The Reverse Logistics Maturity Model: How to determine reverse logistics maturity profile? - method proposal

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28th International Conference on Flexible Automation and Intelligent Manufacturing (FAIM2018), 11-14, 2018, Columbus, USA Manufacturing 28th International ConferenceJune on Flexible Automation and OH, Intelligent (FAIM2018), June 11-14, 2018, Columbus, OH, USA

The Reverse Logistics Maturity Model: How to determine reverse The Reverse Logistics Maturity Model: How2017, toproposal determine reverse profile? - method Manufacturinglogistics Engineeringmaturity Society International Conference MESIC 2017, 28-30 June logistics maturity profile? method proposal 2017, Vigo*a(Pontevedra), Spain a Monika Kosacka - Olejnik , Karolina Werner-Lewandowska Monika Kosacka - Olejnik*a, Karolina Werner-Lewandowskaa

University of Technology, Faculty of Engineering Management, Strzelecka 11, Poznan 60-965, Poland Costing Poznan models for capacity optimization in Industry 4.0: Trade-off Poznan University of Technology, Faculty of Engineering Management, Strzelecka 11, Poznan 60-965, Poland between used capacity and operational efficiency Abstract a a

Abstract a a,* b b Santana P. Afonso , A. Zanin , R. Wernke However, reverse logistics is A. gathering much ,more attention in academia and business practice, there is still a lot of ambiguity related to the reverse logistics architecture, particularly from in perspective processes. paperthere describes structure of the However, reverse logistics is gathering much more attention academia of and business This practice, is stillthe a lot of ambiguity a University of Minho, 4800-058 Guimarães, Portugal maturity enabling assessment of the reverse material flow with the use of fit for purpose maturity model, on the basis of related tomodel the reverse logistics architecture, bparticularly from perspective of processes. This paper describes the structure of the Unochapecó, 89809-000 Chapecó, SC, Brazil the well-known maturity assessment models. Theofaim this paper is toflow provide company maturity model for reverse maturity model enabling the of reverse material with cross the use of fit forvalid purpose maturity model, on the logistics basis of assessment which will bemodels. not only process-oriented but isit towill consider stakeholders of reverse logistics, diversified types of the well-known maturity The aim of this paper provide cross company valid maturity model for reverse logistics material flow and resources consumed in reverse logistics The method is elaborated based on the literature review assessment which will be not only process-oriented but itactivities. will consider stakeholders of reverse logistics, diversified typesand of authors’ own carriedconsumed out in Poland. material flow research and resources in reverse logistics activities. The method is elaborated based on the literature review and Abstract authors’ own research carried out in Poland. © 2018 the The Authors. Published by Elsevier B.V. Under concept Published of "Industry 4.0", B.V. production processes will be pushed to be increasingly interconnected, © 2018 The Authors. by Elsevier This is an open accessPublished article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/) © 2018 The Authors. by Elsevier B.V. information based onarticle a realunder timethe basis and, necessarily, more efficient. In this context, capacity optimization This is an open access CC BY-NC-ND licensemuch (http://creativecommons.org/licenses/by-nc-nd/3.0/) Peer-review under responsibility of the scientific committee of the 28th Flexible Automation and Intelligent Manufacturing This is an open access article under CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of the 28th Flexible Automation and Intelligent Manufacturing goes beyond the traditional aim of capacity maximization, contributing also for organization’s profitability and value. (FAIM2018) Conference. Peer-review under responsibility of the scientific committee of the 28th Flexible Automation and Intelligent Manufacturing (FAIM2018) Indeed, leanConference. management and continuous improvement approaches suggest capacity optimization instead of (FAIM2018) Conference.

maximization. study of capacity optimization and costing models is an important research topic that deserves Keywords: reverse The logistics; maturity model; process contributions from both the practical and Keywords: reverse logistics; maturity model; processtheoretical perspectives. This paper presents and discusses a mathematical model for capacity management based on different costing models (ABC and TDABC). A generic model has been developed and it was used to analyze idle capacity and to design strategies towards the maximization of organization’s 1. Introduction value. The trade-off capacity maximization vs operational efficiency is highlighted and it is shown that capacity 1. Introduction optimization might operational Over the last 10 hide years, significantinefficiency. amount of research work concerning the domain of reverse logistics (hereafter © 2017 The Authors. byresearch Elsevier B.V. RL), has been topic of becomes relevant, organizations seek opportunities to Over the lastreported. 10 Published years,This significant amount researchparticularly work concerning theifdomain of reverse logistics (hereafter Peer-review responsibility the scientific committee the Manufacturing Society International Conference response tounder consumer, regulatory and topic governmental pressures and to Engineering improve their environmental image and RL), has been reported. Thisofresearch becomesofparticularly relevant, if organizations seek opportunities to 2017. performance. However, regulatory RL is perceived as a part of logistics subsystem, there aretheir a lotenvironmental of research works on and RL response to consumer, and governmental pressures and to improve image performance. However, RL is perceived as a part of logistics subsystem, there are a lot of research works on RL Keywords: Cost Models; ABC; TDABC; Capacity Management; Idle Capacity; Operational Efficiency

