This research has looked into some of the generic disposal options mentioned in the literature for the goods accumulated in the reverse channel.
Firms, according to their convenience and situation, may use the options mentioned in Table 2.1. These options can again be used interchangeably by retailers or manufacturers. Nevertheless, firms need to carefully consider various factors which may affect the choice of the most optimal disposal options (Ravi, Shankar and Tiwari, 2005; Dyckhoff, Lackes and Reese, 2013). The available disposal options with factors affecting their choice will be discussed in the section below.
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Disposal option for retailers Disposal options for manufacturers
Return to vendor Sell as new
Repackage, sell as new Sell via outlet
Remanufacture/refurbish Sell to broker
Donate to charity Recycle Landfill
(Tibben-Lembke and Rogers, 2002, p.2)
Direct reuse/resale Repair Refurbish Remanufacture Cannibalisation Recycle Incineration Landfill (Thierry et al., 1995, p.118)
Table 2.1 Disposal options for reversed goods
2.7.1 Return to Vendor/Supplier
Retailers may be able to send their unwanted goods back to their suppliers (Shen and Li, 2015). Suppliers may then be able to take the goods back and sell them on an alternative market (Krumwiede and Sheu, 2002; Tibben-Lembke and Rogers, 2002). However, whether the firms are able to return these unwanted goods to their supplier may depend on the type of agreement they initially have with their suppliers (Yoo, 2014). Sonya Hsu, Alexander and Zhu (2009) note that the vendor contract is very important and is a key determinant in the RL process. How much time and effort the retailer must invest in handling RL may be, to an extent, determined by whether it is the vendor or the retailer driving the relationship. Nevertheless, information flows to supply chain partners, especially where decisions need to be made, is not always adequate (Sonya Hsu, Alexander and Zhu, 2009) which may create problems in timely sending of goods back to the supplier.
2.7.2 Resale As New, or Repackage and Sell As New
The next best option is to try to sell the product as new. However, the ‘logistics value generation
may involve repackaging returns and selling them as new’ (Sonya Hsu, Alexander and Zhu, 2009,
p.517). The remaining unsold and excess products can be sold in store by either reducing the price (Autry, Daugherty and Richey, 2001; de Leeuw et al., 2016) or displaying them in a different
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way (East, 2013). Rogers and Tibben-Lembke (2001) found that 17% of products are resold in the state they already are. When returned by customers, goods may not be in the condition that they were previously sold. Some of these items may need to be repackaged, which may further increase the cost of managing RL (Tibben-Lembke and Rogers, 2002).
2.7.3 Direct Reuse
In recent years, due to the increased price of raw materials (Li and Olorunniwo, 2008), the end of life products that are brought back into the company can be used as resources for manufacturing, which can be cost effective. Again, this will prevent waste by diverting materials from landfills and conserving natural resources (Beullens, 2004; Gharfalkar, Ali and Hillier, 2016) thereby helping in resource reduction (Ravi, Shankar and Tiwari, 2005; Demirel & Gökçen, 2008). This act may again trigger RL.
2.7.4 Sell Via Outlet
If the product cannot be returned to the supply chain or cannot be sold in store, firms look for outlets and secondary markets to sell their products and extract value (Johnsons, 1998; Rajagopal, Kaliani Sundram and Naidu, 2015; Dhakal, Smith and Newbery, 2016). Firms prefer to sell these goods via ‘online and traditional auctions’, however more research is required to understand the best possible way for the firms to dispose of these goods for extracting maximum value (Dhakal, Smith and Newbery, 2016). Rogers and Tibben-Lembke (2001) found that nearly 7% of goods were sold via these outlet stores. Secondary markets are one of the most frequently used options to extract value from products, as it has been found that there is a significant number of goods flowing into various types of secondary markets (Dhakal, Smith and Newbery, 2016).
2.7.5 Sell to Brokers, Dismantlers and Recyclers
Brokers are the parties who assist firms in extracting value from their goods. Firms who want to concentrate on and specialise in forward logistics prefer to use these parties to get jobs related to RL carried out. These days, ‘third party logistics’ can work as brokers for businesses and assist them in extracting value from the goods that accumulate in the reverse channel (Azadi and Saen, 2013). These parties like to buy the goods in large quantities and are reluctant to take jobs related to smaller quantities of goods (Rogers, Melamed and Lembke, 2012). Rogers and Tibben- Lembke (2001) found that almost 7% of the companies they studied used these methods to sell
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their products. According to the law, both retailers and manufacturers are obligated to recycle their products (Bernon and Cullen, 2007) which may require both recycling and dismantling, or selling the product to the recyclers and dismantlers.
