Fuentes de la Informacion Financiera presentada y Fecha de Elaboración

Prior to the late 1960s, there was relatively little concern regarding environmental degradation. The rapid pace of industrialization and societal issues have not been yet perceived as problems to be addressed.52 _Since

the 1970s, more countries have realized the weakness of traditional predatory use of resources and linear economic growth model, namely from over-exploitation, over-production, and over-consumption to over- wastes, resulting in resource crises and environmental issues. They inevitably hindered the sustainable de- velopment of production and consumption and brought serious challenges to human survival and develop- ment.53 _{Clearer notions of the environment and a sense of the need to protect it grew following the European}

Nature Conservation Year in 1970, the United Nations Environmental Conference at Stockholm in 1972, and the report issued by the Club of Rome in 1972. Sustainable development is defined under different view- points including from the government, the business sector, and the citizens. The most widely known one is the one from Brundtland committee in 1987 report, according to which the core concept is to satisfy the needs of the present generation in such a way that it will not lower the chance of the future generations in satisfying their needs.54 _{Sustainable development is originally defined as the reconciliation of “triple-bottom}

line” factors of economic, environmental, and social dimensions.55 _{The expression of “triple-bottom line” is}

often used in the business world to convey this notion of a three-way trade-off. Organizations are increasing- ly aware that choices made about products and processes can have profound environmental and social impli- cations. However, they must balance ecological and economical goals to ensure a reasonable return on investment and long-term enterprise viability for organizational stockholders.56

In German literature, the concept of sustainability works is based on three principles of responsibility, closed-loop, and cooperation.57 _{Responsibility principle emphasizes the inter-generational duties to protect}

and improve the environment for present and future generations. The cooperation principle expresses the ability of interlocking and making the agreement between different processes and stakeholders to obtain value-added chain. Meanwhile the principle of closed-loop refers to the dependence and integration between economic and ecological goals of obtaining sustainable development. Organizations have been aware of the trade-offs between business, economy, and the environment.58 _{The integration is not only important from the}

aspect of the environment and society but also from the perspective of business. Legal regulations and mar- ket environments (e.g. stakeholder pressures and customer demands) that have required more environmental

52 _{See Desta (1999), p. 12} 53 _{See Baojuan/Zu (2007), p. 1} 54 _{See WCED (1987), p. 54}

55 _{See Umweltbundesamt (1998), p. 3; Cf. also Hei/Scheicher-Tappeser (1998), p. 13; Ivisic (2002), p. 100; Seitz (2006), p. 15} 56 _{See Presley/Meade/Sarkis (2007), p. 4596}

57 _{See Kaluza/Pasckert(1997), p. 105; Cf. also Ivisic (2002), p. 100} 58 _{See Neto et al. (2008), p. 6}

responsibilities from business can have a positive influence on economic performance.59 _{For example, stric-}

ter environmental legislations have required many OEMs to work very closely together with their partners in different stages of supply chain to enhance the efficiency of resource conservation, cost reduction, and customer satisfaction.

Under the approach of sustainable development, a new economic growth model named “Closed-loop Econ- omy” appeared in Europe since the late 1980s. The principles of closed-loop economy are “Reduction, Reuse and Recycle,” in which reduction indicates lower input (resource and energy) flowing into production and consumption process and less pollution is generated. The principle of reuse maximizes the rest value of returned products through the utilization of effective repair, refurbish, and recondition programs. The prin- ciple of recycling that refers to the best route for material recovery of products indicates lower waste for final disposal and lower natural resource consumption by turning wastes to secondary resources. By translating disposal to resources through recycling process, negative influences on environment and resource is greatly reduced (see Figure 5).

Figure 5: A closed-loop economy - A fundamental of reverse logistics development Source: Adapted from Baumgarten/Walter (2003), p. 9

The closed-loop economy, with closing material cycle as the core, utilizes ecological laws to reorganize economic activities that increase the utilization ratio of resources and energy to an extreme extent. It can create the ecological balance of economic activities, eliminate environmental pollution, and improve the quality of economic development.60 _{Sustainable development with “triple-bottom line” factors supports}

standing of the environmental efficiency of closed-loop economy as well as implies the economic efficiency by managing resources with the activities of product take-back, reuse, refurbishing, recycling, and energy production.

