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V
Table of contents
Table of contents V
Abstract (ENG) VIII
Abstract (GER) IX
List of Abbreviations XI
1 Introduction 1
1.1 Overview 1
1.2 Objective of the thesis 5
1.3 Structure of the thesis 6
2 Definitions 9
2.1 Definition of ‘’Logistics’’ and ‘’Reverse Logistics’’ 9
2.1.1 Definition of ‘’Logistics’’ 9
2.1.2 Definition of “Reverse Logistics” 10
3 State of the Art 11
4 Challenges in Reverse Logistics 13
4.1 Technical Challenges 13
4.2 Economic Challenges 15
4.3 Political Challenges 17
4.4 Social Challenges 18
5 Challenges in specific Industries 21
5.1 Challenges in the Automotive Industry 21
5.2 Challenges in the Food Industry 23
VI
6 Identification Systems 27
6.1 Difference between Identification and Classification 27
6.2 Identification Systems in Reverse Logistics 28
6.2.1 Overview 28
6.2.2 Font- and Symbol based Methods 30
6.2.2.1 Optical Character Recognition 30
6.2.2.2 Barcode 31
6.2.2.3 Laser-marking 33
6.2.3 Electronic Methods 35
6.2.3.1 Near Field Communication 35
6.2.3.2 Radio Frequency Identification 36
6.3 Identification methods in specific industries 40
6.3.1 Automotive Industry 40
6.3.2 Food Industry 41
6.3.3 Other Industries 42
7 Visions for improving Reverse Logistics 45
7.1 Introduction to Smart Reverse Supply Chain (SRSC) 45
7.2 Internet of Things (IoT) 46
7.3 Blockchain 48
7.4 Artificial Intelligence and Machine Learning 50
8 Opportunities in Reverse Logistics 55
8.1 Technical Opportunities 55
8.2 Economic Opportunities 56
8.3 Environmental Opportunities 57
VII
9 Conclusion 61
9.1 Summary 61
9.2 Final Consideration and Outlook 62
10 Literaturverzeichnis 65
List of Figures 81
VIII
Abstract (ENG)
Context: The increasing social awareness of environmental problems is demanding
the industry to enforce sustainable strategies, including moving towards a Circular
Economy. In order to apply this circularity to supply chains, Reverse Logistics is
needed. It describes the process that manages the flow of unusable materials from the
customer to the remanufacturing point. Notwithstanding its economic and environmen-
tal opportunities, industries are still struggling with its implementation.
Objective: The aim of this work is to analyse the difficulties and potentials of Reverse
Logistics, focusing on technical aspects. Through the evaluation of identification sys-
tems and modern trends, it seeks to overcome the challenges faced by the industry.
Method: The results are obtained through a literature research on both founding and
more recent contributions concerning Reverse Logistics.
Results: Due to the uncertainties concerning quality, quantity, the time of returning
products, and the costs linked to the implementation of a Reverse Logistics network, it
is challenging for companies to motivate the investment in this solution. In addition,
missing support from legislations and a lack of knowledge about the topic add to this
difficulty. Nevertheless, through the appropriate use of identification systems and new
technologies, it is possible to effectively use returned items and save costs on produc-
tion processes. The implementation of Reverse Logistics would allow to decrease
waste production and thus landfill, reduce emissions and maximise utility of natural
resources.
Conclusion: Possible solutions to overcome the challenges of Reverse Logistics can
be achieved through the implementation of the appropriate Identification systems and
a further development of technologies such as IoT, Blockchain, and AI. In order to
encourage industries to introduce Reverse Logistics, a stronger political and techno-
logical contribution is needed.
Keywords: Reverse Logistics, Closed Loop Supply Chain, Auto-ID, RFID, SRSC
IX
Abstract (GER)
Kontext: Das zunehmende gesellschaftliche Bewusstsein für die Umweltproblematik
verlangt von der Industrie die Durchsetzung nachhaltiger Strategien, vor allem von Cir-
cular Economy. Für dessen Umsetzung in der Logistikbranche, ist Reverse Logistics
erforderlich. Dieses beschreibt die Verwaltung der Materialflüsse vom Verbraucher bis
zur Wiederverwertungsstelle von nicht mehr brauchbaren Produkten. Trotz der wirt-
schaftlichen und umweltfreundlichen Chancen die es bietet, haben sich in der Industrie
noch wenige Fortschritte ergeben.
Zielsetzung: Ziel dieser Arbeit ist, die Herausforderungen und Potentialen der Re-
verse Logistics zu analysieren, wobei der Schwerpunkt auf technischen Aspekten liegt.
Die Bewertung von Identifikationssystemen und technologischen Trends soll dazu die-
nen, die Schwierigkeiten der Industrie zu lösen.
Methodik: Die vorgestellten Ergebnisse werden durch die Literaturrecherche sowohl
von grundlegenden als auch von aktuellen Beiträgen bezüglich Reverse Logistics er-
langt.
Ergebnisse: Aufgrund der Unsicherheiten in Bezug auf Qualität, Quantität und Zeit-
punkt der Rückgabe von Produkten sowie der Kosten, die mit der Implementierung
eines Reverse Logistics-Netzwerks verbunden sind, ist es für Unternehmen schwierig,
die Investition in diese Strategie zu motivieren. Zusätzlich erhöhen fehlende politische
Unterstützung und mangelndes Wissen über das Thema die Schwierigkeit. Nichtsdes-
totrotz ist es durch den angemessenen Einsatz von Identifikationssystemen und neuen
Technologien möglich, Produkte effektiv wiederzuverwerten und Kosten bei den Pro-
duktionsprozessen einzusparen. Die Umsetzung der Reverse Logistics würde es er-
möglichen, die Abfallproduktion und damit die Deponierung zu verringern, die Emissi-
onen zu reduzieren und den Nutzen der natürlichen Ressourcen zu maximieren.
Fazit: Die Bewältigung der Herausforderungen der Reverse Logistics kann durch die
Implementierung geeigneter Identifikationssysteme und eine Weiterentwicklung von
Technologien wie IoT, Blockchain und KI erreicht werden. Um die Industrie zur Einfüh-
rung der Reverse Logistics zu ermutigen, ist ein stärkerer politischer und technologi-
scher Beitrag erforderlich.
X
Suchbegriffe: Reverse Logistics, Geschlossene Lieferkette, Auto-ID, RFID, SRSC
XI
List of Abbreviations
Abbreviation Meaning
AI
Artificial Intelligence
Auto
-ID
Automatic Identification
CE Circular Economy
CFRP Carbon Fibre Composite
CLSC Closed Loop Supply Chain
EoL End-of-Life
EORLP Environmental Oriented Reverse Logistics Practices
EoU End-of-Use
EPC Electronic Product Code
EPCIS Electronic Product Code Information Services
GDP Gross Domestic Product
HF High Frequency
IEC International Electrotechnical Commission
ISO International Organisation for Standardization
KPI Key Performance Indicator
LADAR Laser Distance and Ranging Devices
LF Low Frequency
MF Medium Frequency
ML Machine Learning
MSW Municipal Solid Waste
NFC Near Field Communication
XII
OCR Optical character recognition
OEM Original Equipment Manufacturer
PPE Personal Protective Equipment
RFID Radio Frequency Identification
RL Reverse Logistics
SRSC Smart Reverse Supply Chain
TUM Technische Universität München
UHF Ultra-High Frequency
WEEE Waste Electrical and Electronic Equipment
1
1 Introduction
1.1 Overview
Since a link between the increase of temperature and the greenhouse effect was made
in 1955 [Wea-2008], global warming became a public discussion. Charles David Keel-
ing, who, in 1957, started to measure the amount of carbon dioxide in the air and in-
vented the Keeling Curve [Har-2010], set the base for the increasing concerns about
climate change related to the greenhouse gases. The Keeling Curve is used to meas-
ure the accumulation of carbon dioxide in our atmosphere. The environmental con-
cerns led to the development of the concept of Circular Economy in 1970s [Wau-2018].
