When reverse supply chain makes financial sense: a study of factors affecting profitability in reverse supply chains

Figures & data

Figure 1. The reverse supply chain (adapted from Guide and Van Wassenhove 2006)

Table 1. Direct costs factors of RSC (Larsen et al. 2018)

RSC cost factors	Direct influencers of RSC costs
Revenue from resale	Customer willingness to pay for recovered product
	Share of market willing to purchase a recovered product
	Market share of green customers
Process costs	Uncertainty of demand market size
	Ease of inspectability
	Core product dimensions
	Uncertainty of core product quality
	Return volume
	Volatility and uncertainty of return volume
	Core product recoverability
Acquisition cost	Core product return rate
	Incentive needed to reacquire core products
	Availability of core products
	Core product recoverability
	Degree of product customization

Figure 2. Business perspective on RSC

Figure 3. An RSC containing three RSC-functions

Table 2. List of informants

Firm	Interviews
Case firm A	Senior manager for global logistics
	Project manager for operations excellence
	Head of sales for recovered products
	Head of manufacturing at Nordic plant
Case Firm B	Supply chain director
	Project manager for packaging logistics
	Project manager for supply chain development

Table 3. Direct influencers in Case A1

∑I	∑PC	∑OC
a. Sales price of recovered product	e. Screening of used product at customer’s location*	q. Used product acquisition costs
b. Earnings from servicing the recovered product*	f. Holding inventory in the firm’s subsidiary that buys the used product*	r. Cost of new parts in refurbishing process
c. Earnings from sales of additional new products*	g. Transport from subsidiary to factory	s. New product cannibalisation costs*
d. Earnings from servicing new product*	h. Initial screening at factory*	t. Sales costs*
	i. Holding used product inventory at factory*
	j. Refurbishing of used product to a basic non-customer-configured product*
	k. Holding non-customer-configured product inventory at factory*
	l. Configuration to specific customer at request of sales department at subsidiary*
	m. Holding configured product in inventory at factory*
	n. Transport from factory to subsidiary
	o. Holding configured product in inventory in subsidiary*
	p. Transport from subsidiary to customer

* Influencers that need quantification

Figure 4. Sensitivity analysis: Case 1

Table 4. The set of influencers identified in the case

∑I	∑PC	∑OC
a. The avoided cost of the new component (includes purchasing)	c. Transport from subsidiary to factory	i. Used product acquisition costs
b. The avoided cost of disposing of used component (scrapping cost)	d. Screening and sorting*	j. Cost of new parts in refurbishing process
	e. Holding used product inventory at factory*
	f. Recovery process (failure id., disassembly, component switch, reassembly and test)*
	g. Holding recovered component in inventory at factory*
	h. Transport from factory to subsidiary

* Influencers that need quantification

Figure 5. Sensitivity analysis: Case 2

Table 5. The set of influencers identified in the case

∑I	∑PC	∑OC
a. Avoided cost of purchasing new materials	c. Collection of packaging materials at customers’ sites	i. Disposal of worn materials*
b. Added revenue through the service of taking back packaging materials	d. Transport from the German market to the firm’s Scandinavian factory
	e. Internal materials handling and cleaning

* Influencers that need quantification

Figure 6. Sensitivity analysis: Case 3

Guide, V. D. R., and L. N. Van Wassenhove. 2006. “Closed‐loop Supply Chains: An Introduction to the Feature Issue Part 1.” Production and Operations Management 15 (3): 345–350.

 Web of Science ®Google Scholar

Larsen, S. B., D. Masi, D. C. Feibert, and P. Jacobsen. 2018. “How the Reverse Supply Chain Impacts the Firm’s Financial Performance: A Manufacturer’s Perspective.” International Journal of Physical Distribution & Logistics Management 48 (3): 284–307.

 Web of Science ®Google Scholar