to ensure
a smooth return process for customers; fifth, the reverse logistics system must consider the cost of
return transportation, the cost of processing or remanufacturing, and the resale price.

* Corresponding author. Tel.: 011886-4-27016855; fax: 011886-4-27026986

E-mail address: chc015@ocu.edu.tw.

1877-0428 © 2012 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of the Asia Pacific Business Innovation and Technology
Management Society Open access under CC BY-NC-ND license.
doi:10.1016/j.sbspro.2012.03.203
376 Cherng Ying Chiou et al. / Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381

The EU’s WEEE (Waste Electronics and Electrical Equipment) directive states that it is the
extended producers’ responsibility and requirement to finance the collection, treatment, recycling, and
recovery of all WEEE within the EU, and the U.S. Environmental Protection Agency has updated its
guidelines regarding the disposal of computer monitors and requires that businesses use due diligence
to ensure their IT equipment is disposed of properly [3]. Extended producer responsibility (EPR) of the
EU, the manufacturers have to take back used products or pay extra money when they export electrical
and electronic products to the EU [4]. EPR makes manufacturers responsible for their products
throughout their life cycles [5] and incorporates disposal costs in product prices. This gives
manufacturing firms incentives to design their products toward lower costs at end of life, often through
reuse or recycling [6].
Therefore, Taiwanese information and electronics OBMs (Own Brand Manufacturers) should
monitor their OEMs (Original Equipment Manufacturers) or ODMs (Original Design Manufacturers)
move aggressively to put in place product take-back schemes, such as some activities like reverse
logistics, product recovery, and remanufacturing. This will force OEMs or ODMs more dynamic
relationships within an already complex supply chain [7].
2. Criteria of considerations factors for reverse logistics implementation
Several useful reverse logistics implementation criteria and their categories are pointed out in the
literature, including economic reasons, legal reasons, and social reasons [8-11]. In this paper, through
a thorough and detailed analysis of the pertinent literature and in-depth interviews with both three
industrial experts of electronics companies and two scholars from Universities in Taiwan, a tentative
list of three criteria including economic needs (C1), environmental needs (C2), and social needs (C3)
and 12 sub-criteria (see TABLE 1) of consideration factors of reverse logistic implementation was
developed as the basis for survey questionnaire development.
The consideration factors affecting the economic needs (C1) for reverse logistics implementation
are as follows: recycled volumes (C11), recycling costs (C12), total manufacturing costs (C13), and
increase of sales volume for new products (C14). The environmental needs (C2) can be measured in the
following factors: environmental regulations & directives (C21), consumers environmental awareness (C22),
pressures with stakeholders (C23), and reverse logistics management information system (C24). There are four
consideration factors affecting the social needs (C3) for reverse logistics implementation: corporate social
responsibility (C31), competitive pressures (C32), advertising promotion of image (C33), and good recycling
management system and recycling service (C34).

Table 1 Criteria and sub-criteria of considerations factors for reverse logistics implementation
Sub-Criteria References
Recycled volumes (C11) [12-16]
Recycling costs (C12) [13-14,17-19]
Total manufacturing costs (C13) [15,20]
Increase of sales volume for new products (C14) [14-15, 17]
Environmental regulations & directives (C21) [14-15,17,19-21]
Consumers environmental awareness (C22) [14-15]
Pressures with stakeholders (C23) [20, 22-23]
Reverse logistics management information system (C24) [14,16,24]
Corporate social responsibility (C31) [14,20-21,25]
Competitive pressures (C32) [17, 21,24]
Advertising promotion of image (C33) [14-15]
Good recycling management system and recycling service (C34) [14,17,24]

3. Fuzzy analytic hierarchy process

The analytical hierarchy process (AHP) method, introduced by Saaty [26], directs how to determine
the priority of a set of alternatives and the relative importance of attributes in a multi-criteria decision-
making (MCDM) problem. The primary advantage of the AHP approach is the relative ease with which
it handles multiple criteria and performs qualitative and quantitative data [27]. However, AHP is
 Cherng Ying Chiou et al. / Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381 377

frequently criticized for its inability to adequately accommodate the inherent uncertainty and
imprecision associated with mapping decision-maker perceptions to extract number [28]. To improve
the AHP method, this study applies the fuzzy analytic hierarchy process (FAHP) and uses triangular
fuzzy numbers to express comparative judgments of decision-makers. Some calculation steps are
essential and are explained as follows:
Step 1: Establishing the hierarchical structure
Construct the hierarchical structure with decision elements, decision-makers are requested to make
pair-wise comparisons between decision alternatives and criteria using a nine-point scale. All matrices
are developed and all pair-wises comparisons are obtained from each n decision-maker.
Step 2: Calculating the consistency
To ensure that the priority of elements is consistent, the maximum eigenvector or relative weights
and Ȝmax is calculated. Then, compute the consistency index (CI) for each matrix order n using Eq. (1).
Based on the CI and random index (RI), the consistency ratio (CR) is calculated using Eq. (2). The CI
and CR are defined as follows [9]:
λmax − n
C.I . = (1)
n −1
C.I .
C.R. = (2)
R.I .
where
n is the number of items being compared in the matrix, Ȝmax is the largest eigenvalue,
and RI is a random consistency index obtained from a large number of simulation runs and varies upon
the order of matrix (see Table 2).