Circular Economy (CE) is defined as a production and consumption system that imple-
ments a circular life cycle of a product. The natural resource is processed and con-
sumed, but instead of being disposed, it is recycled or remanufactured and can be
successively sold again [Kor-2018]. Apart from being environmentally friendly, Circular
Economy can also bring financial benefits. From a report commissioned by the Ellen
MacArthur Foundation, it emerges that Circular Economy in Europe could save up to
$630 billion every year [Ell-2013].
The concept of Circular Economy needs to be implemented by single manufacturers,
who have to establish the technical procedures to convert a used product into useful
material. In the execution process, Logistics represents the instrument to put Circular
Economy in place by managing the transportation of a product along its circular life
cycle. The specific terminology used to define the process of managing returning prod-
ucts from the end consumer to the manufacturer for recycling purposes Reverse Lo-
gistics [Bri-2004, S. 5].
According to Rogers and Tibben-Lembke [Rog-1999], the entire cost of Logistics in
1997 amounted to $862 billion, while in the same year, costs for Reverse Logistics
resulted in about $35 billion, thus approximately 4% of the logistics operations. Today
about 20% of products sold in the USA enter the reverse supply chain channel, costing
around $100 billion every year [Boy-2014].
The primary driving force for examining and implementing Reverse Logistics networks
is legislation. Successively to European legislation such as the Waste Electrical and
Electronic Equipment (WEEE) [EC - 2002/96/EC] and national ones, such as the El-
ektro- und Elektronikgerätegesetz (Electrical and Electronic Equipment Act) [Pau-
2005], countries as for example Germany were able to reach the degree of proficiency
1 Introduction
2
in WEEE recycling of almost 100% [Bre-2020]. Besides laws, social-environmental and
economic aspects are also relevant for encouraging Reverse Logistics [Bri-2004,
S. 10]. Although for many companies it may seem as an additional cost, the remaining
value of returned or recycled products can positively influence the bottom line of a firm,
by adding value [Lee-2012]. Especially a dedicated Reverse Logistics channel, which
does not just use the conventional forward supply chain in the opposite direction,
should be able to improve incomes of Reverse Logistics (RL) operations by 5-10%
[Boy-2014]. According to Brito [Bri-2004, S. 11], the economic drivers can be divided
into direct and indirect benefits. The direct benefits are cost reduction and product
value increase through recovery. Furthermore, competition for an environmentally
friendly image plays a vital role since sustainability has become a factor driving con-
sumer demand. Achieving a socially engaged image is conditioning the marketing
strategies of companies [Thu-2009]. The indirect benefits refer especially to the so
called ‘’green image’’. It is proven that environmentally conscious strategies increase
customers’ fidelity to the brand and, thus, affect positively its economic performances
[Sis-2007]. A study demonstrated that about 82% of customers are willing to spend
more on green products [Lee-2012], but also those, who are not inclined to pay more,
would prefer them to non-sustainable ones [Thu-2009]. An example of how the envi-
ronment could benefit from reverse logistics is given by the company Xerox, which
reports that more than 90% of their copier material is recyclable and this enabled them
to reduce landfill up to 300 million kilograms in a single year [Gui-2002].
The reasons for returning products from consumers’ point of view are multiple, as ex-
posed by Brito [Bri-2004, S. 12-13]. These can be divided into three categories.
Manufacturing returns: These products are for example materials which were
not necessary or were defected and are returned to the producer with the pur-
pose of being restored into production
Distribution returns: Products sent back during the distribution process, be-
cause of a wrong order, unsold or recalled due to technical concerns
Customer returns: These products are sent back benefiting from warranty or in
case of ‘’end-of-life’’ or ‘’end-of-use’’ products, and thus are not usable any-
more
The design of a Reverse Logistics network is usually divided into three major parts,
which are: collection, identification/classification and recycle or reuse [Zaa-2014]. The
collection process can be performed either by the (re-)manufacturer, by a recycling
network or by a service provider [Zaa-2014]. In the collection process of parts, costs
for transportation can be saved by choosing a good location for sorting and testing
[Dek-2004] as well as efficiently performed gatekeeping. Gatekeeping is the process
1.1 Overview
3
of controlling and testing products at the entry point of the Reverse Supply Chain and
can reduce the amount of items that are recycled unnecessarily, such as defective
ones [Rog-2001; Jay-2008]. The main members of a reverse supply chain are normally
manufacturers or suppliers, recycling specialists and organizations such as charities
[Bri-2004, S. 19]. Companies, which lack in competence of Reverse Logistics, out-
source the task of implementing the returning strategies to external operators [Usa-
2020]. Recycling network, such as RENE or EARN, offer companies to handle for them
the whole reverse logistics operation and, thus, to fulfil their legal requirements [Sch-
2009, S. 7]. Outsourcing is also used when external skills are required to obtain value
from returned products [Bre-2011], for example of cars, which are complex objects
which need to be divided into different categories.
Returned objects can be classified into five groups according to Schmid [Sch-2009,
S. 16]. These are: Reuse, remanufacture, refurbish, repair, and recycle. A different
categorisation is given by Rogers [Rog-1999], who divides returned products into
seven disposing channels, which are:
Return to Vendor
Sell as New
Sell Via Outlet or Discount
Sell to Secondary Market
Donate to Charity
Remanufacture / Refurbish
Materials Reclamation / Recycling / Landfill
In order to understand in which disposing channel the returned product must be as-
signed, these are analysed in relation to: the structure of the object, the deterioration
state and the necessary restoring procedure [Bri-2004, S. 17-19]. The structure anal-
ysis focuses on aspects such as the number of different parts or the materials it is
made of. The deterioration of a product can concern different aspects, for example the
financial decay, i.e., the value after a certain period, or the homogeneity of deteriora-
tion, i.e., whether the different components of the product are in the same condition or
not. In order to understand the necessary intervention, the grade of use of a returned
object during its life cycle is examined. It is studied how much work and cost the object
needs before being sold again. These three aspects are crucial to properly establish
the return channel of a product and optimize its possible revenue.
1 Introduction
4
An important topic that underlines the relevance of Reverse Logistics implementation,
is Planned Obsolescence. Although it is mostly associated to the word planned, also
in this case, obsolescence can be divided into seven typologies, as shown by Proske
[Pro-2016]: Material/qualitative, Functional, Psychological, economic, Planned/in-
tended, accepted and obligatory obsolescence.
