Supply Chain Management: An International Journal

Reverse logistics in the electronic industry of China: a case study

Kwok Hung Lau, Yiming Wang,
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 Case study

Reverse logistics in the electronic industry of

China: a case study
Kwok Hung Lau
Logistics Group, School of Management, Royal Melbourne Institute of Technology University, Melbourne, Australia, and
Yiming Wang
School of Management, Royal Melbourne Institute of Technology University, Melbourne, Australia

Abstract
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Purpose – The purpose of this paper is to report on research undertaken to investigate whether current reverse logistics theories and models can be
totally applied in developing countries like China using the electronic industry as a case study.
Design/methodology/approach – A case study approach was adopted with information collected from company web sites, direct observation, and
in-depth interviews with four major consumer electronic product manufacturers in China. Findings were analyzed and compared across all the cases
studied to determine the common external and internal drivers for reverse logistics implementation as well as the obstacles faced by the whole
electronic industry. A comparison with the literature was made to identify the gaps between current theories and models and actual practices in China.
Findings – The findings suggest that while reverse logistics drivers vary from company to company, barriers to reverse logistics are common and are
mainly external. The major difficulty in implementing reverse logistics in the electronic industry of China is the lack of enforceable laws, regulations or
directives to motivate manufacturers. Furthermore, economic support and preferential tax policies are absent to help manufacturers offset the high
investment costs of reverse logistics. Low public awareness of environmental protection and underdevelopment of recycling technologies are also some
of the obstacles to widespread reverse logistics implementation. The findings also reveal the presence of linkages between the various external factors
that are not fully explored in current reverse logistics models.
Research limitations/implications – The study corroborates the application of transaction cost economics and resource-based view theory to
account for the different approaches to reverse logistics adopted by firms in developing countries. It also reveals a need for further research on the
linkages between external factors affecting reverse logistics implementation. The four case studies of large corporations are drawn from a Chinese
setting in which implementation of reverse logistics is still in an early stage. The complex nature of China’s transitional economy and political
considerations may influence the perspectives and practices of small manufacturers in the management of environmental issues thus limiting the
generalizability of the findings.
Practical implications – The study reveals the problems encountered in the implementation of reverse logistics in China and proposes measures to
expedite the development.
Originality/value – This paper presents a systematic analysis of the external and the internal factors affecting reverse logistics implementation in
developing countries like China. It reveals the need to investigate the linkages between the various external factors that are less explored in current
reverse logistic theories and models. The study also identifies the major drivers and obstacles faced by the industry, a clear understanding of which
might facilitate the formulation of appropriate nation-wide reverse logistics policy and strategy through the support of the government and the
investment of the manufacturers.

Keywords Distribution management, Electronics industry, Outsourcing, Case studies, China, Developing countries

Paper type Case study

Introduction management studies (see for example Bowersox and

Daugherty, 1991; Cooper, 1993; Daugherty et al., 1996). In
Conventionally, forward logistics that transforms raw recent years, however, more emphasis has been placed on
materials to finished products and delivers them from reverse logistics that deals with returns of end-of-life (EoL)
suppliers to customers is the focus of most supply chain products from end-users to retailers, manufacturers, and
suppliers for refurbishment, remanufacturing and recycling
(Chan and Chan, 2008; Li and Olorunniwo, 2008; Rogers
The current issue and full text archive of this journal is available at and Tibben-Lembke, 2001; Stock et al., 2002; Srivastava,
www.emeraldinsight.com/1359-8546.htm 2008). One of the reasons for the increasing attention on
reverse logistics is the need to process the rapidly growing
amount of EoL electronic products such as computers and
Supply Chain Management: An International Journal mobile phones (the so-called electronic waste or e-waste) in
14/6 (2009) 447– 465
q Emerald Group Publishing Limited [ISSN 1359-8546]
compliance with environmental regulations. E-waste contains
[DOI 10.1108/13598540910995228] toxic substances such as bromide, mercury, and lead that are

447
 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

hazardous to the environment (Lee et al., 2000). Simply logistics implementation in developing countries taking into
dumping the EoL products in landfills is not a viable solution. account their unique political and economic characteristics
In fact, most of these scrapped electronic products can be can be developed.
recycled or remanufactured to recapture value. According to Three research questions deriving from the literature are
Guide and Van Wassenhove (2003), the estimated annual sale raised:
of remanufactured products in the USA alone exceeds $50
RQ1. At a firm level, can the current theories that have
billion. Therefore, economic benefit from recycling does
successfully accounted for the reverse logistics
contribute to the booming reverse logistics in developed
activities of firms in developed countries be applied
countries. On the other hand, the high cost of reverse logistics
in developing countries?
also compels firms to look at the issue seriously from a long-
RQ2. At a macro level, is the current model of external
term strategic perspective. Therefore, reverse logistics has
factors affecting reverse logistics activities in developed
become a critical strategic issue for many firms particularly
countries applicable in developing countries?
those in the electronics industry. Major manufacturers in
RQ3. How should the current theories or model be revised to
many industries in developed countries have implemented
take into account the political and economic
reverse logistics to various extents. The practice can be
characteristics of developing countries?
explained using transaction cost economics (TCE) theory
(Maltz, 1993; Skjøtt-Larsen, 2000) and resource-based view To answer these questions, this research adopts an in-depth
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(RBV) of a firm (Halldórsson, 2007; Pandza et al., 2003; exploratory case study approach to find out the current
Rungtusanatham et al., 2003). practices of reverse logistics of four major consumer electronic
In contrast, reverse logistics in developing countries like product manufacturing firms in China. The focus is on the
China, despite being a global manufacturing base, seems to be return of EoL products and the collection of waste electrical
still at an infant stage in most industry sectors. Taking the and electronic equipment. Through detailed cross-case
electronic industry of China as an example, more than 4 comparison, this study has identified the common barriers
million television (TV) sets, 5 million washing machines, 5 to reverse logistics implementation encountered by the
million refrigerators, 6 million personal computers, and 30 electronic industry in China and compared them with those
million mobile phones were trashed in 2003 without recycling faced by firms in developed countries as discussed in the
(Wang, 2005). Albeit extensive domestic researches and a literature. The findings corroborate the current theories of
general consensus that reverse logistics can help maintain reverse logistics and add to the understanding of external
sustainable development and generate additional profits (He, factors affecting reverse logistics. This knowledge helps revise
2005; Yuan, 2006), only a few manufacturers in the the current model of external factors and develop a
electronics industry of China have implemented reverse framework for reverse logistics implementation in
logistics while others remain uninterested. It is therefore developing countries.
necessary to investigate whether the current firm-based In the following sections, the literature on reverse logistics is
theories on reverse logistics, such as TCE and RBV that reviewed and the current theories and model are discussed.
have successfully explained the practices of companies in This is followed by an overview of the research methodology,
developed country, are totally applicable in developing findings, discussion on factors affecting reverse logistics in
countries. In addition, external macro environment factors China, and a proposed generic framework for reverse logistics
affecting reverse logistics implementation in developing implementation in developing countries.
countries would also need to be examined and compared
with those identified in developed countries. Reverse logistics drivers and barriers
While there are both theoretical and empirical researches on
the drivers and the barriers of reverse logistics (see for Owing to its strategic implications, reverse logistics has
example Autry et al., 2001; Knemeyer et al., 2002; Ravi and received much attention in recent years and is widely
Shankar, 2005; Skinner et al., 2008), these studies mainly discussed in the literature (Blumberg, 1999; Carter and
investigated reverse logistics activities in developed countries. Ellram, 1998; Dowlatshahi, 2000; Rogers and Tibben-
There are relatively few studies on reverse logistics practices Lembke, 1999, 2001, 2002; Schwartz, 2000; Stock, 1998,
in developing countries like China where public awareness, 2001; Thierry et al., 1995, Van Hoek, 1999). The basic
environmental legislations, reverse logistics infrastructure and activities and flows of reverse logistics are depicted in Figure 1.
technology, etc. may still be inadequate. Studies by Zhu and Rogers and Tibben-Lembke (1999) suggest that there are a
Geng (2001), Zhu and Sarkis (2004), and Zhu et al. (2005, number of factors affecting reverse logistics practices. The
2007) do focus on the manufacturing industries of China but presence or absence of these factors can become drivers or
the themes are more related to green supply chain barriers to reverse logistics implementation in a particular
management initiatives and performance outcomes. Also, as industry. These factors range from external ones (such as
Prahinski and Kocabasoglu (2006) reviewed, studies on public awareness, legislations, and support of supply chain
reverse supply chain management have relied predominantly partners) to internal considerations (such as importance of
on normative research methods, case studies, and theoretical reverse logistics relative to other issues, company policies,
frameworks. Research on actual practices of reverse logistics is strategic planning, top management commitment, resistance
still relatively limited. This research therefore aims at bridging to change, information and technological systems, financial
the gap by examining the current reverse logistics practices of resources, personnel resources, performance metrics, and
the electronic industry in China. The objective is to identify quality of returned products). Other forces are also at work.
any disparity between the prevailing reverse logistics theories Tan et al. (2002) analyze the reasons for the increasing
and the actual implementation in the industry. Based on the concern of reverse logistics and opine that shortening product
study findings, it is hoped that a framework for reverse life cycle is one of them. As a result, there are associated