Corresponding author: Tel.: +48 61-665-34-14; fax: +48 61-665-33-75; E-mail address: [email protected] 1. Introduction *

* Corresponding author: Tel.: +48 61-665-34-14; fax: +48 61-665-33-75; E-mail address: [email protected] 2351-9789 © 2018 The Authors. Published by Elsevier B.V. The cost of idle capacity is a fundamental information for companies and their management of extreme importance This is an open2018 access under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/) 2351-9789 Thearticle Authors. Published by Elsevier B.V. in modern©under production systems. In general, it is defined as unused orand production potential and(FAIM2018) can be measured Peer-review responsibility of the committee of the 28th Flexiblecapacity Automation Intelligent Manufacturing This is an open access article under the scientific CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/) in several ways: tons of production, available hours of manufacturing, etc. The management of the idle capacity Conference. under responsibility of the scientific committee of the 28th Flexible Automation and Intelligent Manufacturing (FAIM2018) Peer-review * Paulo Afonso. Tel.: +351 253 510 761; fax: +351 253 604 741 Conference. E-mail address: [email protected]

2351-9789 Published by Elsevier B.V. B.V. 2351-9789 ©©2017 2018The TheAuthors. Authors. Published by Elsevier Peer-review underaccess responsibility of the scientific committee oflicense the Manufacturing Engineering Society International Conference 2017. This is an open article under the CC BY-NC-ND (http://creativecommons.org/licenses/by-nc-nd/3.0/) Peer-review under responsibility of the scientific committee of the 28th Flexible Automation and Intelligent Manufacturing (FAIM2018) Conference. 10.1016/j.promfg.2018.10.027

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which with limitations including: i) theoretical orientation, ii) fragmentary approach to RL issues presentation, iii) lack of solutions supporting managing and improving the RL system. It was assumed, that companies are inexperienced with RL management, what creates demand for RL activities support. Reverse material flow is fairly diversified from forward flow (e.g. level of uncertainty and quality of returns). It was claimed, that RL may be perceived as important as production process, as both of them add value. Considering that, it was stated, that there should have been available methods/tools which support companies, including representatives of SME, in order to be aware of RL and to improve it. The framework introduced in this paper seeks to fill in discovered gap, with the use of maturity models. However there are many process-oriented maturity models, complexity of RL system requires new approach, that will link process orientation and resources’ context. In the result, there were examined main aspects of RL, which should be included into maturity model. Considering process character of RL and maturity models capabilities, authors proposed maturity model for RL, which ought to be a support to overcome RL’s challenges. In the presented paper, the method proposal was described. The main focus of the research, was to create a method useful for practical application, for each kind of industry and company size, simple for users considering aspects of RL. In order to achieve the main objective, there were defined the following research questions:  RQ1: What are main processes of reverse logistics?  RQ2: How to define reverse logistics maturity model?  RQ3: How to measure maturity level of reverse logistics The paper was structured as follows: a presentation of the research background from the perspective of maturity model concept and RL was given in Section 2. Section 3 discovered maturity model for reverse logistics with the modelling framework and maturity framework. Finally, in the last section there was given a summary and an outlook for further research. 2. Research background 2.1. Maturity models Maturity models (hereafter: MM) have been perceived as most common used tools of new generation, designed for fast-paced change in customers’ demands on goods and services, which encompass more than just quality requirements, but also consider issues including: Environment, people, occupational health, etc. [1, p. 165]. MM demonstrates evolutionary progress from initial to mature state, where there is established a logical path consisted of number of levels (stages) determined from the perspective of the assessment’s objective. The main purpose of MM is to indicate the stages of maturation paths, what requires characteristic of each level and the logical relationship between them. Considering that, it is relevant to define achievement criteria at particular stage. It was assumed, that with higher maturity level, the expectations on definition, structuring and standardization are greater. Some authors put a pressure on improvements, so MM is treated as a roadmap for process’s/object’s improvement (e.g. [2]). According to Iversen et al., MM are used to assess as-is situations, to guide improvement actions and to control progress [3]. MMs give a lot of opportunities for simple and effective assessment, although they are typically one-dimensional, with focus on process maturity, people capability or other objects’ maturity, however most of them are process-oriented [4, p. 22]. There are many MMs comprehensively described in literature (e.g. in [5]), however the most common approach is Capability Maturity Model Integration (CMMI) [6, p. 1317], which has been perceived as an opportunity for organizations to develop effective processes [7]. The roots for this approach lie in the software industry with the Capability Maturity Model (CMM) [8]. The success of CMMI has inspired the development of many MMs in other domains, what resulted in various topics on the matter of maturity/capability models for: software development,