This industrial strategy is applied to increase sales throughout time, forcing customers
to change a product after a determined period. Since the designing stage, the life cycle
of a product is established. The pieces are built to work for the necessary time, nor-
mally by using lower quality products. This phenomenon is called ‘’contrived durability’’
[Sat-2017]. By applying the concept of ‘’Design for limited repair’’ [Sat-2017], compa-
nies make sure that their products are not easily repairable, making it for example too
expensive to replace a component, and thus pushing the customer to buy a new object
instead. This approach can be achieved by using different techniques, such as the
need for special tools to open the products or by implementing specific design strate-
gies. According to this last-mentioned tactic, replacing a small part may require chang-
ing a bigger and more expensive component. Due to depreciation of the market value,
it is usually more convenient to buy a new product instead of repairing it. An example
are smartphones, which nowadays mostly have a non-removable battery. Since par-
ticular screws are used to close a phone, when the battery needs to be replaced, it
becomes a costly operation, as it is only performable by a professional service centre
[Pro-2016]. Planned obsolescence is becoming a problem since it increases the
amount of waste. In 2001 in Germany, the government expected an increase of waste
from the year 2002 to 2015 of about 350.000t. According to the German Federal Min-
istry for the Environment this value was already registered in 2006 [Sch-2009, S. 5].
Garrido-Hidalgo [Gar-2020] points out that 44.7 million metric tonnes of WEEE were
produced in 2016, with expectations of an increase to 52.2 million metric tonnes in
2021.
Due to the spread of the Covid-19 pandemic in 2020, waste amount is even more
rapidly growing than expected from the authorities. The health emergency requires the
adoption of personal protective equipment (PPE) and national lockdowns are rising the
demand for food delivery. Both aspects explain the cause of intensified implementation
of single-use plastics, which are used for facemasks or food packaging. The additional
phenomenon of panic grocery shopping, due to the fear of supply shortage, strongly
affects the effort for waste reduction. [Sar-2020] According to a study conducted by
Prata [Pra-2020], the global monthly use of face masks amounts to 129 billion. The
missing infrastructure and organization to handle this new amount of plastic waste is
causing damages to our environment. An example of the inadequate disposal of PPE
can be observed through the many facemasks which are often to be found on the
1.2 Objective of the thesis
5
ground in public streets or on beaches. These decompose into microplastics and have
long-term consequences on the environment. [Pra-2020]
These numbers and facts confirm the importance of implementing a Reverse Logistics
network, to regulate and organize the increasing amount of waste.
1.2 Objective of the thesis
The aim of this study is to analyse the challenges and the possible opportunities of
Reverse Logistics, focusing mainly on the technical aspects.
The presented research offers an overview of today’s implementation possibilities and
contributes to better understand in which direction future studies should proceed.
In order to solve the technical challenges, Identification systems are analysed. By un-
derstanding which methods better suits a specific product, the traceability and recog-
nition can be improved and so also its returning network. In the last decade, the only
technology which seems to be giving possible solutions is Radio Frequency Identifica-
tion (RFID), since it allows to overcome the main challenges of barcodes or other font-
based Identification systems [Asi-2011]. In addition, an investigation of new technolo-
gies such as Artificial Intelligence (AI) and Internet of Things (IoT) linked to supply
chain could give an idea of how Reverse Logistics could develop in the future. New
technologies can also strongly improve the identification process.
The example of Reverse Logistics in various industries such as the automotive one
and the food sector can indicate how different products can be processed into a Circu-
lar Economy. These cases provide a guideline for procedures with similar products. By
understanding the problems these industries face when implementing Reverse Logis-
tics, and the commonly used identification systems, the benefits of returning goods can
be achieved.
Due to the focus on technical aspects, which involves the analysis of identification sys-
tems and new technologies, possible solution for the economic, political, and social
challenges are outside the scope of this thesis and will not be discussed. Nevertheless,
it is necessary to identify and solve these difficulties in order to encourage companies
to implement Reverse Logistics.
1 Introduction
6
1.3 Structure of the thesis
This work concentrates on the analysis of problems, especially of technical ones, re-
lated to Reverse Logistics, and tries to investigate the reasons why it is still barely
implemented in industries, although it offers many benefits.
In order to understand the structure of a Reverse Logistics network and the relevance
of the challenges for its implementation, an analysis of the available literature has been
conducted, aimed at identifying the founding research papers as well as more recent
ones, which can describe today’s approach and possible solutions.
In chapter 2 a definition of the main terminology is given, to allow the reader to under-
stand its use in this thesis.
The State of the Art concerning research about Reverse Logistics is describes in chap-
ter 3.
Successively, in chapter 4, the challenges of Reverse Logistics are analysed and ex-
plained. These are divided into technical, economic, political, and social. Despite the
distribution into different sections, many of the difficulties can be repeatedly used in
more than one category, due to their wider impact.
So that the connection of Reverse Logistics to the industry becomes clearer, chapter
5 concentrates on understanding how different sectors cope with the mentioned chal-
lenges. Obviously, each sector has its own characteristics and necessities as far as
Reverse Logistics is concerned. For this reason, an analysis of the difficulties which
are faced by companies from multiple industries, for example the automotive or food
production industry, helps the reader to better understand such issues.
Since identification of returned products is one of the biggest technical challenges, an
evaluation of Auto-ID systems is performed in chapter 6, to understand the state of
science. The research analyses and links RFID and other identification systems to Re-
verse Supply Chain, such as for example NFC, OCR, or further niche methods like
laser-marking, in order to understand their possible implementations and difficulties.
Chapter 7 deals with visions for improving Reverse Logistics with new technologies.
Trying to increase the efficiency of identification systems, the work associates new
tools such as Artificial Intelligence, Blockchain and Internet of Things to Reverse Lo-
gistics. Since research about these topics is limited, it is hard to establish if they will
positively impact closed loop supply chains.
1.3 Structure of the thesis
7
Once understood how to deal with the problems of Reverse Logistics, chapter 8 dis-
cusses the opportunities, dividing them into technical, economic, and environmental.
The different benefits are often strictly linked between each other. For example, a tech-
nical opportunity often brings financial advantages.
The work concludes in chapter 9 with how Reverse Logistics should be further devel-
oped and what future research should be focused on. It is a critical topic for our econ-
omy but even more for our environment, since, as mentioned before, it could signifi-
cantly improve waste reduction and the implementation of the Circular Economy.
8
9
2 Definitions
This chapter is intended to provide the most important definitions used throughout this
work, independently of the area of competence of the reader. This will create a basic
knowledge.
2.1 Definition of ‘’Logistics’’ and ‘’Reverse Logistics’’
2.1.1 Definition of ‘’Logistics’’
Since ‘’Logistics’’ is defined in different ways, depending on to the country of operation,
it is necessary to specify its meaning. In the presented work, the German understand-
ing of ‘’Logistics’’ is used, i.e. the planning, organization and control of both internal
and external product-flow of a company [Mey-2019]. In comparison, in English speak-
ing countries, ‘’Supply Chain Management’’ is used as an equivalent of the German
term Logistics.
Although its etymology is still discussed, the main origin is attributed to the French
word loger, which means to house, to settle. Nevertheless, the first use of this term
can be followed back to the ancient Greeks, as well as the Byzantium and Roman
empire, where the logista was the responsible person for financial control and supply
distribution [Jün-1989]. The association of logistics with a military figure can be traced
along history until the middle of 20th century [Hei-2005].
Today, Logistics has evolved from the idea of local transport. It explains the procedure
of global supply and organization and deals with the task of efficiently providing the
required objects in the right quantity at the established time and place [Gud-2012]. Its
purpose can be summarized into “7-Rs”, namely the right products, in the right quantity,
in the right state, in the right location, at the right moment, for the right client, at the
right prize [Fot-2020].