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

Figure 1 Basic activities and flows in reverse logistics

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increases in unsold products, returns, packaging materials, remanufacturing and reuse (Beamon, 1999; Kaebernick
and waste (Van Hoek, 1999) hence the cost of managing them et al., 2005). Closed-loop supply chains comprising forward
(Giuntini and Andel, 1995). New channels such as Internet and reverse logistics can be combined to achieve more
purchasing are developed to provide customers with quicker sustainable production and consumption (Wells and Seitz,
and easier access to products. Globalization also exacerbates 2005). An efficient and effective reverse logistics management
the problem. Managing returns globally increases costs and strategy has become a crucial weapon for a firm to defeat its
puts additional pressure on the reverse logistics network rivals in the same industry (Deshmukh et al., 2006). Logistics
(Autry et al., 2001). performance, forward and reverse alike, is positively impacted
Broadly speaking, reverse logistics is driven by factors such by a firm’s supply chain management strategy. The two
as environmental legislations (Nnorom and Osibanjo, 2008), together positively affect marketing performance which, in
extended producer responsibility (EPR) (Khetriwal et al., turn, positively impacts financial performance of a firm
2009; Lee et al., 2000), economics (Liu et al., 2008), and (Green et al., 2008).
improved customer service (Wu and Cheng, 2006). Owing to There are also many barriers to reverse logistics.
increased public concern about the environment, most Misconception, lack of management attention and company
developed countries have made legislations mandating policies, absence of standardized processes and technologies,
manufacturers and importers to take back used electronic shortage of personnel and financial resources, and concerns
products at the end of their useful lives. Consumers can now about competitive and legal issues, etc. are among the
return goods within warranty period as part of the after-sales common obstacles (Rogers and Tibben-Lembke, 1999).
service if the products fail to meet their needs or when the Further, reverse logistics are poorly managed in general
products have reached the end of their useful lives. The because more than one company is usually involved in the
returned products may then be refurbished or process. A holistic approach is therefore required which
remanufactured to extend their periods of usage or recycled demands close collaboration among parties and perhaps a
to recapture value (Brito and Dekker, 2002; Chen, 2001; redesign of the existing forward logistics processes to form a
Srivastava and Srivastava, 2006, Tang and Naim, 2004). closed-loop (Chapman and Corso, 2005). In their review of
In fact, reverse logistics contributes to the environmental quantitative models for reverse logistics, Fleischmann et al.
strategy of many large corporations such as Xerox (1997) list out the differences between forward and reverse
Corporation (Clendenin, 1997). Empirical study conducted logistics networks which also constitute some of the barriers
by Murphy and Poist (2003) on management of to reverse logistics particularly in network planning. These
environmental issues in logistics by US and non-US firms include requirement of a convergent structure of network
reveals that these companies share similar perspectives, from many sources to a few demand points, high degree of
strategies, and practices. For sustainable development, a uncertainty in supply both in terms of quantity and quality of
good supply chain strategy enables manufacturing plant to used products returned by customers, and uncertain end
rescue and recover many parts and components from used markets for recovered products. The uncertain timing and
products through reverse logistics activities of quality of returns, the need to balance returns with demands,

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

and the uncertainty in materials recovered from returned manufactured through original equipment manufacturers
items are also some of the complicating characteristics (OEMs). Despite the large scale of operation, only a few
impacting production planning and control for manufacturers in the electronic industry of China have
remanufacturing (Guide, 2000; Guide et al., 2003). implemented reverse logistics while others remain
Depending on the ability to overcome these barriers, some uninterested. However, among the participants, some
firms are able to implement reverse logistics using its own self- implemented reverse logistics proactively instead of
support system, e.g. Eastman Kodak and Hewlett-Packard, reactively. So, one may wonder why there is such a
whereas others resort to outsourcing to third-party logistics difference in attitude and what the reasons for the
(3PL) providers to handle consumer or EoL returns and reluctance are in implementing reverse logistics. Answers to
recycling, e.g. 3M (He and Wang, 2005). Self-support system these questions may help determine if the current reverse
is suitable for industries such as high-end electronic product logistics theories and models for developed countries can be
manufacturing as it helps a firm collect valuable information applied directly to developing countries like China or need to
about its products for continuous improvement (Smith, be revised to take into account the local political and
2005). However, it involves significant capital investment. economic characteristics.
The outsourcing approach permits a firm to focus on its core
activities as well as to achieve more flexible reverse logistics Theoretical foundations and conceptual model
operations and to transfer risk to third party. However,
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selection and management of 3PL providers can be difficult. Two prevailing theories, namely TCE and RBV, can be
Another approach, which is usually initiated by industry applied to study reverse logistics. TCE specifies the
association or government, is to set up a collaborative entity conditions under which a firm should manage an economic
or strategic alliance to run reverse logistics for a number of exchange internally within its boundary or externally through
firms in the same industry (He and Ji, 2006). This inter-organizational arrangement. It focuses on minimizing
collaborative approach is more effective and efficient as it the total transaction costs of producing and distributing a
reduces the investment of individual firms and enables particular good or service. These costs are determined by
economies of scale through centralization. Nevertheless, limited rationality, opportunistic behavior, frequency,
conflict of interests among members can be a challenge (Jin uncertainty, and asset specificity involved in the transactions
et al., 2006). (Williamson, 1975, 1985, 1996). The first two elements are
assumptions that underpin the choice of a firm between
insourcing and outsourcing. The last three elements are
Reverse logistics and the electronic industry
factors or variables that characterize any transaction and
Reverse logistics plays an important role in the electronic affect the transaction cost (Figure 3a). The theory helps
industry of developed countries particularly upon the determine a firm’s boundary and accounts for the efficiency-
implementation of the Waste Electrical and Electronic seeking behavior of the firm through inter-organizational
Equipment (WEEE) and the Restriction of Hazardous arrangements governed by contracts (Baiman and Rajan,
Substance (RoHS) directives of the European Community 2002; Maltz, 1993).
(EU) in 2005 and 2006 respectively (Wikipedia, 2009a, b). In contrast, RBV sees a firm as a bundle of resources and
The industry has undergone major changes in recent years assets and emphasizes the use of rare, valuable, in-imitable
due to increased public awareness of environmental and un-substitutable resources to gain sustainable competitive
protection (Bossone, 1990) and hyper competition advantage (Barney, 1991; Conner, 1991; Grant, 1991;
(D’Aveni, 1994). Governments of developed countries have Wernerfelt, 1984). Resources include tangible physical
all introduced laws and regulations to govern the use of assets, intangible information and knowledge, and
materials for production, the recycling of products at the end capabilities that are built upon effective use of tangible and
of their useful lives, and the handling of e-waste during intangible resources, repeated and refined practices, and
recycling (Nnorom and Osibanjo, 2008). As depicted in accumulated experiences. Capabilities are more difficult to
Figure 2, the needs to comply with government regulations, to imitate or substitute and therefore add greater value to the
achieve greater profitability by reducing wastes, and to firm (Figure 3b). The theory helps explain a firm’s investment
enhance corporate image through promotion of recycling have in building capabilities that are difficult for its competitors to
urged manufacturers to implement reverse logistics in their imitate or mitigate in a short period of time so as to attain
supply chains. However, rapid technological advances, long-term sustainable competitive advantage (Collis, 1994;
together with fashionable designs to entice frequent Reed and DeFillippi, 1990).
purchases of new products, have significantly shortened Depending on size, internal constraints, and other
product life cycle and generated pressure on reverse logistics considerations, different companies may adopt different
(Helo, 2004). attitudes towards reverse logistics. For firms taking a
Since its accession to the World Trade Organization, China reactive approach, reverse logistics is implemented mainly to
as a developing country has become more and more comply with legislations. The activity is considered as a cost
influential to the global economy. The country is not only function and the objective is to run it at lowest cost. For firms
one of the world’s largest manufacturing bases because of the taking a proactive approach, reverse logistics forms part of the
cheap labor it offers but also closing in to become the world’s company’s long-term strategy to gain competitive advantage
largest consumer market because of its huge population over its competitors. The activity is seen as a unique capability
(Langley et al., 2007). Owing to the rapid growth in global that adds value to the product. From a theoretical perspective,
demand for consumer electronic products in recent years, big TCE explains why small firms with limited resources usually
foreign firms, such as Nokia, Philips, Xerox, Kodak, Siemens, rely on outsourcing to 3PL to implement reverse logistics in
and Cannon, etc., have set up their plants in China or the initial stage. In this regard, the selection of reverse logistics