2.1.2. A closed-loop economy – A fundamental for reverse logistics development

Still in the early 1970s of the last century, wastes from private households and from businesses, including hazardous wastes, were untreated and dumped in municipal landfills.61_{A closed-loop economy with the}

ecological and economic integration has expanded the approach of waste management. The pursuit of the ideal of closed-loop economy leads to a new waste management approach emphasizing the basic principles

59 _{See Winkler/Kaluza/Schemitsch (2006), p. 6}

60 _{See Schmid (1996), p. 107; Cf. also Baojuan/Zu (2007), p. 1} 61 _{See Wehkling et al. (1995), 12; Cf. also Wuttke (2011), p. 8}

of reduction, reuse, and recycling. They stipulated the cores of the closed-loop economy.62 _{The concept of}

waste management under closed-loop orientation developed an organizational and technical platform for the implementation under considerations of economic and ecological objectives. Therefore, many European countries have enacted waste legislation for the adoption of new waste management approach for prevention and recycling in order to reduce the amount of wastes and recapture value from wastes.63 _{Recycling has}

become an important component of modern waste management approach that is defined as the process of systematically collecting, sorting, decontaminating, and treating used material waste into new products.64

The increasing attention to modern waste management approach based on the principles of reduction, reuse, and recycling was perceived as the fundamental for the development of reverse logistics in the 1990s.65 _From

the new waste management approach, one of the elements in order to maintain sustainable development is to manage economically and ecologically the problem of wastes, which need the supportive processes of col- lecting, transporting, warehousing, sorting, testing, dismantling, and recovering. It is considered as logistics management of waste streams. Noting the global approach to the problem of wastes is a noticeable trend of increasingly greater use of logistics management processes of waste streams to meet the principles of sus- tainable development, while combining ecological and economic objectives. The ecological purpose stresses the relationship between logistics and the environment, which is to protect natural resources and reduce pollution arising from the presence of wastes. The economical objective is clear from the essence of logistics to reduce operation costs while improving services of waste management. In the long term, these objectives are most consistent and the attempts to achieve them lead to positive results for closed-loop economy. Posi- tive results of logistics in waste management have led to popularizing the concept of reverse logistics, which contributes to the practical implementation of the philosophy of sustainable development, both at the level of individual enterprises and extended supply chains.66

In the perspective of closed-loop economy, reverse logistics refers to the role of collecting, transporting, handling, warehousing, recycling discarded products; a broader perspective includes all relating to logistics activities carried out in source reduction, recycling, substitutions, reuse of materials and disposal; which have been seen as the important solutions for environmental problems and sustainable development.67 _{Under this}

perspective, the concept of reverse logistics emerged as an attempt to prevent waste of potentially useful materials, reduce the consumption of fresh raw materials, reduce energy usage, and reduce the need for "conventional" waste disposal, which is also regarded as waste logistics. Waste recycling falls into a first management category in reverse logistics functions because the early literatures in RL focused on recy- cling.68 _{Many researchers suggested that resource reduction ought to be the ultimate goal of the reverse}

logistics processes in closed-loop economy.69

Although reverse logistics is closely linked with waste logistics and recycling, it differs somewhat from waste management, as the latter is mainly concerned with the efficient and effective collection and processing of wastes: that is, products for which there are no longer any reuse potential (no recovery val- ue).70 _{Reverse logistics concentrates on the flows where there is some value to be recovered and the out-}

comes enter a (new) supply chain (low to high value recovery).71 _{The methods of product treatment are very}

important in defining boundaries of reverse and waste management. In our view, if the goods are discarded with the similar characteristics and in the same format into the consumer market; or the goods are disman- tled, broken up in spare parts for refurbishing, remanufacturing, and recycling, then it is still relevant to

62 _{See Ivisic (2002), p.11; Cf. also Deubzer (2011), p. 22}

63 _{See Mager/Waltemath (1997), p. 6; Cf. also Deubzer (2011), p. 22} 64 _{See Wiard/Sopko (1989), p. 6; Cf. also Wildemann (1997), p. 8} 65 _{See Enarsson (2006), p. 185-187}

66 _{See Starostka-patyk/Grabara (2010), p. 698}

67 _{See Stölzle (1993), p.150; Cf. also Rogers/Tibben-Lembke (1998), p.17}

68 _{See Guitinan/Nwokoye (1975), p. 28; Cf. also Pohlen/Terrance (1992), p. 35; Wu/Dunn(1994), p. 20; Marien (1998), p. 43} 69 _{See Carter/Ellram (1998), p. 85; Cf. also Enarsson (2006), p. 186; Kocabsoglu/Prahinski/Klassen (2007), p. 1141} 70 _{See Brito/Dekker (2002), p. 1-4; Cf. also Cherrett et al. (2010), p. 243; Gevaers/Voorde/Vanelslander (2010), p. 4-6} 71 _{See Brito/Dekker (2002), p. 4}

discuss reverse logistics. If the goods have no recovery value and are therefore disposed of incineration or landfill, it is regarded as waste management.72 _{Moreover, major differences also exist between the network}

types and the demand side. While a flow of recovered products are frequently directed toward reuse markets, waste streams eventually end at landfill sites or incinerations plants after various treatment processes.73

However, the similarities in the supply side of products discarded, e.g. households and business customers, and the processes of recycling create very thin differences between waste management and reverse logistics in the aspects of environmental considerations and under the perspective of closed-loop economy. Figure 6 demonstrates the brief review of reverse logistics processes and the difference from waste management.

