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Reverse Logistics Strategies and Implementation: A Survey of Tianjin SHEN Chenglin School of Business, Tianjin Polytechnic University, Tianjin 300384, China [email protected] Abstract The purpose of this paper is present a survey of reverse logistics (RL) development in Tianjin. Combined with the theory of circular economy, we apply green development index to evaluate the level of reverse logistics in Tianjin. Current RL strategies of Tianjin are surveyed in the aspects: practical patterns, policies, legislation and strategic programming. Finally countermeasure suggestions are brought up to improve RL development. The insights and learning under different scenarios may be help for decision making by various stakeholders such as local government, local remanufactures and third party logistics providers. Keywords Reverse logistics, Circular economy, Strategy, Tianjin 1 Introduction The sustainable development policy has been adopted as a basic state policy in China. To build well-off and harmonious society, circular economy (CE) becomes the inevitable practical mode in this age of China. Growing green concerns and advancement of reverse logistics (RL) concepts and practices make it all the more relevant. As an effective means for solving the problems of global resource shortage and environment pollution, reverse logistics is regarded as a bridge to connect circular economy development and environmental protection. Generally speaking, three drivers (economic, regulations and consumer pressure) drive product returns worldwide. Concerns about environmental issues, sustainable development and legal regulations have made organizations responsive to RL. Reverse logistics management has been applied widely in enterprises world wide. RL issues are mainly code-driven in Europe; profit-driven in North America and in initial stage in other parts of the world, including China. Tianjin, which is the largest coastal city in the northeast part of the North China’s Plain, introduced CE idea in 1999 and has made rapid economic progress over the recent decades. But the RL has not received necessary attention and generally carried out by unorganized sectors. In order accelerate the progress of CE and realize the economic aims of reduction, resources and innocuity, the RL strategy and implementation of Tianjin have to be investigated comprehensively. In this paper, firstly we analyze the current condition of the RL in Tianjin. The analysis consists of a brief quantity calculation of RL which we use Green Development Index to express. Secondly we summarize the RL’s policies of Tianjin government and analyze the implementation status. Finally combined the quantity analyses we put forward several countermeasures to improve the RL in Tianjin. Thus, managing product returns in a more effective and cost-efficient way to stimulate CE to develop in a sound way. 2 Analysis of RL development level in Tianjin 2.1 RL strategic decision and driven factors Reverse Logistics (RL) may be defined as the management of returned materials from customers, including their restoration, reengineering, recycling, liquidating or disposal of waste in an environmentally friendly manner. The objective is to minimize the handling cost and lead to the maximal profits from the goods or proper disposal. The key thing is to speed up this cycle, thus to increase the customer service level and customer satisfactory. A major problem in reverse logistics is the irregular return flow of end-of-life products and the uncertainty about the expected number of products returned through a deposition program. So estimation of returns is a pre-requisite for establishment of an effective and efficient RL network and hence becomes very crucial in this context. The CLM(Council of Logistics Management) book broached that organization may have three-phase pattern of development, 891 namely: reactive, proactive and value-seeking. We look upon the decisions regarding Reverse Logistics at three phases: strategic, tactic and operational. Three-phase pattern of development mainly address on strategic decisions. In our study we focus on strategic decision problems. The strategic decision for a firm may include problems such as recovery strategy, product design, and network capacity & design and so on. We categorize the driving forces for companies and other organizations to active in RL into three factors: economics (direct and indirect), legislation and extended responsibility. Companies may get involved with recovery as a strategic step to get prepared for future legislation. Getting more competition ability or a good environmental image may be other drives in these cases. One should note that reverse logistics is often done for a mix of reasons whether the organization practical pattern is reactive, proactive and value-Seeking or not. 2.2 Quantitive analyses of RL development in Tianjin RL development level can directly affect the development degree of CE. The character of CE is 3R( Reduction, Recycle, Resource), which is coherent with the RL. We use previous study results to reflect the level of RL (Shen chenglin, 2007) because the indices in this study delegating 3R characters. In the paper, we established an index system on the basis of four big systems, that is, industry system, city infrastructure system, habitation environment system and social consumption system. The index system is composed of objective layer, factors layer (first layer), indexes layer (second layer), and sub-index layer (third layer). The factor layer (first layer) includes the index economy development, green development, human and culture development; the indexes layer (second layer) includes economy strength, reduction, recycle, reuse, society, etc; and the sub-indexes layer (third layer) is built up from 30 concrete indexes. For more details, see in the literature of the author. Finally we apply green development index to evaluate the CE level in Tianjin from 2000 to 2005(see table 1). Table 1 Green development