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

Figure 2 Reasons for implementing reverse logistics in the electronic industry

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Figure 3 Underlying theories of reverse logistics implementation

providers is similar to that of forward logistic providers. The buyers), and competitive (referring to competitors). The
emphasis is on the service provider’s capability of taking up internal environment is consisted of strategic factors (such as
the organizational role to handle EoL returns for recycling strategic costs, overall quality, customer service,
and reuse (Lau and Ma, 2008; Meade and Sarkis, 2002). environmental concerns, and legislative concerns) and
RBV, on the other hand, accounts for the incorporation of operational factors (such as cost-benefit analysis,
reverse logistics as part of long-term company business transportation, warehousing, supply management,
strategies by some large corporations in order to attain remanufacturing, recycling, and packaging) that a firm must
sustainable competitive advantage (Clendenin, 1997; Wells examine in designing its reverse logistic system. While the
and Seitz, 2005). model is comprehensive in considering the various factors in
While TCE and RBV theories can be used to justify the the reverse logistic process from a holistic perspective, it is
different approaches to reverse logistics implementation at a basically a firm-centered framework with little consideration
firm level, they are inadequate to account for reverse logistic on how the different sectors in the macro environment can
initiatives from a macro perspective. A conceptual model of work together to foster reverse logistics for the whole industry.
reverse logistics implementation linking the external In an attempt to explore the relationships between the
environment with the firm is needed. In examining the external factors and how they collectively influence the
factors affecting reverse logistics systems for EoL computers, implementation of reverse logistic systems in developing
Knemeyer et al. (2002) propose a conceptual model that puts countries like China, this study proposes a conceptual model
the various exogenous and endogenous factors together. linking the various factors together (Figure 4) and uses the
Under this model, the external (or macro) environment findings from four case studies to investigate what the
comprises four sectors, namely input (referring to suppliers), relationships should be. Five external factors derived from the
regulatory (referring to government and interested literature are included. They include awareness (e.g., public
aggregators such as lobbying groups), output (referring to concern and EPR), legislations (such as regulations and

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

Figure 4 Conceptual model of factors affecting reverse logistic system

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directives), economics (i.e. incentives and benefits from Cheng (2006) adopt a multiple-case approach to compare the
reverse logistics), systems (referring to reverse logistics characteristics of reverse logistics in the publishing industry
information system, infrastructure, and technology), and among China, Hong Kong and Taiwan. Li and Olorunniwo
collaboration (with supply chain partners as well as (2008) also explore the reverse logistics practices of three
competitors). These factors affect the development of companies to determine the necessary information technology
reserve logistics for the whole industry at a macro level and resource commitment a firm requires in running an
whereas the internal factors (including strategic and effective reverse logistics system and how these elements can
operational ones) determine what reverse logistics system or be integrated across the supply chain.
model (e.g. self-support system or outsourcing) a firm will The cases selected in this study include four major
choose. TCE or RBV can be used to account for the rationale companies, which are referred to as A, B, C, and D for
behind the decision a firm made in choosing its reverse commercial confidentiality reasons. The first two are multi-
logistics system. national giants in the electronic industry while the other two
are major local electronic manufacturers in China. They are
Methodology among the largest corporations in the industry and are more
capable than smaller manufacturers to implement reverse
This study has chosen the electronic industry of China for logistics that requires significant resources. The choice of two
investigation. According to Zhu et al. (2007), the electrical/ foreign and two domestic companies for study may help
electronic industrial sector in China appears to be leading in determine if reverse logistics practice is related to local
green supply chain management practices probably because of political and cultural characteristics. Senior managers of the
its long-term international experiences compared to other four companies were initially contacted and a survey
sectors. Therefore, implementation of reverse logistics in the questionnaire for the structured interview was discussed and
electronic industry should be more widespread than other
revised based on their suggestions and inputs. The revised
industries. Issues identified should reasonably reflect the
questionnaire was then e-mailed to the four managers prior to
common challenges faced by manufacturers in various
the in-depth interviews. Owing to budget constraint and long
industrial sectors.
traveling distances between the headquarters of the
An in-depth case study approach with cross-case
companies – Company A in Bejing, Company B in
comparison is adopted for this research. Case studies are
suitable for exploring issues that are too complex for empirical Shanghai, Company C in Qingdao, and Company D in
survey or experimental research. It is most appropriate when a Shenzhen, the interviews were conducted via both telephone
“how” or “why” question is being asked about a phenomenon and face-to-face discussion where feasible. To facilitate cross-
(Yin, 1994). Although the use of small sample in the case case comparison, secondary data such as annual company
study approach may forbid generalization of findings to reflect reports for the last three years were also downloaded from the
the circumstances of the whole population (Merriam, 1985), company web sites. To understand the current state of
the limitation can be overcome by selecting major and recycling practice, the 3PL provider providing reverse logistics
representative subjects for study. Therefore, to provide a services to two of the companies under study was also
preliminary in-depth investigation of a problem, the interviewed during a visit to its WEEE recycling center in
qualitative approach is suitable for studying issue on which Wuxi. All the interviews and the site visit were conducted in
little research has been conducted (Benbasat et al., 1987; March 2007.
Walsham, 1995). Case study is in fact commonly adopted in The exploratory interviews reveal that drivers for reverse
reverse logistics research to explore the various issues logistics in the consumer electronic product manufacturing
involved. For example, Tan (2006) uses a case study to industry of China vary from company to company. In
demonstrate a decision-making model for manufacturers to contrast, barriers to the implementation of reverse logistics
maximize their profits in reverse logistics operations. Wu and are relatively common to the surveyed manufacturers. The