The precise definition of Logistics can hardly be given, due to its constant development.
Today it covers a main part of industries’ value chain, especially due to outsourcing.
Nevertheless, it is changing with the introduction of Industry 4.0 and the stronger use
of Artificial Intelligence. Industry 4.0 is a new industrial approach defining a stronger
interaction with smart technologies which allow the communication between people,
objects, and complex systems. The revolution is driven by Cyber Physical Systems,
described as systems which are controlled by computer algorithms. [And-2014]
2 Definitions
10
2.1.2 Definition of “Reverse Logistics”
Reverse Logistics, often referred to as Reverse Supply Chain and part of Closed Loop
Supply Chain, has its first definition published only in the beginning of the nineties by
the Council of Logistics Management [Bri-2004, S. 4] and thus still represents a young
sector of Logistics.
Although there are many definitions, the most common one describes Reverse Logis-
tics as ‘’the process of planning, implementing and controlling flows of raw materials,
in process inventory, and finished goods, from a manufacturing, distribution or use
point, to a point of recovery or point of proper disposal’’ [Bri-2004, S. 5].
The etymology of the adjective ‘’Reverse’’ can be traced back to the latin word rever-
sus, which is the past participle of revertere and means turn back, turn around [Onl-].
This explication clearly describes the correlation of Reverse Logistics to the Forward
Logistics. In addition, it helps to explain the purpose of it, which is to bring back prod-
ucts from the consumer to the supplier.
11
3 State of the Art
On the basis of the definition of Reverse Logistics given in chapter 1, this chapter de-
scribes its current State of the Art.
In order to understand the structure of a Reverse Logistics network and the relevance
of the challenges in its implementation, an analysis of the available literature has been
conducted, aimed at finding the founding, as well as more recent, research papers,
which can describe today’s approach and possible solutions. According to the paper
of Kosacka [Kos-2020], the most cited articles about Reverse Logistics, which give a
general overview of the topic are ‘’Quantitative models for reverse logistics: A review’’
[Fle-1997] and ‘’Reverse logistics and Closed loop supply chain: A comprehensive re-
view to explore the future’’ [Gov-2015].
Due to the rising concern for the climate change, the concept of Reverse Logistics has
evolved over time. The first basic approach can be followed back to Ginter [Gin-1978],
who anticipated the concept of Reverse Logistics by discussing the importance of ma-
terial recycling. Following the official definition of Reverse Logistics in the early nineties
by the Council of Logistics Management (Chapter 1), research on the topic increased.
The published research papers in this period focused on the general definition and
construction of Reverse Logistics. Thierry [Thi-1995] focused on the idea of Product
Recovery Management, which allowed to recover economic and ecological value
through waste reduction. Fleischmann [Fle-1997] analysed the concept of material cy-
cles instead of one way processes. He divided Reverse Logistics into distribution, in-
ventory, and production planning. An overview of Reverse Logistics was given by Rog-
ers [Rog-1999], who tried to offer an insight into its management. Nevertheless, he
underlined the missing information given the topicality of the subject in those years.
At the beginning of the new century research focused on the barriers and possible
opportunities of Reverse Logistics. Ravi [Rav-2005] pointed out the main challenges
of Reverse Logistics and found a correlation between them. Also Sasikumar [Sas-
2008] offered a detailed analysis of issues in Reverse Supply Chain processes. Pos-
sible opportunities of Reverse Logistics were discussed from Kumar [Kum-2008], who
underlined the potentiality of remanufacturing. In addition, new technologies were
taken into consideration as possible problem solvers. With the diffusion of Radio Fre-
quency Identification (RFID), this technology was often proposed as possible solution
to the main difficulties in tracing products. Payaro [Pay-2004] explained the impact of
Information and Communication Technology, such as RFID, in Reverse Logistics
3 State of the Art
12
processes. Visich [Vis-2007] merged RFID technology with Closed Loop Supply
Chains and offered a guidance to companies, that were interested in implementing the
identification technology into their processes.
Due to the recent development of Industry 4.0 (Chapter 1) and new technologies, such
as Internet of Things (IoT), current research about Reverse Logistics progressively
includes these topics. These methods are studied in the attempt to find solutions to the
challenges of Reverse Logistics. Smart Reverse Supply Chain was already discussed
by Xu [Xu-2011b] in 2011, who suggested the implementation of IoT and RFID in Re-
verse Logistics to solve main difficulties. Also Liu [Liu-2018] underlines the importance
of IoT in the development of Reverse Supply Chain, especially due to possible im-
provements in data exchange between distribution members. The adoption of IoT in
Closed Loop Supply Chain is also taken into consideration from Garrido-Hidalgo [Gar-
2020], due to the current diffusion of high recycling-intensive lithium batteries. Also
Block-chain plays a pivotal role in the new development of Reverse Logistics, as
pointed out from Saberi [Sab-2019], since it offers better product traceability and pay-
ment transparency. The association between Closed Loop Supply Chain and Industry
4.0 is discussed by Dev [Dev-2020]. The author provides a general basis to easily
understand the advantages of Industry 4.0 systems for the performances of Reverse
Logistics.
Whereas at the beginning Reverse Logistics was playing a niche role in the Value
Chain of manufacturers, today it is an established subfield of Supply Chain Manage-
ment [Gui-2009]. With the rapidly growing use of E-Commerce systems, the chances
of products being returned are increasing, since the customer buys a product without
seeing it. For this reason, an efficient Reverse Logistics network is needed, in order to
satisfy consumers’ requirements. In addition, due to rising social awareness towards
environmental issues, clients are expecting manufacturers to recycle returning prod-
ucts instead of disposing of them. This social evolution is also offering new market
opportunities for industries.
This entire paper is centred on an analysis of the available literature concerning Re-
verse Logistics and, as such, deepens this chapter’s literature overview.
13
4 Challenges in Reverse Logistics
4.1 Technical Challenges
Technical difficulties are one of the main reasons why industries are still not imple-
menting Reverse Logistics. These are often hard to overcome and the few available
solutions are usually very expensive, which turns into an economic challenge. The
technical difficulties can be divided into product-, network- and material related.
One of the main challenges of Reverse Logistics, which differentiates it from Forward
Logistics, is the difficulty in forecasting the returning time of products [Gui-2002]. In the
traditional Forward Supply Chain, the object can be followed along every step until it
reaches the final customer. Because every member of the logistic process collabo-
rates, it is possible to keep track of the product and know exactly when it will arrive at
destination. Whereas in Reverse Logistics, it is necessary to wait for the customer to
introduce the used object into the Reverse Channel, which makes it difficult to plan the
recovery.
The manufacturer faces the difficulty in predicting the quality of returned materials.
These can be exposed for longer time to use and external factors and thus be deteri-
orated. As mentioned in the first chapter, the producer has to analyse a product based
on three indicators [Bri-2004, S. 17]: structure of the product, its quality decline and the
use which was made of it. Also quantity becomes a factor of uncertainty since the
manufacturers can hardly forecast how much of their sold goods will be coming back
[Gov-2015]. This is crucial in order to being able to organise the space availability in
warehouses [Bre-2011].
These uncertainties are linked to the inability to establish the identity of a returning
product [Tho-2009]. Whereas it is easy to apply the implementation of identification
methods in Forward Supply Chain, since there are no customers involved, the same
solutions are not valid in Reverse Logistics. The main challenge becomes implement-
ing technologies for tracing products [Gon-2010] and thus filling the gap of information
[Lee-2012].