Figure 6: Processes of reverse logistics and difference from waste logistics Source: Adapted from Brito (2003), p. 40

Although the processes of reverse logistics are not new because product recovery and recycling in itself has been applied for centuries,74 _{the management of discarded products with the new driving forces and the}

emphasis of extended responsibility of manufacturing industry for the entire life cycle is new and has ob- tained noticeable attentions. A closed-loop economy has harmonized economic development with environ- mental protection by regulating related take-back laws following the principle of extended producer respon- sibility. Since the 1990s, the commercial sector and industrial companies in Europe have paid increased attention to the environmental problems by formulating sustainability strategies and recovery programs. Increasing investments in product eco-design as well as take-back and recovery of EoL products applied in many firms in Europe over the last decades are the examples of integration of economic and ecological goals for sustainable supply chain management. The impacts of environmental concerns have occurred in all phases of the cycle of products including research and development, procurement, production, distribution, use and disposal, which require the integration of different functions and organizations in business networks. Along with the development of logistics, reverse logistics is regarded as an integral part of logistics system.75 The evolution of logistics also motivated the development of reverse logistics.

2.2.

Logistics - Motivations for reverse logistics development

2.2.1. Logistics development and reverse logistics

Logistics is the term now widely used to describe the transport, storage, and handling of products as they move from raw material source, through the production system to their final point of sale or tion.76The start of awareness for logistics in business community and academic field of management studies was located and dated in the US in the early 1960s with the creation and awareness of Marketing Logistics,

72 _{See Thiery et al. (1995), p. 417; Cf. also Gevaers/Voorde/Vanelslander (2010), p. 4-6} 73 _{See Cherrett et al. (2010), p. 243}

74 _{See Krikke (1998), p. 2-3} 75 _{See Stölzle (1993), p. 154-155} 76 _{See McKinnon (2010), p. 3}

Business Logistics, and the Logistics of Distribution.77 _{Some years later, the development of logistics prac-}

tices and research also evolved in Europe78 _{and in other parts of the world. In the 1970s, the awareness of}

logistics was regarded as classical logistics relating largely to Marketing and Physical Distribution, in which the models of well-managed distribution system, the treatment of the issues of transportation and warehous- ing were explored.79 _{“Material” logistics or “physical” logistics in German language referred to as “TUL”}

logistics (Transport, Umschlag, Lagerung) indicated the role of logistics in transport, handling and ware- housing. It is the sum of material and quantifiable activities of “placing”, “pacing”, and “parsing” goods and things.80

During the 1980s, companies tried to optimize good flows in order to cut logistics costs by the improvement of outbound (i.e. distribution) and inbound (i.e. supply and production) flows.81 _{Companies in this period}

also optimized the total flows by developing an overall process for managing information and goods flows. Logistics is structured as a cross-divisional function or integrated logistics at the company level. Functions of procurement, inventory control, transport, warehousing, material handling, packaging and after-sales services are increasingly coordinated in a single flow of material movements.82 _{Companies also began outsourcing}

logistics operations to gain cost reduction and flexibility. The professionalization and concentration of “Third Party” transport and Logistics Service Providers (LSPs) initially emerged.83 _{The instrumentations of}

logistics through “hard” engineering technologies (mechanized and automated transport, warehousing, packing, and other equipment) were increasingly employed in Europe in this period. The terminology of reverse logistics did not surface officially in published papers in Europe during this time. Most of the related contents of reverse logistics were often labeled waste disposal, or waste management, and recycling in the aspects of environmental concerns.

The significant development of modern logistics occurred in the 1990s in which the holistic understanding of logistics is explored as intra and inter network of processes.84 _{Logistics is integrated with various functions}

in not only internal business networks but also cross-institutional integration that brings benefits of value- added chain. Logistics is regarded as a competitive advantage in business performance and becomes a more complex process with the increasing cooperation of downstream and upstream partners. Control of flow dynamics in the integrated logistics networks is set up under customer demands and synchronization of the flow across multi-stage sequences of activities.85 _{For example, customer satisfaction can be increasingly}

improved through after-sales services and warranty services with the support of integrated logistics net- works. The emergence of returned products from customers and the implementation of take-back responsi- bility for EoL products have initially increased the complexity of integrating and the requirements of opti- mizing logistics performance. The principles of closed-loop economy have required the possible extra asso- ciated costs and the need to effectively coordinate with the other functions of logistics. Many numerical studies and case studies indicate that logistics management of reverse flows can efficiently be integrated in existing logistics processes.86 _{In fact, reverse logistics adds to the dominant position of logistics with the}

tight interlocking in other areas of logistics because all logistics domains of procurement, production and distribution have to confront the issues of reverse flows from input, throughput and output, and the goals of waste minimization in each process.87 _{Reverse logistics is also characterized with cross-functional natures in}

business process management of a company by interfacing with many other functional areas within an organ-