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

following are a few examples of the responses from the white home appliance manufacturers in the world. The
interviewees reflecting some of the challenges: company has set up its own logistics subsidiary to handle all
The main reason for our company to adopt different attitudes towards its logistics functions including reverse logistics. It conducts
reverse logistics for the overseas and the local markets is the lack of life cycle analysis for all its electrical and electronic products
enforceable laws and regulations in China relating to the treatment of
WEEE. In overseas such as the European market, we have to abide by the
and the whole group has passed the environment
EU’s RoHS and WEEE directives in order to do business there (Senior management system of the ISO 14001 since 1998. In
Marketing Manager of Company D). China, Company C collaborates with a local recycling
Our company does not participate in the recycling business of EoL products technology company to establish a nation-wide WEEE
directly but has outsourced the function to a third party. We do it out of recycling network.
social responsibility despite there are no mandatory laws or directives in Company D is a major local manufacturer of consumer
China like the EU’s WEEE and RoHS. Instead of investing heavily on
reverse logistics, we incorporate the concept of design-for-recycling in our electronic products and an OEM specializing in color TV. To
Eco-Design process right at the beginning. This is critical to reducing waste cater for both the overseas and the local markets, the company
and the cost of recycling the product at the end of its useful life (National has taken active response towards the EU’s RoHS directive
Logistics Manager of Company B).
and China’s call for green production. It imposes strict rules
Unlike purchasing raw materials from suppliers in forward logistics, we have of rejection during the manufacturing process and stringently
to wait until customers scrap the used products if we try to use the salvaged
parts or recycled raw materials from EoL returns through reverse logistics.
selects its suppliers to ensure full compliance of the EU’s
RoHS directive. At present, Company D is using a third-party
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Further, the uncertainties in quality, quantity, and recovery time of WEEE

also complicate our production plan and control (Senior Logistics Manager recycling firm to recycle unqualified TV sets but is planning
of Company C).
to set up its own subsidiary to take care of the recycling
The selling of salvaged parts and raw materials from EoL returns brings business.
almost no profit to the company as it costs more to recycle because of the
small volume. One important way to keep our business sustainable is to sell
the used products in second-hand market (Executive Manager of the 3PL Status quo of practices
providing company commissioned by Companies B and D). Table II summarizes the status quo of reverse logistics
practices of the four companies as revealed by the
The qualitative interviews uncovered the major problems interviewees in the telephone/face-to-face interviews.
faced by the industry and highlighted the direction for The findings in Table II suggest that all the four large
improvement. Through detailed cross-case comparison, consumer electronic product manufacturers under study have
common barriers to reverse logistics and reasons for a clear understanding of reverse logistics and are
adopting different attitudes towards reverse logistics by the implementing it in China to different degrees. This indicates
interviewed companies were identified. Linkages between the a general increase in awareness of reverse logistics in the
various macro factors affecting reverse logistics electronic industry. However, only Company C has taken
implementation were also explored. The findings and the reverse logistics as its corporate strategy in contrast to the
analyses are presented and discussed in the following sections. literature on effective reverse logistics management strategy
being used as a crucial weapon to compete (Chan and Chan,
Findings 2008; Deshmukh et al., 2006). This discrepancy suggests that
manufacturers in China may still be focusing more on short-
Company profiles term gains than long-term benefits. To remain competitive in
Table I gives the brief organization profiles of the four a global environment, they are compelled to be cost
companies in the case studies. conscious. After all, it is the lower cost of production in
Company A is the world’s largest manufacturer of mobile China that makes it the biggest global manufacturing base
devices. In China, the company has four manufacturing bases. (Zhao et al., 2006). The high set up and operating cost of
Company A implements an environmental management reverse logistics system prohibits a widespread
system and requires all its suppliers to meet the implementation as it adds to the total cost of production.
requirements of ISO14001 or other internationally The different approaches to reverse logistics and recycling
recognized standards relating to hazardous material adopted by the four companies also reflect the various degrees
restriction. The company aims to reduce all waste fractions of strategic significance they have placed on reverse logistics.
during the manufacturing process to a minimum, especially While others resort to outsourcing to reduce cost of
for those ending up untreated in landfills. In December 2005, operation, Company C uses a full-scale self-support system
Company A introduced a “Green Box” program in China to that requires heavy capital investment. The company
take back EoL mobile phones for refurbishing or recycling. It possesses its own logistics network and facilities as well as
uses third-party recycling firms to take care of its recycling independent information management system. Together they
business. enable Company C to handle reverse logistics in an
Company B is one of the world’s biggest electronic economical manner to achieve long-term benefits.
companies. In China, the company has 35 joint ventures. From a TCE perspective, outsourcing of current reverse
Company B implements its waste management program logistics practices by Companies A, B, and C is
setting a target of 20 percent reduction in waste globally. It understandable. In terms of frequency of transaction,
has also established take-back and recycling systems for both collection of used mobile phones (Company A) and
consumer electronics and lighting in Europe and the USA. At unqualified TV sets (Companies B and D) for recycling are
present, Company B uses a third-party reverse logistics relatively irregular in frequency and volume. Infrequent door-
service provider in China to handle take-back and recycling of to-door collection in small volume results in high operating
unqualified TV sets. cost making outsourcing a more viable option. Serving
Company C started off as a local refrigerator manufacturer multiple clients, 3PLs are more able to achieve economies of
in China in the 1980s and has now become one of the leading scale and operate at lower unit cost. Further, uncertainties in

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Table I Organization profiles of the companies under study

Company A Company B Company C Company D
Number of employees 58,000 (in 2003) 121,700 (in 2003) Over 50,000 (in 2005) Over 20,000 (in 2005)
Organization structure 15 manufacturing facilities in nine 15 manufacturing facilities in 60 Over 240 subsidiary companies, 110 14 subsidiary companies, six science
countries, R&D centers in 11 countries. countries. Listed in Helsinski, Stockholm, manufacturing facilities, R&D in 30 and technology research centers, two
Listed in Helsinski, Stockholm, Frankfurt Frankfurt and New York stock exchanges countries. Listed in Hong Kong and overseas manufacturing bases. Listed in
and New York stock exchanges Shanghai stock exchanges Hong Kong stock exchange
Kwok Hung Lau and Yiming Wang

Net sales in 2005 EUR 34.20 billion EUR 29.00 billion RMB 103.40 billion HKD 10.47 billion ( ø EUR 0.95 billion)
( ø EUR 8.6 billion)
Main functions Customer and market operation, Purchasing, manufacturing, marketing Technology research, manufacturing, OEM supplier, research and
Reverse logistics in the electronic industry of China

technology platforms, brand and design, and distribution, research and trade and financial services, logistics development in TV technology
developer support, research and development in technology supplier
venturing, business infrastructure
Main services Mobile phones, multimedia, enterprise Medical diagnostic imaging and patient Original designing, manufacturing, Processing, manufacturing, marketing

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solutions and network monitoring systems, energy efficient after sales service center and distribution, after sales service
lighting solutions, personal care and establishment, marketing and center establishment
home appliances and consumer distribution, research and development
electronics in technology
Main products Mobile devices Consumer electronic products and Refrigerators, refrigerating cabinets, air Color TV, DVD, home theatres, mobile
medical equipment conditioners, washing machines, phones and satellite receivers
televisions, mobile phones, home
theatre systems, computers, water
heaters, DVD players and integrated
furniture
Scale of operation in Four manufacturing bases, six R&D 35 joint ventures, six research centers 18 original designing centers, ten Ten manufacturing bases, one science
China centers manufacturing parks and technology industry park
Sources: Company web sites of A, B, C, and D on the internet
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Table II Status quo of reverse logistics practices