A further technical difficulty, when it comes to Reverse Logistics, concerns the network
structure. The returning process needs to be established according to the needs of the
company as well as its financial possibilities. Already when it comes to collecting the
products there is need to choose if for example testing at every collection point or at
the main facility. Early testing could save costs of transporting unnecessary products,
4 Challenges in Reverse Logistics
14
but it requires more analysis equipment [Fle-1997]. Testing is especially important to
avoid returning wrong products. Different materials are often involuntarily mixed when
it comes to Municipal Solid Waste (MSW) in Germany [Tho-2009], complicating the
recycling processes. Thus, it is important to decide whether to use a centralized or
distributed network (Figure 4.1).
Figure 4.1: Centralized and Distributed Network [Boy-2014]
The factors for deciding which of the above depicted networks is more suitable are the
lifespan of the object, the value, and its geographical expansion [Boy-2014]. Succes-
sively, it is necessary to decide if either implementing a closed loop- or an open loop
system. The first one includes the entire process of returning products, whereas the
open approach refers only to collection and sorting of material, without its successive
processes [Boy-2014]. According to Govindan [Gov-2015], establishing the location of
all facilities needs to be already part of the designing stage of a product.
4 Economic Challenges
15
A well-designed network requires a new relationship between the supplier and 3rd party
logistics provider [Gui-2002]. The lack of coordination and collaboration leads to a
missing exchange of information regarding stock [Bre-2011] and, accordingly, to in-
ventory management difficulties [Gov-2015]. The dependency between the supply
chain members is an important challenge of Reverse Logistics and causes inflexibility
along the process [Thu-2009]. Furthermore, implementing a Reverse Supply Chain is
challenging due to the missing infrastructure. On one hand, there is the need to create
a system that allows the organisation of a significant amount of data [Lee-2012], over-
coming todays’ insufficiency of technological infrastructure [Jay-2008]. Due to the
missing technologies, it is difficult to keep track of the products sold and, thus, identi-
fying them at the returning stages. On the other hand, the required infrastructure [Del-
2003] could also support companies that are already struggling with lacking expertise
on Reverse Logistics [Pra-2019].
The third difficulty concerning technical aspects of Reverse Logistics is linked to the
material and the composition of returning products. Whereas recycling a plastic bottle
can be easy, since it is composed of a single material and its size is small, often prod-
ucts can be much more complex to handle. Many returning objects are composed of
different materials and have a unique shape, which obliges the remanufacturer to dis-
mantle them manually. This process can take a long time and be very expensive, with
little chance of automatization [Sch-2009, S. 24]. Since the returning objects can be
very different and derive from multiple companies, it is hard to standardize the disman-
tling process in order to involve machines [Asi-2011]. The designing stage of a product
also plays an important role in the consideration of technical difficulties. As a means to
improve disassembly standardization, the design of an item should consider this as-
pect, making it easier for the recycler to separate the different components [Gui-2002].
In order to facilitate the conversion of a product in a raw resource, it is pivotal to choose
the right material, avoiding for example fragile or expensive ones [Bre-2011]. An im-
portant consideration needs to be done regarding toxic substances, such as batteries,
which are more complex to be recycled or remanufactured and therefor increase costs
of the Reverse Logistics network [Bre-2011].
4.2 Economic Challenges
The economic aspects are a main challenge in the implementation of a Reverse Lo-
gistics system. Since creating a Reverse Supply Chain may demand to change the
structure of a well running construction process [Thu-2009] and, therefore, threatens
to compromise revenue, many industries are reluctant to do so. Due to the uncertain-
ties in Reverse Logistics, as seen in the part on technical challenges (chapter 4.1),
4 Challenges in Reverse Logistics
16
stakeholders hesitate to invest in companies establishing these processes [Usa-2020].
As a consequence of stakeholders’ insecurity, also managers are afraid to implement
such networks. This dynamic underlines that for many companies the issue of being
environmental friendly is “a balancing act between taking care of Mother Earth on the
one hand and pleasing profit- hungry shareholders on the other” [Gif-1997], leaving
aside the ethical issues that this dichotomy raises [Thu-2009].
A challenge which the industry has to face are the high costs of Reverse Logistics
specialists and qualifying employee [Bou-2018], since there is a lack of expertise, as
mentioned in chapter 4.1. High costs are also included when it comes to environmental
adaption [Del-2003], and new machines or working tools are needed to implement a
well-organised Reverse Logistics.
Generally speaking, the implementation of Reverse Logistics can constitute a major
cost for a company, as underlined by Lee [Lee-2012]. Due to the lack of knowledge
about the topic, it is difficult to see the financial benefits it guarantees [Bou-2018]. This
means that since the traditional Supply Chain would deliver a produced item to a cos-
tumer, and this represented the economic profitability of the process, bringing back the
products could not show immediately its financial chances.
A major economic challenge is linked to the organisation and the network of Reverse
Logistics. Since returning products includes multiple supply chain members, it is nec-
essary to construct an “eco-oriented partnership” [Thu-2009], in order to guarantee an
entire environmentally friendly process. An additional important aspect when it comes
to the network, is the agreement between the members of the Reverse Supply Chain
on the value of a returning product [Fle-1997]. The price of the product is established
through the discussion between two entities, both of which want to maximise their prof-
its [Gov-2015]. In order to reach an economic benefit on both sides and increasing the
interest in Reverse Logistics, a good collaboration between the multiple entities is re-
quired. The price-agreement problem is also caused by the lack of information about
the product, especially due to a missing data sharing network [Usa-2020].
The challenge mentioned in chapter 4.1 about implementing a centralised or distrib-
uted network is also an economic issue. A centralised system requires a stronger trans-
portation infrastructure, since all returning products are brought to a single point and
then distributed again. This implies spending more money for shipping but saving on
testing and sorting equipment. The decision is mainly based on the geographical ex-
pansion of the company’s network.
4 Political Challenges
17
Industries also face an economic difficulty when it comes to the stage of processing
the returned products. Despite representing an added value in the production phase,
because the purchase of raw material can be avoided, disassembling items can be
expensive [Fle-1997]. On the one hand, there is the need to dismantle the products
manually due to their complex composition, which is costly due to the manpower and,
on the other hand, a recycling process needs its technological infrastructure. The com-
pany must be able to manage the processed material, for instance through a database,
which represents other costs [Bou-2018].
The last important economic challenge in Reverse Logistics concerns the marketing
sector. Industries need to rely on customers’ willingness to pay for refurbished, recy-
cled, or reused products. According to Michaud [Mic-2010], only a small part of clients
is willing to trade the environmental aspects of a remanufactured product with its qual-
ity. In order to achieve better financial results through Reverse Logistics, this issue
needs to be changed. A further marketing difficulty refers to the cannibalization of new
products. Selling a restored item could affect the sales of the new version. For exam-
ple, with smartphones, selling a remanufactured device for a small price may convince
the customer to choose it, rather than the more expensive new one. Furthermore, an
original equipment manufacturer (OEM) that allows its products to be remanufactured,
has to face external competition as well. If they allow small enterprises to refurbish
their products, these may sell them for lower prices and by doing so take their clients.
[Zaa-2014; Ata-2010].
4.3 Political Challenges
The political challenges in Reverse Logistics are often closely linked to financial and
social ones and are partially overlapping. Especially social values are a driver to the
implementation of solutions to political difficulties. These can be divided into legislation,
operational and strategic challenges.