Table 2 Random Index

N 1 2 3 4 5 6 7 8 9

R.I. 0 0 0.58 0.90 1.12 1.24 1.32 1.41 1.45

Step 3: Construct a fuzzy positive matrix

A decision-maker transforms the score of pair-wise comparison into linguistic variables via the
positive triangular fuzzy number (PTFN) (see Table 3). The fuzzy positive reciprocal matrix can be
defined as [29]
~
[ ]
~k
A k = Aij (3)

where
~
A k : a fuzzy position reciprocal matrix of decision-maker k,
~ k : relative importance between i and j of decision elements
Aij
~k ~k
Aij = 1, ∀i = j, Aij = 1 Aij , ∀ i , j = 1, 2,....., n
k

Table 3 Triangular fuzzy numbers

Linguistic variables Positive triangular fuzzy number Positive reciprocal triangular fuzzy number
Extremely strong (9, 9, 9) (1/9, 1/9, 1/9)
Intermediate (7, 8, 9) (1/9, 1/8, 1/7)
Very strong (6, 7, 8) (1/8, 1/7, 1/6)
Intermediate (5, 6, 7) (1/7, 1/6, 1/5)
Strong (4, 5, 6) (1/6, 1/5, 1/4)
Intermediate (3, 4, 5) (1/5, 1/4, 1/3)
Moderately strong (2, 3, 4) (1/4, 1/3, 1/2)
Intermediate (1, 2, 3) (1/3, 1/2, 1)
Equally strong (1, 1, 1) (1, 1, 1)
378 Cherng Ying Chiou et al. / Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381

Step 4: Calculate fuzzy weights value

According to the Lambda-Max method proposed by Csutora and Buckley [28], the fuzzy weights of
the hierarchy can be calculated. This process is described as follows.
z Let Į=1 to obtain the positive matrix of decision maker A
k
~k
m = aijm n x n
. Then, apply the AHP to [ ]
calculate weight matrix Wm .

Wmk = wim
k
[ ]
, i = 1, 2, ......., n (4)
z Let Į=0 to obtain the lower bound and upper bound of the positive matrix of decision-maker,
Alk = [aijl ] and Auk = [aiju ] . Then, apply the AHP to calculate the weight matrix, Wl and Wu .
~ ~ k k
nxn nxn

W l
k
= [w ], k
il i = 1 , 2 , ......., n (5)

W u
k
= [w ], k
iu i = 1 , 2 , ......., n (6)
k
z To ensure the fuzziness of weight, two constants, S l
and S , are calculated as follows:
k
u
k
­w½
S lk = min ®
1 ≤ i ≤ n¾ im
k
(7)
w
¯­ w
¿½ kil
S uk = min ®
1 ≤ i ≤ n¾ im
k
(8)
* * ¯w¿ iu
The lower bound ( Wl k ) and upper bound ( Wuk ) of the weight matrix are defined as
*
[ ] * *
Wl k = wilk , wilk = Slk wilk , i = 1, 2, ........, n (9)

= [w ],
* * *
Wuk k
iu wiuk = Suk wiuk , i = 1, 2, ........,n (10)
* * *
z Aggregating Wl k , Wmk and Wuk , the fuzzy weight for decision-maker k can be acquired as follows:
~ *
( k*
Wi k = wilk , wim
*
)
, wiuk , i = 1, 2, .......... , n (11)
z Applying the geometric average to incorporate the opinions of decision makers is defined as
follows:
~ ~ ~
( ~
Wi = 1 Wi1 ⊗ W i 2 ⊗ ......... ⊗ Wi n
k
) (12)
where
~
Wi : the fuzzy weight of decision makers i is incorporated with K decision-makers.
~ k : the fuzzy weight of decision element i of k decision-maker.
Wi
k: number of decision makers.
4. Research methodology
The selection of subjects of this research for the formal questionnaire of 12 experts who are in
charge of environmental management work are from different Taiwanese electronics firms for this
study.
This paper utilized fuzzy analytic hierarchy process (FAHP) to explore the consideration factors
for reverse logistics implementation. In this study, the AHP framework is categorized into three criteria
and 12 sub-criteria, a multi-criteria decision model is proposed. FAHP then is applied to determine the
relative importance for reverse logistics implementation factors of Taiwanese Electronics Industry. The
FAHP was used to select important criteria from different companies’ experts of information and
electronics firms who are in charge of related environmental management work. The priorities and
ranking of each factor was obtained. The results of this research have shown the overall weights and
performance ranking of the evaluation criteria with respect to the reverse logistics implementation.
5. Results and discussion
The overall priorities and performance ranks of all criteria and sub-criteria king order of global
weights of criteria and sub-criteria for consideration factors of reverse logistics implementation as
shown in Table 4. The result indicates that the overall performance ranking order of the evaluation
criteria, and the economic needs are the best performance criteria for overall weights and ranks for
 Cherng Ying Chiou et al. / Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381 379