Status quo Company A Company B Company C Company D
Understanding of definition and Yes, fully understands the meaning Yes, fully understands the meaning Yes, fully understands the meaning Yes, fully understands the meaning
significance of reverse logistics (RL) and importance of reverse logistics and importance of reverse logistics and importance of reverse logistics and importance of reverse logistics
Reverse logistics taken as company No, taken only as part of the business No, taken only as part of the business Yes, incorporated in the company’s No, taken only as part of the
strategy strategy strategy green product strategy business strategy
Reasons for implementing reverse To sharpen competitiveness, reduce To comply with laws and regulations, To respond to local government To respond to the EU’s RoHS
logistics cost, and improve customer and enhance customer’s and support and the EU’s directives, and directive and China’s call for green
satisfaction shareholder’s awareness achieve material reuse and energy products
conservation
Waste management practices in Maintains a high percentage of waste Differentiates recycled waste from Conducts life cycle analysis of its Designs products that are easier for
place utilization actual waste products recycling
Kwok Hung Lau and Yiming Wang

EoL product and packaging Yes, web site is set up to inform Yes, customers are informed of take- Yes, hotline and web site are set up to Yes, web site is set up to inform
recycling business in place with customers of available recycling back channels when they purchase provide customers with information customers of available recycling
information on return channels channels the company’s products on channels to return WEEE. Door-to- channels
Reverse logistics in the electronic industry of China

available to customers door collection service is also

available
Independent information No No Yes, an independent system is set up No
management system for RL in place to manage RL information

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Green design implementation in Yes Yes Yes Yes
place to facilitate EoL product
recycling and reuse
Recycling channel Uses own service centers, retailer Collects through retailers and Establishes recycle network together Collects through its own sales
stores, municipal and industry municipalities with professional recyclers network and retailers
association’s collection points
Collection model of WEEE Uses self-support collection network Uses 3PL to handle collection Uses self-support collection network Outsourced to 3PL
with no financial incentive for users but offers monetary incentive to users
who return WEEE for returns of WEEE
Reverse logistics and recycling Uses 3PL and selected recyclers Uses 3PL and collaborates with Runs its own logistics company and Uses 3PL and selected recycler
mode competitors to achieve economies of WEEE processing center
scale
Reverse logistics activities in China Started the “Green Box” program in Moves all WEEE to a selected recycler Set up the first trial point for WEEE Moves WEEE to a selected recycler
2005 and requires recyclers to strictly but imposes no standards for strict disposal in 2003
follow the company’s standards compliance
Volume 14 · Number 6 · 2009 · 447 –465

Major difficulties in implementing Lack of laws and public awareness of Lack of efficient recycling systems Lack of technology and public Lack of support from top
reverse logistics in China environmental protection awareness of environmental management
Supply Chain Management: An International Journal

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Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

terms of quantity and timing of supply as well as quality of reverse logistics information, and setting up its own
returned products for recycling also increase the cost of reuse processing center for WEEE disposal and recycling.
thus discourages remanufacturing practice and investment Organizational commitment of Company C to obtain long-
(Fleischmann et al. 1997). Dismantling and recycling of used term sustainable competitive advantage through green and
electronic products requires special equipment and expertise reverse logistics is comparatively strong that it positively
to process heavy metals and toxic chemical compounds (Liu influences operational performance (Prahinski and
et al., 2008). The absence of economies of scale again renders Kocabasoglu, 2006; Green et al., 2008). The company even
a low return on investment in these additional equipment and develops its own reverse logistics strategy as a constituent of
expertise. Company A is able to use its service centers and the long-term green product strategy to ensure continuous top
retailer shops as collection points mainly because self-assisted management support and resource investment. In
return of used mobile phones is more successful that of other comparison, Company A focuses on refurbishment of used
heavier EoL products. There is little network set up cost and mobile phone to recapture value. Company B emphases on
collection cost is relatively low. The company can therefore waste management and minimization through material reuse
maintain its own self-support collection network and only in the production process to achieve its global waste reduction
uses 3PLs for recycling. Companies B and D, with no option target. Company D stringently selects its suppliers to ensure
for self-assisted product return, have outsourced all the compliance of EU’s directives to safeguard its overseas
reverse logistics activities in order to cut cost. In short, for markets. Because of the different focuses and emphases, the
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Companies A, B, and D, the transaction cost of setting up and three companies do not have separate comprehensive strategy
managing a self-support reverse logistics system is higher than for reverse logistics but only take it as part of the business
that of outsourcing. For Company C, the collection involves strategy.
various kinds of used home electronic appliances ranging The comparison also reveals that government support can
from refrigerators, washing machines, air conditioners, audio play an important role in implementing reverse logistics in
equipment, to TV sets. The volume is relatively large and developing countries. At present, only local firms in China
economies of scale are easier to achieve. Using its own may receive preferential policy support from the government
subsidiary logistic company to coordinate both forward and but there is no consistency in practice. One of the reasons for
reverse logistic activities to maximize asset utilization, Company C to embrace reverse logistics whole-heartedly may
Company C is able to enjoy a relatively lower transaction be due to the fact that the local government of Qingdao in
cost in running its own reverse logistics system than the other Shandong province, where the headquarters of Company C is
three companies. Although not necessarily cheaper than located, is providing support through subsidies to help build
outsourcing at the beginning, a self-support reverse logistics Company C as a pilot in reverse logistics business in China.
system like that of Company C may help reduce unit However, the other three companies are not enjoying the
operating cost and bring other benefits to the firm in the long same preferential treatment even though Company D is also a
run. local firm. The different collection modes of WEEE adopted
From a RBV perspective, the setting up of its own EoL by Company A and Company C reflect the impact of
product collection network and processing center by government support. Collection of WEEE without monetary
Company C represents a capability building initiative aiming incentive (Company A) usually requires high consciousness of
to achieve long-term competitive advantage. While environmental protection from customers, which is still
outsourcing may help a firm save operating cost in the short underdeveloped in China to date. For Company C,
run, it does not add much value to its product or service. The monetary incentive to customers is used to encourage return
resources involved in outsourcing are tangible and not rare, of EoL products. The local government enacted legislation for
in-imitable, or un-substitutable as 3PL services are non- WEEE collection (enforceable only within the province) and
exclusive and accessible to all firms. Any advantage gained offers recycling subsidies to cover the company’s financial
through outsourcing can easily and rapidly be mitigated by deficit during WEEE collection thus greatly enhances its
competitors, not to mention the loss of control as a serious effectiveness. All the other three interviewed companies have
disadvantage (Lau and Zhang, 2006). In contrast, setting up expressed their desire that the Chinese government should
one’s own system helps develop intangible resources, such as strengthen legislations in this regard and provide greater
enhanced corporate image, and capabilities, such as expertise consistent support to motivate enterprises in the electronic
in recycling and remanufacturing. Accumulated knowledge industry to implement reverse logistics.
and experience through repeated transactions, together with
continuous investment in reverse logistics equipment and Drivers of reverse logistics
expertise, will not only increase efficiency and reduce unit On the main driving force of reverse logistics, a common
operating cost in the long run but also develop capabilities consensus of the four surveyed companies is the fulfillment of
that are very difficult for other competitors to imitate in a obligation for environmental protection (Table III). Extended
short period of time. The amount of resources invested by producer responsibility has now almost become a norm for all
Company C in reverse logistics is significantly greater than large international enterprises particularly in the electronic
that of the other three companies surveyed. They include industry (Khetriwal et al., 2009). To some, social
adoption of green product design and conducting life cycle responsibility can also be used as a tool to gain publicity or
analysis for all its products to facilitate recycling, setting up of as a marketing incentive (Chan and Chan, 2008). Since
hotline and web site to provide customers with information on reverse logistics includes recall of defective products, the four
channels to return WEEE, providing door-to-door collection companies studied all believe that customer service could be
service, setting up of its own logistics company to take care of improved through reverse logistics. Despite the fact that
both forward and reverse logistics activities so as to maximize reducing production cost is reported in the literature as one of
asset utilization, developing independent system to manage the driving forces (Brito and Dekker, 2002; Chen, 2001;

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Table III Driving forces of reverse logistics