According to Guide [Gui-2002], the many different national borders which recognize
different laws make it more difficult to implement Revers Logistics for a company that
operates in more than one country. In addition, the laws are not contemporary to the
rapidly progressing market [Bre-2011], obliging industries to cope with older legisla-
tions and depending its evolution from it. The difference between countries is not only
evidenced in the laws but also in the professional expertise. According to [Kos-2020],
the research about Reverse Logistics is strongly focused in few countries, mainly
China, USA and India. This allows companies in these nations to have the necessary
knowledge to implement such networks, while in other countries the topic is still less
4 Challenges in Reverse Logistics
18
discussed [Pea-1992]. Further political difficulties are the insufficient sustainability-fo-
cused regulations [Gon-2010] as well as the missing measures to limit planned obso-
lescence [Sat-2017], which is described in the introduction.
The operational challenges are mainly referred to missing support from governments
and the political entities to companies implementing Reverse Logistics. There is a lack
of guidelines and rules as well as of procedures explaining how to process End-of-Life
(EoL) products [Gon-2010]. Since the topic of Reverse Supply Chain is still little known,
there is a missing organizational infrastructure to encourage industries, as well as a
lack of policies and financial aids. One of the main political challenges for the imple-
mentation of Reverse Logistics networks, caused by the missing understanding of the
topic, is the difficulty in obtaining permits and operational locations, which are needed
for testing or sorting. Since remanufacturing is an interest concerning the whole soci-
ety, because it could limit climate change, companies establishing a recycling system
should be supported and helped when it comes to the infrastructure and granting li-
censes. [Bou-2018]
As mentioned by Prajapati [Pra-2019], many political difficulties can be categorised as
strategic ones. Since Reverse Logistics is still not an established process of today’s
Supply Chain, is it not integrated with the business plan of many companies [Chi-2015].
In addition, in order to keep a competitive advantage, the best practices are not shared
among logistic players [Hos-2015]. As stated in the previous paragraph, due to the
missing information about Reverse Logistics, marketing and organizational structures
are still not developed, which also leads to missing key performance indicators (KPI).
This increases the difficulty in establishing a strategic plan and organizing the process
of returning products as well as of secondary markets. [Bou-2018]
4.4 Social Challenges
Social challenges are often linked closely to political and economic ones. As mentioned
in chapter 4.2, due to uncertainties in Reverse Logistics, many stakeholders hesitate
when it comes to investing in companies with these networks. This phenomenon leads
to a lack of commitment from the management of industries coping with the issue of
Closed Loop Supply Chain. A further difficulty regards the lacking commitment to the
environmental cause from the workers, which would need a sustainable-oriented for-
mation [Thu-2009]. Generally there is a lack of willingness in organizations to establish
environmentally friendly structures [Chi-2015].
4 Social Challenges
19
The biggest social challenge concerning Reverse Logistics is the approach of custom-
ers to remanufactured products. Willingness to pay as well as the education of con-
sumers for Reverse Supply Chain products is still low [Gui-2002]. For example there
is the perception of a lower quality of the items [Rav-2005]. These factors underline
the urgence of changing the social awareness about Reverse Logistic. In a consumer-
driven market, companies will only implement remanufacturing networks if there is de-
mand for it. It is, thus, necessary to spread more information about the consequence
of creating too much waste, which often goes into landfill. In addition, customers should
understand the negative impact on the environment of planned obsolescence, which
obliges to consume more. Nevertheless, since it is unavoidable that products get old
and obsolete, remanufacturing them must be mandatory and, thus, a stronger encour-
agement for companies to implement Reverse Logistics practices are needed. In this
sense, a further challenge is the ‘’emotional attachment’’ [Gon-2010] of customers to
their items even after their life-cycle, which means that they often do not return them
impeding the functionality of Reverse Supply Chain. [Rav-2005]
20
21
5 Challenges in specific Industries
5.1 Challenges in the Automotive Industry
The automotive industry represents the most important economic sector in Germany
and contributes with around 12.6% to the national gross domestic product (GDP) in
2019 [BVL-2019; Des-2019; BMW-2019]. Accordingly, an increase of Reverse Logis-
tics in this Industry would bring relevant environmental benefits. When it comes to im-
plementing a Closed Loop Supply Chain, the automotive OEM face many challenges
due to the complexity of the structure of a car. When a vehicle reaches the end of its
life-cycle, it is often scrapped, because of the high costs of dismantling it [Bre-2011].
Since a car is composed by so many different parts and materials (Figure 5.1), it needs
to be dismantled manually, which is a long and expensive process.
Figure 5.1: Audi R8 dismantled [Rob-2018]
The use of lighter materials, such as carbon fibre composite (CFRP), can make cars
environmentally friendlier throughout their life cycle by reducing the fuel consumption,
but can create difficulties during the dismantling stage. Carbon Fibre Waste Manage-
ment is challenging due to the separation of the fibre and the matrix as well as the
necessity of high energy procedures [McC-2010]. In addition, fragile parts can break
and not be usable anymore. When remanufacturing a car, it needs to be considered
that some pieces cannot be recycled or reused and are processed differently from one
another. Windscreens, for example, are mainly recycled by external companies since
it is too costly to dismantle them at the OEM facility. An important environmental risk
5 Challenges in specific Industries
22
when handling returned products concerns the treatment of toxic materials, for exam-
ple batteries, which require special processes. [Bre-2011; Cha-2012]
The uncertainties explained in chapter 4.1 relate also to the automotive industry. Be-
cause it is hard to establish when a used product will return, managing the warehouse
and the dismantling procedure is challenging. On the one hand, the missing flow of
information makes it difficult to organize the stock and the availability, whereas, on the
other hand, not knowing what will return does not allow to prepare the different pro-
cessing procedures that are needed for the multiple materials. [Cha-2012; Bre-2011]
A further challenge in implementing the Closed Loop Supply Chain is that the circle is
never really closed due to external enterprises. Often customers bring their car to
smaller manufacturers, which are not collaborating with OEM and, thus, obstacles the
company in recollecting its materials [Cha-2012].
Especially the economic issues represent an important challenge for the automotive
industry. When establishing the Reverse Logistics network there are high costs for the
purchase of the needed adaption, such as machines and licenses [Del-2003]. Further-
more, recycled material can become more expensive than virgin one due to the costs
of disassembly [Cha-2012]. To encourage manufacturers to use recycled items, new
technical procedures are needed to lower the dismantling prices of returned products.
Establishing a Reverse Logistics system can also be challenging when it comes to the
creation of the network. There needs to be a strong collaboration between the supply
chain members, which leads to dependency and inflexibility among them [Thu-2009].
An important issue is the visibility of results by implementing Reverse Supply Chain.
Since nothing is sold, for many industries it is hard to see a major advantage and this
uncertainty limits the implementation of such networks [Boy-2014]. Because of this
insecurity, it is difficult for managers to obtain financial contributions, for example, from
stakeholders, although many of the executives underline the importance of climate-
friendly actions [Thu-2009].
The main challenge when it comes to Reverse Logistics in the automotive industry
concerns customers. Since cars are an expensive product, clients are not willing to
pay even more for an environmental friendly product, although they prefer them to
traditional ones [Thu-2009]. The perception of a remanufactured car as of poorer qual-
ity [Rav-2005] plays a fundamental role, since the customer is less lean to trade its
quality for the green image. Thus, it becomes a big challenge for many companies to
market the returned products efficiently [Cha-2012].