2.7.6 Donate to Charity
Disposing of unwanted goods can be achieved by donating them to charity (Li and Olorunniwo, 2008; Lambert, Riopel and Abdul-Kader, 2011), as ‘donating obsolescent but still usable product
to charity may generate tax advantages for the company that exceed what the company would receive from selling the product’ (Tibben-Lembke and Rogers, 2002, p.273). In other cases, for
brand controlling purposes, companies may instead donate the product to charity and protect the brand rather than selling to secondary markets (Rogers, Melamed and Lembke, 2012).
2.7.7 Repair, Refurbish, Remanufacture and Recycle
Reuse, repair, refurbish, remanufacture and recycle have been the options discussed several times by various authors including Thierry et al. (1995), Blackburn et al. (2004), and Krikke, Bloemhof-Ruwaard and van Wassenhove (2003). Remanufacturing and recycling demands higher levels of investment and commitment; however, repair and refurbishment are considered as tasks that require ‘limited product disassembly and reassembly’ (Thierry et. al., 1995, pp.114- 135). In this instance, repairing and refurbishing have become processes, among others, that help the retailers cut their costs (Bernon, Rossi and Cullen, 2011). Rogers and Tibben-Lembke (2001) found that 15.5% of the products are remanufactured or refurbished.
2.7.8 Cannibalise
Cannibalisation refers to the reduction on the purchase and sale of the items that are no longer selling well in the marketplace (Pancras, Sriram and Kumar, 2012). Cannibalisation has become a significant aspect in the prospect of RL, as this helps the company to manage the product according to their sales or popularity level (Bernon, Rossi and Cullen, 2011).
2.7.9 Send to Central Return Centre (CRC)
The CRC helps firms to process all their regional returns in a Centralised Return Centre. When a customer returns goods to the retailer, the retail store collects the goods and sends them to the CRC (Tibben-Lembke and Rogers, 2002). Sonya Hsu, Alexander and Zhu (2009) note that the activities or operations in the CRC in a retail context is important because it increases the retailers’
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profitability by reducing costs. The CRC helps firms to execute the RL task because it provides economy of scale, and gives standardised information about the product which helps the planning cycle of the retailer so that an informed decision about the further development of the product can be made (Sonya Hsu, Alexander and Zhu, 2009).
The CRC may be the most appropriate option for the firms to execute and process their returns, however there are a number of problems associated with it. For instance, a large quantity of products available for sale in the reverse channel can indicate the failure of that product (Tibben- Lembke and Rogers, 2002). In other cases, Sonya Hsu, Alexander and Zhu (2009) found that the biggest problem faced by CRCs is the time required for managing damages when no return authorisation is forthcoming from the vendor. The CRC is not in a position to decide anything because they don’t know how much it is going to cost (Sonya Hsu, Alexander and Zhu, 2009). The link between vendors and the CRC information sharing can be weak, and improving and updating the relationship between CRC and the vendors by sharing the information between them can prove very beneficial in the process of RL (Sonya Hsu, Alexander and Zhu, 2009). Min et al. (2006, cited in Bernon, Rossi and Cullen, 2011) discussed the aspect of centralised versus decentralised return centres to minimise overall operating costs. Literature reveals that larger businesses more often use CRC for sending their goods back from various regional points (Rajagopal, Kaliani Sundram and Naidu, 2015); hence, smaller firms who operate as a single entity will not be able to reap the benefit of the CRC.
2.7.10 Incineration and Landfill
With incineration and landfill capacities in decline, businesses are looking to recycle or reintegrate used goods either in part or wholly for further use (Fleischmann et al., 2000). This has resulted in increasing issues such as RL, which may help to recover products via remanufacture and reuse (Demirel and Gökçen, 2008). However, ‘if companies cannot sell the product as is, and cannot
remanufacture or refurbish it, there is one final option, short of recycling or landfilling the product’
(Rogers and Tibben Lembke, 2001, p.139). Even if it is not the preferred decision, one of the last options in the process of RL remains landfilling (Kim et. al., 2006; Achillas et al., 2010; Kinobe et al., 2015). This option, however, creates unfavourable effects both economically and environmentally (Vaverková et al., 2013).
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The volume of accumulation may affect decision making and what disposal decision should be taken – and why – is equally important. However, if value from these goods is to be maximised, considering the time factor can become an equally important decision, which will be explained in the section below.