Driving force Company A Company B Company C Company D
Support from government policies and legislation £ £ U £
Promotion of corporate image £ U £ U
Reduction in production cost £ U £ £
Fulfillment of obligation for environment protection U U U U
Improvement of customer service U U U U
Notes: U – Considered as a driving force; £ – not considered as a driving force

Srivastava and Srivastava, 2006), none of the four interviewed costs), lack of publicity and knowledge of reverse logistics,
companies agree that this is the case in China. In fact, they and unpredictability of supply and demand for recycled
opine that to establish an effective recycling channel in China products are also barriers faced by all the four enterprises.
at the moment incurs high cost since little profit can be made The findings are not entirely in line with the literature
from recycling. Therefore, it is still a long way to the use of (Caldwell, 1999) particularly on the lack of environmental
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reverse logistics system to recapture value and recover assets laws and legislations and public awareness. Undeniably,
as advocated in the literature (Chan and Chan, 2008). enforceable laws, legislations and directives for environmental
According to the manager of the 3PL provider providing protection such as those introduced in the EU have yet to be
reverse logistics service to Companies B and D, it costs RMB established in China. All the companies interviewed also
50-100 to collect and process a waste TV set but the total admit that, in general, awareness of both the end-users and
worth of all the useful raw materials recycled is only about the producers (particularly the small manufacturers) of
RMB 30. Similar findings are also reported in the latest electronic products about the subject needs to be increased.
studies such as Liu et al. (2008). Therefore, many of the EoL This may help create a positive macro environment to
products are sold as second-hands for higher monetary value facilitate the development of reverse logistics.
rather than directly recycled. While the presence of secondary
markets facilitates reuse of materials, extending the life of Discussion
obsolete electronic products thus reducing environmental
impact, efficiency of these markets has yet to be improved Based on the findings of the case studies, it can be seen that
through mature development of e-reverse logistic (Sarkis et al., full and mature implementation of reverse logistics in the
2004). Profitability of reverse logistics arises mainly from electronic industry of China is still a distance away. The
economies of scale. However, this could hardly be achieved in findings also reveal that the current model of factors affecting
China at present due to underdevelopment of infrastructure reverse logistics practice applicable in developed countries
and technology. A visit to the 3PL provider’s WEEE needs to be revised in order to apply in developing countries.
processing center reveals that recycling is done mainly While TCE and RBV are still appropriate theories to explain
through manual dismantling with simple tools, let alone at a firm level the different attitudes adopted by corporations
special equipment or automation. This aligns with the towards reverse logistics and their choices of reverse logistics
observation reported by Liu et al. (2008). Low public systems, some of the driving forces of reverse logistics (e.g.,
awareness of environmental protection and conservation also reduction in production cost) in developed countries, such as
hampers efficient WEEE collection to achieve economies of the USA, Europe, and Japan as reported in the literature, are
scale. different from those in developing countries like China.
Further, it appears that the major barriers to reverse logistics
Barriers to reverse logistics implementation in China are mostly external factors and are
As for the obstacles to reverse logistics implementation, all the macro in perspective. The barriers are common to almost all
interviewed companies (except Company C which receives the surveyed companies suggesting that they are issues of the
preferential treatment from the local government) agree that whole industry. Using the proposed conceptual model
the lack of laws and legislations is the major barrier to (Figure 4) as a guide, the following sections explore the
implementing reverse logistics (Table IV). High costs of linkages between the external and the internal factors
operation (comprising mainly transportation and reprocessing affecting reverse logistics in developing countries like China.

Table IV Barriers to reverse logistics

Barrier Company A Company B Company C Company D
Lack of laws and legislation U U £ U
High costs and lack of supportive economic policies U U U U
Underdevelopment of recycling technology £ U U U
Lack of publicity and knowledge of reverse logistics U U U U
Reluctance to devote managerial and financial resources in reverse logistics £ £ £ U
Unpredictability of supply and demand for recycled products U U U U
Notes: U – Considered as a barrier; £ – not considered as a barrier

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External factors affecting reverse logistics Economics

As revealed in the case studies, the external barriers identified Based on the information provided by the surveyed
are closely linked together and a set of comprehensive companies, it is clear that unlike their counterparts in
improvement measures requiring efforts from both the developed countries, electronic manufacturers in developing
government and the firms would be needed to remove the countries like China are still not able to recapture value and
obstacles. For example, the lack of legislation and economic recover assets from recycling probably due to low volume of
incentives minimizes the willingness of manufacturers to returns and limited investment in recycling technology.
implement reverse logistics. This in turn reduces their Therefore, economic benefits derived from reverse logistics
initiatives to invest in reverse logistics infrastructure and are very limited at this stage. The major economic incentives
technology and limits the scope for collaboration among would come from local government through financial and
supply chain partners and competitors to attain greater other supports as in the case of Company C, in which the
efficiency through economies of scale. The findings of the local government enacted legislation for WEEE collection and
case studies tend to support the argument that there are offers recycling subsidies to cover the company’s financial
linkages between the five external factors as depicted in the deficit during WEEE collection. However, this is just a
proposed conceptual model particularly in the case of preferential treatment or an exception, as the local
developing countries like China. government in question wants to make the case a successful
pilot in reverse logistics business in China. Without local
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Awareness
government support and financial aid, small manufacturers
The case study findings suggest that while awareness of
would unlikely be able to support their own reverse logistics
sustainable development and extended producer
operations. As the high set up and running costs will smother
responsibilities are relatively high for large corporations in
attempts to invest in reverse logistics particularly for small
the electronic industry of China, public awareness of
firms at the initial stage, it is important for the government to
environmental protection and conservation needs to be
provide economic incentives to small manufacturers to kick
enhanced as EoL returns from consumers for recycling are
start reverse logistics programs and to facilitate collaboration
still relatively small in volume. The low public awareness and
among companies.
the lack of environmental legislations may be positively
correlated. In any case, higher public awareness and Systems
participation in recycling should help increase the amount The findings of the case studies also reveal that at present
of EoL returns to the producers through reverse logistics thus reverse logistics information system, infrastructure and
achieve economies of scale to reduce operating cost. In this technology in developing countries like China are still
regard, the government can improve the situation by relatively underdeveloped. Among the four surveyed
educating citizens on the need for waste reduction and companies, only Company C has an independent system set
recycling and promoting the use of environment-friendly up to manage information of reverse logistics. Site visit to the
products. It can also assist in establishing return collection 3PL provider’s WEEE recycling center also discloses that only
channels and setting up collection points to encourage wider primitive dismantling tools are being used in the recycling
public participation. Manufacturers should also adopt more process. The process is mainly manual with no automated
green designs for their products to reduce the use of processing or special equipment installed. The lack of
hazardous materials and to facilitate recycling. information system, infrastructure and technology prohibits
economies of scale and significantly reduces recaptured value
Legislation
from recycling. The absence of legislations and economic
As indicated by three of the four surveyed companies, the
incentives further aggravates the problem by reducing
major barrier to reverse logistics in China is the lack of
propensity to invest. To remedy the situation, both the
enforceable laws and regulations which may be related to the
government and the manufacturers have to invest in this
unique political and economic characteristics of the country.
regard in order to make reverse logistics a success. For
As the economy of China is rapidly booming in the last
example, to help small manufacturers reduce set up costs, the
decade, the central government may not be eager to impose
government can invest in centralized processing centers to be
stringent environmental legislations to overly restrain
jointly used by multiple firms for recycling. Led by the big
economic growth. After all, small manufacturers competing
enterprises in the industry, manufacturers should invest in the
on cost will find it difficult to maintain their competitive
use of latest reverse logistics information system and
advantage or even survive if they are mandated to set up costly
technology so as to increase efficiency.
reverse logistics systems to handle returns. For long-term
sustainable development and competitiveness in the global Collaboration
market, however, the government has to set up as soon as At present, Company A requires all its suppliers to meet the
possible regulations to promote, control, and standardize requirements of ISO14001. It also demands its recyclers to
reverse logistics practices. It should also introduce to the strictly follow the company’s standards. Company D
industry corresponding laws and directives for WEEE and stringently selects its suppliers to ensure full compliance of
RoHS like those implemented by the EU. Despite gradually the EU’s RoHS directive. Apart from these requirements, the
migrating to a market economy, China is still relying on case studies reveal little collaboration among supply chain
central planning to instigate control. To expedite development partners, let alone competitors, in the electronic industry of
of reverse logistics in the country, the government can play China to promote reverse logistics. Company C’s self-support
the role of coordinator or facilitator by stipulating rules and model is a closed system. For the other three firms, reverse
regulations on the sharing of responsibilities and obligations logistics becomes the responsibility of the 3PL provider once
among manufacturers, distributors, and end-users in WEEE the function is outsourced. This relatively costly and piece-
collection. meal approach is not beneficial to reverse logistics