consideration factors in the reverse logistics implementation with 0.4842 of total weights and number
one of total ranking; environmental needs with 0.3728 of total weights and number two of total ranking;
social needs with 0.1430 of total weights and the worst ranking performance criteria.
From Table 4, the relative weights and rank order of sub-criteria with respect to each evaluation
criteria are computed as 0.1823 (environmental regulations & directives), 0.1526 (recycled volumes),
0.1498 (Recycling costs), 0.1147 (total manufacturing costs), 0.0883 (Consumers environmental
awareness), 0.0670 (increase of sales volume for new products), 0.0642 (pressures with stakeholders),
0.0624 (corporate Social Responsibility), 0.0393 (competitive Pressures), 0.0380 (reverse logistics
management information system), 0.0230 (advertising promotion of image) , and 0.0184 (good
recycling management system and recycling service), respectively.

Table 4 Ranking of global weights of criteria and sub-criteria for consideration factors of reverse logistics
implementation
Criteria Global weights Rank
Economic needs (C1) 0.4842 1
Environmental needs (C2) 0.3728 2
Social needs (C3) 0.1430 3
Sub-criteria
Recycled volumes (C11) 0.1526ġ 2
Recycling costs(C12) 0.1498ġ 3
Total manufacturing costs(C13) 0.1147ġ 4
Increase of sales volume for new products(C14) 0.0670ġ 6
Environmental regulations & directives(C21) 0.1823ġ 1
Consumers environmental awareness(C22) 0.0883ġ 5
Pressures with stakeholders (C23) 0.0642ġ 7
Reverse logistics management information system(C24) 0.0380ġ 10
Corporate Social Responsibility(C31) 0.0624 8
Competitive Pressures(C32) 0.0393 9
Advertising promotion of image (C33) 0.0230 11
Good recycling management system and recycling service(C34) 0.0184 12

6. Conclusion and suggestions

Taiwanese IT industry now plays an extremely important role in the global hi-tech manufacturing
system, and Taiwan has become the world's second largest manufacturer of information hardware.
According to information compiled by the Market Intelligence Center (MIC), Institute for Information
Industry (III) of Taiwan in April 2010, Taiwan’s information and electronics products (including
hardware, digital networks, and mobile devices) had total value of the output amount of US$121,223
millions in 2010.
From the results shown in Table 4, the environmental regulations & directives are the best
performance criteria for overall weights and ranks. In the recent few years, three of the most important
environmental protection directives of WEEE (Waste Electronics and Electrical Equipment), RoHS
(Restriction of the Use of Certain Hazardous Substance in Electrical and Electronic Equipment), and
EuP (Eco-design Requirements for Energy-using Products) in the EU have entered into effect, which
banned the use of toxic substances and demanded recycling waste in the information and electronics
products. The three directives of the EU have greatly influenced the industry. This resulted in higher
pressures and drivers for OBMs to improve environmental performance and led to OBMs help their
OEM/ ODM firms desiring to achieve a better environmental performance in supply chains and
recycling the electronics waste in response to international environmental requirements.
Most developed countries, such as in Europe, the US and Japan have regulations focused on
preventing and managing waste streams, and recycling programs. Reverse logistics has become a
matter of strategic importance for companies that must consider in decision-making processes
concerning the design and development of their supply chains [11]. Waste reduction is at the heart of a
new trend, which has three main motivators: governmental legislation, economic value to be recovered
380 Cherng Ying Chiou et al. / Procedia - Social and Behavioral Sciences 40 (2012) 375 – 381

in returned product, and environmental concerns. The government-mandated motivation is especially

strong in Europe, where governmental regulations are compelling businesses to address recovery and
disposal of end-of-life products. In the US, the motivation has been largely due to economic factors –
recovering value where there is an economic incentive – but legislation has begun to compel producers
to set up systems for product recovery and safe disposal in a number of industries, particularly for
electronic product disposal [30].
In practice, some companies seem to ignore the significance of reverse logistics to their supply
chain [31]. Taiwan’s computer manufacturers should respect more on the waste disposal like IBM.
Since 1995, IBM has recovered and processed more than 1.4 billion pounds of electronic products and
products waste worldwide. HP began recycling in 1987. In 2007, it had processed exceed 1.0 billion
pounds of electronic products and supplies recycling waste. Dell has offered a coupon for 10% off
electronics & accessories if consumers donated a PC to National Cristina Foundation of US in order to
help disabled and economically disadvantaged children and adults in your community. Currently, there
is evidence that indicates that many Asian countries, such as Japan, South Korea, and China have set
up their environmental protection laws and regulations in the information and electronics industry,
while no law or regulation has existed in this industry in Taiwan since the EU’s environmental
directives of RoHs, and WEEE were placed in effect in 2006. Therefore, it is urgent that Taiwan’s
government and related institutions should speed up establishing related environmental laws or
regulations, and waste recycling systems for the information and electronics industry in responding to
international environmental pressures.

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