Download Reverse Logistics Strategies and Implementation: A Survey of Tianjin

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,
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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.
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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
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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
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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.
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