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development for the industry as efficiency and economies of Table V indicates that to successfully implement full-scale
scale are difficult to achieve. While the lack of information reverse logistics for the electronic and other industries in
system, infrastructure and technology may be an obstacle to China, the central government should introduce enforceable
collaboration, the use of the same 3PL provider by two of the environmental laws and regulations and provide guidelines and
surveyed companies (Companies B and D) for reverse directives for the industry as soon as possible. It should
logistics suggests that there is scope for collaboration even enhance public awareness of environmental protection and
among competitors. In this regard, the government can act as conservation through education and promotion. The
initiator or facilitator to set up collaborative reverse logistics government should also take the initiative to invest in
system to help reduce operating cost of small firms through recycling infrastructure and technology, set up regional
economies of scale. Manufacturers can also collaborate with centralized WEEE processing centers, and help develop
suppliers, distributors, and 3PL providers using information collaborative recycling systems for the industry to achieve
technology to further optimize the whole supply chain economies of scale. Observing a nation-wide policy that has to
operation taking both the forward and the reverse logistics yet to be developed, local governments should provide financial
activities into consideration. aids to small manufacturers to help implement reverse logistics
In summary, to promote development of reverse logistics in and to facilitate collaboration among companies. Large
developing countries like China, efforts have to be made to enterprises with more resources and stronger capabilities
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enhance awareness, introduce legislations, provide economic should take the lead to invest in reverse logistics so as to set
incentives, invest in infrastructure and technology, and examples for smaller manufacturers to follow. Successful
enhance collaboration among companies. Success of all reverse logistics requires the whole-hearted participation of all
these improvement measures depends on the presence of the parties in the supply chain, including suppliers,
support from the government and investment by the manufactures, distributors, and end-users. The government,
manufacturers as summarized in Table V. however, should play a central role of facilitator, coordinator

Table V Improvements measures for reverse logistics implementation in China

Improvement measure
Support from government
Increase of public awareness on Educates citizens to enhance awareness of environmental protection and the need for waste reduction
environmental protection and conservation and recycling
Cultivates consumers to purchase environment-friendly products and participate in WEEE recycling
activities
Sets up return collection channels and points to encourage public participation in recycling
Introduction of enforceable environmental Introduces corresponding laws and directives for WEEE and RoHS like those implemented by the EU
protection laws, regulations, and directives Establishes laws to promote, control, and standardize reverse logistics practices.
Stipulates rules and regulations on the sharing of responsibilities and obligations among manufacturers,
distributors, and end-users in WEEE collection
Provision of financial, administrative, and Provides financial aids or incentives to small companies to implement their EoL product recycling
infrastructure support programs. The support of Qingdao government for Company C in this regard is a successful example
Acts as initiator or facilitator to set up collaborative reverse logistics system to help reduce operating cost
through economies of scale
Assists manufacturers to establish effective recycling network and system for WEEE returns to ensure
efficient and effective recycling operation
Invests in reverse logistics infrastructure such as centralized processing center
Investment by manufacturer
Adoption of green design for electrical and Produces environment-friendly products and reduces the use of hazardous substances in the design. The
electronic products green mobile phone designed by Company A is a good example
Makes full use of sustainable materials and designs to facilitate recycling and reuse of EoL products. In
this regard, the product life cycle analysis of Company C is a good example
Investment in reverse logistics technology Establishes effective recycling network and system for WEEE returns to ensure smooth and easy reverse
logistics flows and efficient recycling operation. In this regard, the full-scale self-support reverse logistics
system of Company C is a good example
Invests in the use of latest reverse logistics technology to increase efficiency
Integration of forward and reverse logistics Combines forward and reverse logistics to form a close loop through the use of integrated logistics
information management system to reduce waste and to improve profitability. In this regard, the
independent information management system for reverse logistics developed by Company C is a good
example
Collaborates with suppliers, distributors, and 3PL providers to further optimize the whole supply chain
operation taking both the forward and the reverse logistics activities into consideration

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cum mediator to provide adequate financial and infrastructure the latter can be accounted for by the RBV of a firm as
support, establish comprehensive rules and regulations, and discussed in the section of theoretical foundations.
define clear responsibilities and liabilities for different parties. In selecting the appropriate reverse logistics model for
Combining the conceptual model of external factors affecting implementation, the case studies reveal that the four enterprises
reverse logistics (Figure 4) and the proposed improvement have taken into account a number of strategic and operational
measures discussed above, a generic framework to expedite the factors. To facilitate generalization, these factors are collectively
development of reverse logistics in developing countries is grouped under strategic significance, financial considerations,
presented in Figure 5 which shows the linkages among the management skills, and technological requirements.
drivers and the roles of the government and the manufacturers.
Strategic significance
The importance of reverse logistics in the company’s business
Internal factors affecting reverse logistics strategy plays a significant role in determining the reverse
Apart from revealing linkages between external factors affecting logistics system. As the case studies reveal, enterprises which
reverse logistics, the case studies also shed light on how regard reverse logistics mainly as an EPR or a need to abide
electronic manufacturers in China would decide on whether or by laws (e.g., Companies A, B, and D) and those which see it
not to implement reverse logistics and which approach should as a strategic weapon to gain long-term profit (e.g. Company
be adopted. Based on the discussions with the senior managers C) will adopt totally different approaches. Based on RBV and
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of the four surveyed companies, it is found that the decision- TCE, the case study findings tend to corroborate that self-
making process did involve many strategic considerations, such support system or joint management (or collaborative)
as legal concerns, strategic significance and customer service, approach will likely be used when reverse logistics is
and operational considerations, such as cost-and-benefit regarded as a source of long-term profit. If reverse logistics
analysis and internal management resources, similar to those is implemented mainly for observing environmental laws and
regulations, outsourcing is usually used to allow the company
explored by Knemeyer et al. (2002). Owing to the lack of
to focus resources on its core competency.
mandatory legal requirements, the high initial investment, and
the lack of economic benefits in reverse logistics operation, most Financial considerations
small manufacturers have chosen not to invest in this regard so Financial considerations comprise investment, profitability,
as to minimize total cost. On the other hand, large enterprises and cost. Developing a self-support system, for example, will
such as the four companies in the case studies opt to implement involve heavy financial investment because treatment of
reverse logistics either because they see it as an EPR (Khetriwal WEEE requires special equipment and facilities. Outsourcing,
et al., 2009), a compliance with legal requirements of overseas however, may help shift the risk to the 3PL and save the
markets, a response to local government support, or a long- company significant equipment and infrastructure costs. On
term strategy to sharpen competition and increase profit. The the other hand, higher profitability can be achieved under the
former approach can be explained by the TCE theory whereas self-support model due to lower material cost and better