5 Challenges in the Food Industry
23
The last difficulty in the automotive industry when it comes to Environmental Oriented
Reverse Logistics Practices (EORLP) concern social and political aspects. It is difficult
to justify such investments, since climate-friendly policies, which would encourage
companies are missing, and customers as well as employees are not familiar with the
topic. [Thu-2009]
5.2 Challenges in the Food Industry
Since the food industry causes 21%-37% of worldwide greenhouse gas [Fan-2019]
and 30% of the produced food is wasted [Gus-2011], it is important to understand how
to implement Reverse Logistics in this sector. There are three areas in the food industry
in which closing the loop of Supply Chain can be relevant: production, consumption
and waste management [Yig-2020], as it also becomes clear from Figure 5.2.
Figure 5.2: Circular Economy in Food Supply Chain [Jur-2016]
On the one hand, Reverse Logistics can help save unsold food by either bringing it to
consumer who may need it or using it as a fertilizer. On the other hand, it must deal
with the packaging and its recycling, since most of the food we buy is packaged in
plastic, paper, or other materials.
One of challenges food companies need to overcome, is the knowledge deficit; it is
difficult to find experts that can guide retailer or manufacturers to implement Reverse
Logistics [Vij-2014]. Furthermore, when it comes to food industry logistics, the process
5 Challenges in specific Industries
24
is strictly time based, as the products are perishable [Yig-2020]. This means that there
may always be the chance of returning products. In addition the study performed by
Perrin [Per-2001] underlines that the key reasons for not returning products are incon-
venience, storage difficulties and the distance to remanufacturing facilities.
A major challenge in Food Reverse Logistics concerns political and social aspects.
Retailers are demanding multiple actions from governments in order to encourage the
industry to establish returning policies. Because it is not mandatory and no certifica-
tions are needed, retailers are not interested in this issue. The absence of policies
leaves to the companies the choice whether to establish a Reverse Supply Chain net-
work, but since many lack relevant knowledge, it is difficult seeing it implemented. [Vij-
2014] Furthermore the existing laws often make it even harder for industries to estab-
lish a recycling network. An example is the Commission Regulation No 282/2008 of 27
March 2008 on recycled plastic materials and articles intended to come into contact
with foods and amending Regulation (EC) No 2023/2006 (Text with EEA relevance)
[EC - 282/2008]. This regulation describes the requirements for plastic recycling and
the procedure for authorisation of recycling processes when it comes to food packag-
ing. The collaboration with the authorities and the bureaucracy linked to such regula-
tions represent a considerable effort for the interested company. The implementation
procedures often require long times and can be costly. This partly explains the hesita-
tion in requiring the necessary authorisations.
In addition, since demand in a returning network is still limited, it is hard to see com-
mercial benefits, and the environmental ones are hard to measure [Sim-2020]. Com-
panies are afraid that a change in strategy may affect the brand image and fail to meet
the customer’s requirements [Sim-2020].
Besides companies, also customers often lack knowledge. The missing concern of
consumers towards environmentally friendly products is a further obstacle for retailers
to launch Reverse Logistics [Vij-2014]. Thus, from the social point of view, there is an
insufficient attention towards environmental issues, especially from governments. This
leads to a general lack of information both from the industries and from the consumers.
[Pho-2020]
Reverse Logistics in Food Supply Chain faces special economic challenges. Instead
of benefitting from tax incentives for the environmental efforts, industries are afraid of
a rise of costs [Vij-2014]. Because of the uncertainties and the costs related to the
return management, RL is seen as a threat to the stability of a company [Has-2012].
5 Challenges in the Food Industry
25
A further challenge for food suppliers is the organization of the supply chain network
and the lack of collaboration [Tro-2017], because of the unequal distribution of costs
and the lack of funding from other members [Sim-2020]. Since suppliers have short
terms relationships with dealers, for example supermarkets, and focus on discounting
strategies, in order to beat the competition, they are sceptical when it comes to high
investment costs. Especially in the food industry, the profit margins are restricted,
which makes producers reluctant to invest in environmentally friendly strategies [Sim-
2020].
26
27
6 Identification Systems
6.1 Difference between Identification and Classification
Two processes are central to the return of products during a Reverse Logistics net-
work: identification and classification. As illustrated in Figure 6.1, when a product ar-
rives at the facility, it needs to be inspected as to its identification and successively
sorted into categories.
Figure 6.1 Reverse Logistics Process [Chi-2018]
To better understand how to implement a Closed Loop Supply Chain, these two as-
pects need to be understood and differentiated.
Classification is defined in the Cambridge dictionary as “the act or process of dividing
things into groups according to their type” [Cam-]. In Reverse Logistics the term clas-
sification is mainly used to divide the products into the different forms of reuse. Fleisch-
mann divides these in five groups [Fle-1997]:
Direct reuse
Repair
Recycle
Remanufacture
Dispose
The Classification Stage includes a catalogue, to confront returned products with
standard part models, based on information such as reference models, type of product
and weight [Gar-2019].
In addition, returning products as for example a car, are often divided into different
categories, to arrange them for their remanufacturing process. Vehicles are mainly
composed of four parts: engine, frame, covering body and parts like suspension and
wheels [Cha-2012]. When a car returns after its life cycle, each of these four categories
6 Identification Systems
28
are separated and processes differently. This process allows to optimize the reuse of
every single part of a product.
Identification is normed by the IEC as “the act of segregating and uniquely defining a
specific unit within a set of similar functional units” [IEC-714-04-07].
The identity of an object is a set of attributes peculiar to itself, which allow to recognise
it explicitly and distinguish it from other similar or identical items [Hip-2016, S. 11]. This
means that the object or the process must have a trait that uniquely differentiates it
from all the others. This can occur by means of a description or even a visual attribute.
An identification feature of a process does not only concern the different parts, but also
the timeline of each stage [Hip-2016, S. 17].
In Reverse Logistics, in order to understand in which category or remanufacturing pro-
cess the objects fall, a clear identification is essential. Thanks to a deep understanding
of the characteristics of an object and the knowledge about the parts that it is made of,
it is possible to reach a higher recycling rate. When Identification does not occur, it
leads to a disorganized remanufacturing process with different objects and materials.
[Tho-2008] Despite this disadvantage, a Reverse Logistics process without an identi-
fication stage is possible. The returning products are only categorised based on their
common characteristics.
6.2 Identification Systems in Reverse Logistics
6.2.1 Overview
Automatic Identification (Auto-ID) Systems refer to the technologies which allow the
identification of either a person or an object. Despite the identification, most tools allow
the collection and transmission of data to a central server [Hel-2009, S. 306-309].
These systems are mainly used for persons and for objects. In order to proof the iden-
tity of a person, there are several biometric systems which are divided into acoustic,
optic and facial recognition [Hel-2009, S. 199]. These technologies are used, for ex-
ample, in smartphones to unlock them or for granting access to restricted areas [Cho-
2013].
In Reverse Logistics, Auto-ID System are necessary since they can deal with the prob-
lem of uncertainty as explained in chapter 4.1. Through the identification of a product
already at the beginning of the returning process, the recycling management can be
organized efficiently. By accessing to its information, also gatekeeping can be easier
6.2 Identification Systems in Reverse Logistics
29
to implement, since it is possible to understand if the object has the credentials for
being remanufactured.