77 _{See Stock/Lambert (2001); Cf. also Ballou (2007), p. 333} 78 _{See Pfohl (1972), p. 12}

79 _{See Baumgarten/Walter (1996, 2000), p. 2 and p. 4} 80 _{See Sheffi/Klaus (1997), p. 3}

81 _{See Malmborg (2004), p. 3-4} 82 _{See Waters (2007), p. 4} 83 _{See Peter Klaus (2009), p. 57-59}

84 _{See Baumgarten/Sommer-Dittrich (2003), p. 240} 85 _{See Peter Klaus (2009), p. 57-59}

86 _{See Flecischmann et al. (2001), p. 13} 87 _{See Pfohl (1993), p. 214}

ization. Decisions made in each of these areas have an impact on the ability of logistics to conserve re- sources, generate additional revenues, and achieve green goals.88

The increasing roles of logistics in cross-functional integration have led to the increased attention to manag- ing all operations and activities in a firm following the process chain to maximize value chain.89 _Therefore,

the orientation of managing the chain of cross-functional and cross-institutional processes was initially established in the business activities of many companies with the objectives of satisfying customer demands and optimizing the logistics processes. Management of process chain has united the internal and external value chain of firms to create competitive advantages. In each firm, there are frequently four essential processes including process for research and development, process for supply, process for order processing, and process for returns management (see Figure 7).90 _{Process chains are closed by the integration of reverse}

logistics into basic functions,91 _{e.g. procurement, production, and distribution. The performance of each}

process chain is equally dependent on how effectively and efficiently a firm integrates internally and coope- rates externally with its direct partners and on how well these business partners cooperate with their own partners.

Figure 7: Process chains in logistics

Source: Adapted from Baumgarten/Darkow/Walter (2000), p. 28-29; Cf. also Ivisic (2002), p. 148

The process of development focuses on designing new products and services, which plays an important role in improving the competitive advantages for firms through attractive design, convenient and modern func- tions, and eco-friendly products. This process has integrated with reverse logistics operations by developing innovative design of package and products for easily delivery and recovery. Therefore, selecting partners to collaborate in the process of research and development is very critical for firms in improving their value chain.92 Demand determination, purchase, and procurement logistics are the most important activities in the process of supply. This process focuses on forecasting and planning the demand of materials, accessories, equipment, and information for production. The cross-functional integration and intensified collaboration with supply chain partners (e.g. suppliers, logistics service providers) help firms ensure the optimization of supplying and using materials and facilities for production. The process connects closely with reverse logis- tics operations in balancing the volume of products or components returned, recovered, and reused for new production, which help firms reducing the costs of materials, production, and disposal.93

The process of order processing is strongly influenced by customer orientation and is implemented by many sub-processes to ensure that the contracts of customers are conducted effectively.94 _{Reverse logistics is}

88 _{See Stock (1998), p. 56} 89 _{See Baumgarten/Sommer-Dittrich (2003), p. 7} 90 _{See Baumgarten (1995), p. 148} 91 _{See Pfohl (1993), p. 214-216} 92 _{See Baumgarten/Risse (2000), p. 32} 93 _{See Pfohl (1993), p. 243} 94 _{See Baumgarten/Darkow/Walter (2000), p. 10}

involved strongly and positively in this process by managing effectively the returns in production, from distribution, and after post-stage consumption. For example, the integration of reverse logistics into distribu- tion and consumption of goods through after-sales services, spare part management, and returns management has contributed to increasing customer satisfaction, reducing costs, and improving profitability.

In the decade of the 2000s, the integrated logistics networks, the increasing management of process chain, and the growing inter-organizational collaboration have motivated the development of supply chain man- agement as a network of firms that interacts to manage the total flows of business processes. All organiza- tions along the supply chain share the same objectives of satisfying final customers and improving their profitability, therefore increasingly cooperating to achieve this aim. Most opportunities for cost reduction and value chain enhancement lie at the interface between supply chain partners. The integrated logistics in this period aims at improving overall effectiveness and reducing overall costs at both firm and network