Figure 5 A proposed framework for expediting reverse logistics development

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customer service and corporate image in the long run. This Figure 6 summarizes the decision-making process of reverse
may give the company a sustainable competitive advantage logistics implementation taking into account the strategic and
that is difficult for its competitors to mitigate according to the operational factors of the internal environment as depicted
RBV. The use of 3PL provider for reverse logistics to comply in the conceptual model. Figure 7 shows the different
with environmental laws and regulations can reduce risk and arrangements of consumer or EoL return collection under the
cost according to TCE but it only achieves relative low or self-support, outsourcing, and collaborative models, which
even no profit to the firm. At present, full-scale self-support may be selected as an outcome of the decision-making
system requires such high set up and running costs that only process.
one of the four large enterprises studied, namely Company C,
has adopted this model. Conclusion and further research
This research has found that, at a firm level, TCE and RBV
Management skills
theories commonly used to account for reverse logistics
Management skills refer to the knowledge and capabilities to
practices in developed countries are also applicable to
manage the facilities, equipment, people, and information
situations in developing countries like China. By comparing
involved in the different reverse logistics systems. To run a self-
the drivers and the barriers to reverse logistics as reported in
support system, the demand for management skills is high as the
the literature and those observed in the electronic industry of
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company will be responsible for everything ranging from

China, it is observed that while the driving forces for reverse
maintenance of equipment and facilities, training of staff,
logistics vary from company to company, the barriers are
internal communication among departments, to proper common to most firms and are related mainly to the external
management of information for integrating both forward and environment. To begin with, there is a lack of enforceable laws
reverse logistics of the whole supply chain. With outsourcing, and legislations to motivate companies to implement reverse
however, the major challenge is just to maintain good logistics or to standardize recycling procedures. Next, there is
communication and a cooperative relationship with the 3PL little economic control by the state, such as severe penalties or
provider. For information management, self-support system heavy pollution tax, to prevent companies from violating
requires mainly internal communication whereas the environment protection directives. Furthermore, the lack of
outsourcing and the collaborative approaches demand effective supportive economic policies from the government
joint management and information exchange among partners. discourages small firms from investing in reverse logistics
because of its prohibitive start-up cost and slow return on
Technological requirements investment. In addition, the lack of publicity and knowledge
Technological requirement for reverse logistics depends on of reverse logistics hampers public awareness of
the approach adopted. Self-support system requires environmental protection. Finally, underdevelopment of
possession of all the necessary technology, special recycling infrastructure and technology in developing
equipment and trained personnel for the treatment of countries is also an obstacle to widespread implementation
recycled WEEE, which involves recycling of reusable of reverse logistics.
materials and proper treatment of noxious waste. These At a macro level, the current model of external factors
requirements and associated costs will be shifted to third party affecting reverse logistics is inadequate and needs to be
under the outsourcing and the collaborative arrangement. expanded. The study discovers that in developing countries

Figure 6 Decision-making process of reverse logistics implementation and selection of model

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 Reverse logistics in the electronic industry of China Supply Chain Management: An International Journal
Kwok Hung Lau and Yiming Wang Volume 14 · Number 6 · 2009 · 447 –465

Figure 7 Return collection arrangement under the different reverse logistics models
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like China, many external factors are closely linked together and other burgeoning developing countries. To enhance
with mutual influence on one another. This observation adds generalizability, an appropriate future research will be to
to the current understanding of external influence on reverse conduct a large-scale empirical study to survey many
logistics implementation. It also supports the proposed companies within and across industries for comparison.
conceptual model suggesting the presence of linkages Further research is also proposed to investigate the challenges
between the various external factors. The findings of the and barriers to reverse logistics faced by smaller
case studies have helped identify these linkages to complete manufacturers to reveal issues other than those identified
the proposed model. Unlike in developed countries where for large corporations. Attempt to investigate in detail the
initiatives of reverse logistics rest mainly with the firms, a mutual impacts of the external factors affecting reverse
comprehensive plan involving joint effort of the government logistics development and the issues involved in collaborative
and the manufacturers is required in developing countries like reverse logistics management is also recommended. This will
China to promote development of reverse logistics for the augment current theories and models of reverse logistics and
whole industry. In this regard, a set of improvement measures further enrich the proposed framework. As many small
have been proposed on the assumption that appropriate companies will likely outsource their reverse logistics
nation-wide reverse logistics policies and strategies can be functions to 3PL providers initially, it will also be useful to
formulated through the collaboration of the government and look at the issues from a different perspective by involving
the industry. With the analyses and the recommendations, the third-party reverse logistics service providers in future studies.
three research questions of the study have all been successfully
answered.
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Equipment Directive”, available at: http://en.wikipedia.org/
wiki/Waste_Electrical_and_Electronic_Equipment_Directive About the authors
Wikipedia (2009b), “Restriction of Hazardous Substances
Directive”, available at: http://en.wikipedia.org/wiki/ Kwok Hung Lau is currently a Senior Lecturer of Logistics in
Restriction_of_Hazardous_Substances_Directive the School of Management at the Royal Melbourne Institute
Williamson, O.E. (1975), Markets and Hierarchies: Analysis of Technology University of Australia. He holds a B. Social
and Antitrust Implications, Free Press, London. Science in Geography and an MBA from the Chinese
Williamson, O.E. (1985), The Economic Institutions of University of Hong Kong, a MSc. in Information Systems
from the Hong Kong Polytechnic University, a
Capitalism: Firms, Markets, Relational Contracting, Free
M.Urban Planning from the University of Melbourne, and a
Press, New York, NY.
PhD degree in Geocomputation from the Royal Melbourne
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Williamson, O.E. (1996), The Mechanisms of Governance,

Institute of Technology University. He has had papers
Oxford University Press, Oxford.
published in journals and conference proceedings such as
Wu, Y.C.J. and Cheng, W.P. (2006), “Reverse logistics in the
Environment and Planning (Part B), International Journal of
publishing industry: China, Hong Kong, and Taiwan”,
Physical Distribution & Logistics Management, International
International Journal of Physical Distribution & Logistics
Journal of Information Systems & Supply Chain Management,
Management, Vol. 36 No. 7, pp. 507-23. Australasian Transport Reform Forum, International Conference
Yin, R.K. (1994), Case Study Research: Design and Methods, on City Logistics, and Australian and New Zealand Marketing
2nd ed., Sage Publications, London. Academy Conference. His areas of research interest include
Yuan, P.H. (2006), “Development of China’s reverse logistics modeling in logistics, e-supply chain management,
drawing lessons from external experience”, Logistics Science outsourcing, and reverse logistics. Kwok Hung Lau is the
and Technology, Vol. 29 No. 126, pp. 84-7. corresponding author and can be contacted at:
Zhao, X., Sum, C.C., Qi, Y., Zhang, H. and Lee, T.S. (2006), charles.lau@rmit.edu.au
“A taxonomy of manufacturing strategies in China”, Yiming Wang has been working in the civil and the business
Journal of Operations Management, Vol. 24 No. 5, sectors of China for almost 20 years occupying engineering
pp. 621-36. and managerial positions in government and business
Zhu, Q. and Geng, Y. (2001), “Integrating environmental enterprises. He was awarded the second class prize of
issues into supplier selection and management: a study of China’s National Scientific and Technological Progress in
large and medium-sized state-owned enterprises in China”, optical measuring instrument design in 1989. At present, he is
Greener Management International, September, pp. 27-40. deputy general manager of a logistics company in Shanghai.
Zhu, Q. and Sarkis, J. (2004), “Relationships between His expertise includes organization management, supply
operational practices and performances among early chain management, and policy research on free port.
adopters of green supply chain management practices in Yiming received his Master of Business degree in Logistics
Chinese manufacturing enterprises”, Journal of Operations Management at the Royal Melbourne Institute of Technology
Management, Vol. 22 No. 3, pp. 265-89. University in 2007. His areas of research interest include
Zhu, Q., Sarkis, J. and Geng, Y. (2005), “Green supply chain international trade, outsourcing, reverse logistics, and
management practices in China: pressures, practices and collaborative planning.

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