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quality management, product development, SCM, supplier relationships, R&D, innovation, etc. [9]. The demand on MM is increasing as the number of related papers in SCOPUS database has been increased from one in 1983 till 95 in 20171. Although, there can be observed growing diversity and scale of publications, field of MMs research become more confusing in terms of the need for clarity of the maturity meaning [6, p.1318] and MM’s structure [10, p. 298]. Following Fraser et al., authors determined a list of most common elements and types of MMs, including [9]:  limited number of maturity levels (from three till six),  characteristic at each maturity level described by certain requirements, which should be achieved on that level,  ordering maturity levels from the lowest to the highest (perfection = maturity). Considering MMs shortcomings and common components, authors recommend to use guidelines for MM establishment proposed by Lasrado et al. [11]. To sum up all information regarding MMs, it was stated, that the process orientation in MMs is predominant, however the MM should fit the purpose. The last recommendation was vital in the presented research. 2.2. Reverse logistics In order to answer RQ1, there was made a short literature review according to Reverse Logistics (hereafter: RL). However, RL is young concept, it has received growing interest among practitioners (organizations like General Motors, Canon, Dell, and Hewlett-Packard, have introduced it into business practice [12, p. 77] and researches (confirmed by number of works on RL topic accessed on 04.02.2018: 32 600 hits in Google Scholar database, 198 results in Science Direct database (searching within titles) and 1027 hits in WoS database (searching within titles)). Following previous studies on RL [13, 14], it was stated, that there are few main aspects of RL, presented in the Fig. 1.

Fig.1 Main aspects of reverse logistics

According to the Fig.1, there are five main issues related with RL. RL adoption into business became a strategic goal for economic benefits and image-building operation, what may provide a competitive advantage, however it is also often effect of environmental legislation. Drivers of RL activities were investigated in work: [15]. Stakeholders of RL may be considered from the perspective of the question: Who does play a role in RL? It was stated, that RL’s main actors are: Government, creating a law (framework for other stakeholders); forward supply chain actors (supplier, manufacturer, wholesaler, retailer, end user) and specialized reverse chain players (e.g. recycling specialists), responsible for advanced recovery [16].

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Search results with maturity model in the title, total number of papers from 1983-2018 was 947 (access: 02.02.2018).

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In order to answer the question How?, there was crucial to define what are flows in RL’s processes? Firstly, on the basis of the material type, there may be distinguished two main streams: products and packaging [17, p.133-134.]. Packaging usually flows back, because it is reusable or due to the law regulations, which restrict its disposal [17, p.133]. Considering products flow, authors passed through many misunderstandings related to definition of RLs and other concepts closely related to RL, including green logistics and waste management [13, p. 21]. In order to clarify all presented concepts, there was prepared summary of mentioned issues in the Table 1. Table 1. Reverse logistics vs other related terms. Term

Type of material flow

Material flow characteristic

Main focus

Reverse Logistics

backward

Products with some value to be recovered, which may enter a (new) supply chain

Products’ recovery

Green logistics

forward

Resources used to run a business

Environmental protection and resource conservation

Waste management

backward

(e.g. water, electricity, paper, etc.) Waste (products or materials that are to be discarded)

Prevention of waste and proper waste utilization

Authors noticed, that the greatest difficulty was related to make a clear distinction between material flow in case of waste management and RL (Table 1). RL is focused on material stream of products with no function fulfillment at each stage of life in the supply chain. It corresponds with the approach of Rogers & Tibben‐Lembke [17], who recognized product according to its origin (end user or partner in supply chain) as well as Fleischmann, who divided three types of returns according to its origin and reason of appearance: manufacturing, distribution and customer described in details in: [14]. In the paper, the last approach to returns was adopted (Table 2). What is more authors claimed that with material flow, there is always related information flow e.g. companies are forced to report activity related to waste management. Coming back to the aspect of activities in RL, it was stated that, both product and packaging, may go through a variety of different processes. Due to the fact, that there is no one common approach among researchers, authors prepared a summary of information about RL with the use of SIPOC diagram (Table 2). Table 2. SIPOC diagram for RL [14, 17]. SUPPLIERS (S)