index of Tianjin from 2000 to 2005 Reference value 2000 2001 Reduction index 1 0.220 0.3158 Reuse index 1 0.797 0.811 Recycle index 1 0.715 0.732 Green development index 1 0.357 0.431 2002 0.322 0.711 0.697 0.422 2003 0.350 0.714 0.712 0.446 2004 0.360 0.798 0.710 0.459 2005 0.379 0.822 0.794 0.491 Thus we estimate the RL level from the 3R indices (Note: Here we use the reuse index to reflect resource index as the targets are the same). The results show that of all the 3R indexes in the past six years, the value of reduction index was the lowest, while the value of reuse index was the highest. During this period, the reduction index increased year after year due to the effective control of the consumption of the energy, raw material and water. The discharging amounts of the three wastes have reached the international classifiable level. The using intensity of farm pesticides accesses to the level of developed countries. But the usage of chemical fertilizers on agricultural products is rather large; hence the local government should pay more attention to the soil sustainable capability. By the comparison of the reuse indexes, we found that their values increased steadily, indicating that the local government have emphasized the rate of reusing industrial waste water.On the other hand, the rate of comprehensive using urban sewage has a big gap to the reference value. The recycle index remained steadily at 0.71 in the past five years but increased to 0.79 in 2005. Disposal rate of industrial waste residue was still low compared with the advanced level and need to be ameliorated. In all, RL development level of Tianjin increased yearly, the local government should fill up the gap with the advanced cities or countries. 3. Current strategies and implementation status Scholars (Achrol, 1983; Carter etc, 2001) introduced a model that show all the distinct types of tangible, external organizations that affect a firm’s reverse logistics activities(see figure 1). The framework shows that the task environment is divided into: Input, regulatory, output and competition. 892 The regulatory task environmental consists of both government agencies and interest aggregators. Government policies and legislations have great influence upon a firm’s reverse logistics activities. Here we give no more mechanisms between participators (firms, consumers, government). Current RL strategies of Tianjin will be surveyed in the aspects: practical patterns, policies, legislation and strategic programming. 3.1 RL practical mode presents a mixed characteristic Society in general and particularly in Tianjin context is still price sensitive and to a little extent quality sensitive (quality for a given price) but not Eco-sensitive in its buying and promotion behavior. The manufactures/service providers did not receive much more pressure from prospective consumers. That is the environmental conscious consumption habits have not been established in Tianjin yet. Most firms involved in RL because of negative punishment from the environmental regulations. Quite a few of companies engaged in RL activities are profit-driven. These kinds of industries converge at electrical return products, metal disposal, plastic garbage and glass disposal. In recent years automobile waste recovery systems are being established. Intravenous industry expanded fast. Tianjin has developed various types of ecological industry parks (EIP) in Tianjin development zone and Dagang zone. The Tianjin development zone has basically realized zero emissions. All these kinds of practices can be regarded as value-seeking forms. Macro Environment Regulatory Government Input Suppliers Interest Aggregators Output Reverse Logistics 1.Reduction 2.Reuse 3.Recycle 4.Disposal Buyers Competitors Competitive Figure 1 A model of the environmental forces affecting reverse logistics activities (Achrol etc, 1983) 3.2 Tianjin has taken a series of policy to develop RL to coordinate CE development From 1999, the government adopted CE idea in the area below: (1) Adjusting industrial structure, shutting down some enterprises that have backward technologies, waste resources, pollute environment ;(2) Optimizing energy structure, reducing the proportion of coal in energy, raising the utilization rate of coal, promoting clean coal technologies, developing renewable energy such as firedamp; (3) Quickening the construction of sewage and garbage treatment facilities to better treat domestic pollution. A series of projects to carry out the 3R policies during Tianjin 10th Five-Year Plan include: blueness sky project, green water project, quiet project, solid waste pollution prevention project, eco-city and villages project, water environmental governance project, strengthening anti- radiation management. The government encourages enterprises to engage in circular economy through preferential policies. The enterprises engaged in comprehensive use of resources will enjoy tax reduction and exemption policy. The efficiency of CE obviously advanced in recent years. 3.3 Laws and regulations have been continuously improved Generally speaking, there has not been a legal framework for the development of RL. China has issued many laws and regulation such as: Cleaner Production Promotion Law, Law of the People’s Republic of China on Environmental Impact Assessment (EIA), Renewable Energy Law, Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste and so on. Tianjin promulgated and implemented many laws and regulation in environmental protection, energy saving and local cleaner production policies and rules. The regulations such as hazardous waste 893 operating license management solution of Tianjin (2004), Tianjin hazardous waste transfer implementation details (2004) issued and implemented gradually. Such legislation efforts have laid a foundation for RL activities according to law. 3.4 Strategy of RL plan is still not clear but combined in CE programming Although many efforts have been paid on CE for government but the public has not been adequately aware of the significance of developing circular economy, let alone RL programming. Now for the government mainly deal with RL as intravenous industry. Companies focus on quite a few recycle materials owing to profit-driven. The RL is generally carried out by unorganized sectors. But more exciting is the rate of garbage innocuous disposal is higher than 90%. Generally speaking, solid waste comprehensive utilization and garbage separate collection management need sound and reasonable RL network system. Tianjin is committing to build a basic framework for CE and strengthen RL network both for society and industrials. 