Input (I)

Process (P)

Output (O)

Customers (C)

Internal: Organization

quality-control returns

Collection

(Quality control, production, warehouse)

by-products

usable product (directly/reprocessed)

Internal: other department, Employee

External: Partners in the supply chain (distributor, retailer, etc.)

product recalls

End user 0(final customer)

excess inventory

B2B commercial returns (e.g. wrong/damaged deliveries, unsold products) packaging

Evaluation Storage Recovery

unwanted product (fully value) warranty returns

Redistribution

service returns (repairs, spare-parts, etc.) end-of-use returns (e.g. leasing product)

Integration

useable material (directly/reprocessed) useable packaging energy waste on landfill

External: partner in supply chain (distributor, retailer), End user, company from other supply chain

end-of-life returns

In the Table 2, authors considered main aspects of RL’s: suppliers (internal and external), various types of input (in relation to supplier type), processes included into RL, expected output (in accordance to recovery/reprocessing option) and customers of RL activities (internal and external). So far, RL was mostly presented from the context of

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recovery options (reuse, remanufacturing, recycling, etc.) provided for customers. In the paper, there were considered all types of material flows supplied by internal and external suppliers. Moreover, there was presented a process’ structure of RL. Authors suggested to consider each process from the perspective of Plan–Do–Check–Act cycle (PDCA) as one of the most common and the easiest management approaches for process control and continuous improvement. Collection is the first RL process, which refers to bring the products for eventual introduction back into the forward logistics and supply chain. Collected returns should be evaluated in order to choose appropriate recovery scenario. Evaluation may encompass activities that determine the further path for return, including: inspection, disassembling, testing, sorting. Evaluated returns should be storage in order not to lose their actual recovery value. Next process was recovery. In authors opinion, recovery options should have been selected in accordance to the influence on: People, Planet and Profit simultaneously, to consider more than only cost-effectiveness. The most popular recovery options include: reuse, repair, remanufacture and recycle. Moreover, there was also considered disposal as an option of returns management. In the context of the recovery option selection, authors recommended the use of Recovery option inverted pyramid presented by De Brito & Dekker [14, p.13]. After properly recovery, obtained flows should have been redistributed, so to ensure customers recovery product available. As a last process there was added integration, due to the fact that RL’s processes require holistic view on all processes, not single perspective. Authors are aware of complexity of the RL’s processes but from the perspective of RQ1, there was important to define main RL’s processes. To sum up, authors stated that, RL is still in a state of infancy, particularly in emerging economies [18], like Poland, what may be influenced by various barriers described by quality of returned products, financial constraints and lack of: training and education, people’s awareness, performance measurement, efficient information systems, etc. [19, 20]. Considering that, there was added additional dimension of RL on Fig. 1, namely challenges, what corresponds to overcoming mentioned barriers. All presented issues had an impact on maturity model formulation in Section 3. 3. Reverse Logistics Maturity Model (ReLMM) Structure The proposed ReLMM is a specific model, what becomes a result of: i) focus on specific domain of logistics which is dealing with backward flow of goods from typical final destination place to the destination with the purpose of capturing value, or proper disposal, ii) approach combining process resources. The basic reason of conducting research according to MM formulation for RL was other research on the topic of Logistics Maturity, considering all logistics processes in service industry, which have been carried out by authors of the paper. Previously only C. Battista et. al. (e.g. in [21]) worked on maturity model provided for the whole logistics system, but RL was not included into model. In the result, authors treated that as a research gap and made an attempt to fill it. After the need for ReMM was discovered, authors were looking for solution. In the result of the literature review, there was found only one work, including only few aspects of RL with the focus on types of products, but without consideration of all aspects of RL investigated in the Section 2.2 of the paper. Moreover, in the mentioned work [22] various type of returns (manufacturing, distribution and customer) were not analyzed. Authors stated, that it proved model’s fragmentarisation, considered as the greatest disadvantage of maturity model recalled in [22]. Taking into consideration previous guidelines about RL and MM, it was stated that ReLMM should meet the following requirements:    

R1: Process and resources approach incorporated into model, R2: Connection of ReLMM score and‘s RL challenges, R3: Model prepared for all material flow types in RL, considered all processes of RL with holistic view, R4: Simplicity and not time-consuming assessment.

In the prepared ReLMM there were included the following pillars: 1.

Modelling Framework – conceived as a reverse logistics reference model, where main RL processes where described and there were ascribed to them appropriate questions (achievements),

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2. 3.

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Maturity Framework – used for maturity profile development, Improvement Guidelines – useful to trace the link between maturity score and best practices.

In the Modelling Framework, there were incorporated RL’s processes (Table 2), where to each process there was assigned adequate achievement question, in the RL context. Example of framework for collection process was presented in the Table 3: Table 3. Framework for Collection process. Achievement

ID

Level

Aspect

There are collection points for returns

C1

1/2

Physical network (A1)

Customers/partners know about collection pints

C2

3

Formalization (A2)

The location of collection points is planned in accordance to supply potential

C3

4

Structuration (A3)

There is strategy for creating a collection points network

C4

5

The returns’ reasons are known, but not verified

C5

1/2

Performance measurement (A3)

The customer’s feedback about returns is gathered

C6

3

The returns’ reasons are investigated in order to minimize number of returns

C7

4

The returns’ reasons are considered at the stage of new product development

C8

5

Collection is realized ad hoc, when there is a return, it is managed

C9

1

Collection is realized, it is repeatable, there are known collection paths

C10

2

Collection is defined and formally structured

C11

3

Collection is measured (parameters: cost, lead time, volume, return rate) and controlled

C12

4

Collection is optimized, with the use of IT tools, e.g. tracking system

C13

5

The returns are known

C14

1/2

The returns are well recognized

C15

3

The knowledge about returns is used to plan activities and resources

C16

4

The knowledge about returns is used to improve the structure of the reverse network

C17

5

There are made supplies forecasts

C18

1/2

Supplies forecasts are formally standardized

C19

3

Supplies forecasts are verified according to accuracy level

C20

4

Supplies forecasts are included into MPS

C21

5

There is a return policy

C22

1/2

The return policy is known and understandable for Employees and customers

C23

3

The return policy is reviewed periodically

C24

4

The return policy is improved according to market requirements

C25

5

Information flow & data exchange (A4) Optimization (A5) Stakeholders’ relations & engagement (A6)

As it was mentioned before, RL is very sophisticated area consisted of many processes. It was assumed that each process should be evaluated separately, because each may present different maturity score. In order to assess maturity of the selected process, there should be prepared a list of achievements questions (e.g. C1-C25 for Collection, Table 3). List of achievements’ should cover all required issues of process in context of maturity evaluation as well as RL main focus. Aspects for each process were prepared according to literature review, by authors of the paper as the result of discussion. After questions’ formulation, they should be ascribed to maturity level, considering the Maturity Framework, described in the paper. Following Fraser’s consideration, in the presented study, there was used a 5-level maturity staircase, where maturity levels were ordered from Level 1 (immature) to Level 5 (perfection), and each level was characterized including aspects from Table 3. Maturity Framework description was presented in the Table 4.

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Table 4. Maturity Framework. Aspect

Level 1

Level 2

Level 3

Level 4

Level 5

Physical network (A1)

Lack of network

Single objects

Physical network exists and works inefficiently

Good-working

Physical network exists, constant development

Formalization (A2)

YES

Structuration (A3)

YES

Performance measurement (A3) Information flow & data exchange (A4)

YES Available

Accessible

Useable

Data exchange

no

weak

proper

good

Optimization (A5) Stakeholders’ relations & engagement (A6)

Real data exchange with all RL network participants YES Integrated, relevant

According to data in Table 4, each maturity level was described by achievements considered from the perspective of RL’s aspects (A1-A6). In order to measure company’s maturity level of RL, the percentage of accomplished achievements of each RL’s process should be calculated. In the result, the final score will present current maturity level. Considering obtained result there will be possible to define improvement potential. Formulation of achievements questions allow to identify improvement potential what is related to RL’s barriers. 4. Summary Presented method proposal has got conceptual character and becomes a result of research on RL, in Poland. In authors’ opinion the major limitation of the model is a list of achievements’ questions, which was result of authors’ research conducted on the basis of literature review. Although authors were aware of existing limitations, it was stated that flexibility is the main advantage. Model may be modified in a simple manner by changing achievements. Moreover, authors claimed that simplicity in construction and use, makes this approach very valuable for business practice. It is not a success to create a model, but to use it in business practice, what firstly require model’s verification. To sum up, in the next step of the research, authors plan to develop a roadmap for improvements, considering RL’s barriers. What is more, the measurement of the RL’s maturity of Polish companies was planned in next year, in order to verify the proposed model. Acknowledgements This paper refers to the research conducted under Statutory activity, financed by MNiSW/Poznan University of Technology, project: Research on reverse logistics maturity of enterprise (Project ID: 503227/11/140/DSMK/4152)

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