4 Countermeasures to improve RL development 4.1 Building legal system on the promotion of Reverse logistics Transferring Tianjin’s mode of RL from reactive to proactive even to value-seeking and raising the quality and efficiency of economic development cannot be realized overnight. Necessary legislation must be hastened to change the behaviors of enterprises compulsorily and push the development of circular economy according to law. The legislation framework should be made clear, which will include the basic law, comprehensive law and special law. The local regulations and special laws of RL need to be perfected. The pollution discharge right trading system should be promoted in more broad regions. Energy label and accreditation system should be implemented. Scientific production norms should be issued to standardize every link of the production – preventing and reducing wastes from the very beginning. Different pollution discharge standards should be adopted for different regions of different development levels and the charge rate for waste discharge should be raised. Supervision should be intensified to help enterprises involved in circular economy can profit. Especially, remanufactures and third party logistics(TPL) providers engaged in reverse logistics need encouraged under laws and regulations. 4.2 Guiding the development of Reverse logistics through policy guidance A system and policy environment should be gradually established in favor of the development of reverse logistics Industrial policies should emphasize raising resource efficiency and environment, promoting strategic economic restructuring so that they would be helpful to building a circular economy system. Policy of logistics should pay more attention to ‘Reverse’ industrials. Effective incentive policies, recovery treatment system and rational pricing mechanism should be in construction. After Completing the statistics and calculation of resource utilization, the local government need place a comprehensive use of resource and product recovery under overall strategic RL plan and complete system. Government can use economic means to build an incentive mechanism for RL. Using market means to promote circular economy is an extension of incentive mechanism for environment protection. The tools include taxation, the property right of resources, pricing system and contract energy etc. The programming of RL in Tianjin should promote early. Sound and advanced RL network system for society and industrials should be designed. Govern can invest or encourage TPL invest in RL area to get profits. 4.3 Developing applicable technologies to form the technological support system for RL Most of the enterprises have not been able to develop common and key technologies that can help substantially raise resource efficiency, and there also lack channels for them to know about relevant technological information. A number of platform and common technologies should be developed that produce good economic return, consume less resource and have less pollution, including information technology, substitution technology, The technological development for RL should be included in the 894 Tianjin’s mid- and long-term scientific development plan. 4.4 Carrying out education and publicity activities to awaken environmental awareness The public may not aware of the significance of developing circular economy, let alone RL. The public has not known much about the concept, connotations and role of RL. Great effort should be made to increase publicity and education in order to help leaders, enterprises and institutions and the public better aware of the importance of Reverse logistics. The activities should be well organized for energy saving week, water saving day, land day and environment day. Various training activities can be organized to enhance the sense of resource shortage and environment protection among the public. The higher education should intensify the education about building a resource-conserving society, and the role of human being. In all, Developing reverse logistics is by no means the matter of government departments. It is also a matter of obligation for each citizen, for RL is closely related with daily life of everyone. Government and companies should play a active role in saving resources and opposing waste. All the citizens shall be gradually developing a resource-saving and environment friendly way of life and consumption. References [1] Shen chenglin, Qin Ruiqi. Circular economy indicators to evaluate regional development: a case study of Tianjin municipality. Chinese Business Review, 2007(46):15-19 [2] R S Achrol, T. Reve, L.W. Stern. The environment of marketing channel dyads: a framework for comparative analysis. Journal of Marketing, 1983(47):55-67 [3] Carter C R, Ellram L M. Reverse logistics: A review of the literature and framework for future investigation. International Journal of Business Logistics, 1998,19(1):85-102 [4] De Brito M P, Dekker R. A framework for reverse logistics. ERIM Report Series Reference No. ERS-2003-045-LIS, 2003 [5] Samir K. Srivastava, Rajiv K. Srivastava. Managing product returns for reverse logistics. International Journal of Physical Distribution & Logistics Management. 2006, 36(7):524-546 [6] Han Qixiang, etc. Tianjin Statistical Year book. China Statistic Press. 2001-2006 [7] Zhou Hongchun. Circular economy in China and recommendations. Ecological Economy, 2006,(2): 102-114 895