Auto-ID systems for products can be divided into font/symbol based and electronic
based methods (Figure 6.2). Font and Symbol based methods, such as Optical Char-
acter Recognition (OCR) and Barcodes, are identification labels put on products.
These can be also engraved through laser technologies. Electronic based methods
used in Logistics are NFC and RFID, which work through the collaboration of a tag and
a reader.
According to the field of specialization of a company, i.e., what type of object it
produces and its financial possibilities, different systems are required. Auto-ID Tech-
nologies have been developed in order to enable a unique item identity and a related
information. This allows to improve the production, distribution and warehouse man-
agement due to the possibility to track the production along the whole Supply Chain
[Sar-2000]. The process of attributing the necessary information to the specific item
occurs by associating the data for example to a barcode and saving it on a server.
Successively it is only necessary to scan the barcode to read its characteristics. The
procedure of inspecting the product can be either manually or automated, based on
the Auto-ID method. The advantages of these technologies are an easier Supply Chain
Management, a more accurate traceability of products, a clear identification of prod-
ucts’ differences as well as theft detection and an increase in speed at checkout sys-
tems [McF-2003].
Figure 6.2 Auto-ID Systems
6 Identification Systems
30
6.2.2 Font- and Symbol based Methods
6.2.2.1 Optical Character Recognition
The OCR is a font-based Auto-ID System, which allows to read a specific font. Most
systems are also able to recognize specific characters and compare them with infor-
mation saved for example on an electronic device. The process occurs using a sensor
(Figure 6.3), which, by passing over the written characters, reads them and, if needed,
displays them on a screen.
Figure 6.3: OCR [Ata-2017]
OCR can be used in Reverse Logistics for example to read the label of a returning
product. One of the disadvantages of this technology is that it needs visual contact to
the text. In addition, it is only able to recognize the characters from short range, which
means that the object needs to be close to the scanner and the label must face the
right direction. A further downside is the limited data storage. Since the scanner only
obtains information from the words, unless it is a longer text, the content will be limited.
A positive aspect is that a standardization of used fonts allows a simple automatization
of the process of identification. Furthermore, in case of a technological failure, a person
is still able to read the information and substitute the scanner. Another positive aspect
is the possibility to read the data without needing a physical contact with the product.
[Hel-2009, S. 199]
6.2 Identification Systems in Reverse Logistics
31
6.2.2.2 Barcode
Barcode is one of the most used identification technologies and considered an estab-
lished solution [McC-2004]. Although the one-dimensional version is mostly known
(Figure 6.4), there are also other variations which allow to achieve a higher data stor-
age. The scanning range of barcodes is of approximately 3-5 cm [Tha-2017].
Figure 6.4: EAN-13 [Act-a]
The 1-D barcode is composed by a sequence of numbers. Each number is represented
by a composition of lines, which are differentiated by their width. The scanner recog-
nizes the image as a binary code and is thus able to send the information to devices
such as computers. Although its application on products is very simple, since it can be
printed on almost every material and its size is relatively small, the industrial use is
constrained. This is caused by the limited number of different sequences which can be
composed on the barcode.
Successively to the 1-D barcode, a two-dimensional version is introduced, in order to
increase the information density of the code [Hel-2009, S. 307]. This barcode, which is
constituted by black and white dots, allows to read the necessary information from
every orienteering, making it easier and faster for the operator. One of the most com-
mon 2-D Barcodes is the QR Code (Figure 6.5).
Figure 6.5: QR Code [Act-b]
6 Identification Systems
32
In order to increase the data density 3-D and 4-D barcodes are used. These two pos-
sibilities are based on the two-dimensional barcode. 3-D barcodes use colours to in-
crease the possibilities of different patterns (Figure 6.6), and thus can store a wider
Figure 6.6: 3D Barcode [Sym-]
information range. 4-D barcodes can only be used on screens, because they change
with time. illustrates an example of 4-D Barcode, in which the image changes in two
different time frames. These are three dimensional barcodes that are changed in es-
tablished time intervals in order to increase even more the information density.
Figure 6.7: 4D Barcode [Hei-]
The implementation of a barcode system in Reverse Logistics has positive as well as
negative aspects. A challenge is the need for visual contact and the short range [Hel-
2009, S. 207]. These aspects oblige the company which handles returning objects to
scan every single item at a time, which is time consuming and, therefore, expensive.
In addition, the barcode needs to face the scanner to be recognized. Since this is dif-
ficult to automate, the scanning process is often performed by a human operator, mak-
ing it labour intensive [Fei-2008].
6.2 Identification Systems in Reverse Logistics
33
Furthermore, the scanning process needs to be long enough for the device to recog-
nize the barcode, which can take a while [Blu-2004, S. 145]. Due to the fact that it is
time consuming, the barcode use is especially suitable for smaller companies with
fewer products [McC-2004]. A further challenge are atmospheric conditions. Barcodes
are usually printed on paper or other easily degradable material, exposing it to water
or other external factors. A barcode which is ruined or dirty cannot be read anymore
[Blu-2004, S. 145]. The last problem when it comes to barcodes, is the difficulty to scan
a big amount of returning products. If for example there is a pallet with crowded mate-
rial, it is challenging for the human operator to optically scan each code [Blu-2004,
S. 145].
A positive aspect of barcodes linked to the presence of human operators is the possi-
bility to read the code. In case of technical problems, if for example the scanner cannot
read the sequence, an operator can manually insert the numbers into the system. This
is only possible with 1-D barcodes, since they have the numbers written below (Figure
6.4) [Hel-2009, S. 307]. The main advantage of a barcode is the efficiency, especially
related to its high affordability [McC-2004]. According to Blumberg [Blu-2004, S. 144],
barcodes have been measured to grant an increase of around 300% in products reg-
istration and identification over manual processes. Due to the low costs of scanners, it
is also possible to scan a product at each distribution point, allowing to better track the
supply chain [Blu-2004, S. 144]. The benefits of barcodes when data collection is
needed, can be described as precision and speed [You-2007]. In order to solve the
challenge of range, a study has been conducted to use LADAR (laser distance and
ranging devices) to recognize barcodes from a wider distance [Gil-2004]. The down-
side of this technology is that visual contact would still be needed.
6.2.2.3 Laser-marking
Laser marking is the technique of engraving a specific symbol or characters on mate-
rials (Figure 6.8). Thus, it is not exactly an identification system, but rather a possibility
of implementing other methods, for example barcodes, more efficiently. Engraving a
code instead of printing it can solve multiple problems linked to external factors such
as water. Laser is implemented by companies as a method for serialization as well as
identification of items [Sch-2019]. The process allows to realize permanent marking
with a high degree of thermal or chemical resistance as well as a high contrast and
detail resolution [Sch-2019]. As an import reason to implement laser marking as iden-
tification method is its environmental advantage. By marking on object only little
6 Identification Systems
34
material is wasted. The only waste produced is what is taken off with the laser. Laser
does not need any paint, compared to spraying, and neither is lubrification necessary
[Sob-2017]. In addition, since laser engraving is usually performed in closed rooms
with air filters, there is minimal environmental impact. This also allows to strongly re-
duce the noise pollution as well as thermal influence. [Sob-2017]
Figure 6.8: Laser Marking [Sob-2015]
Laser marking has advantages beyond the positive environmental impact. One of
these is the reduction of energy consumption and, accordingly, lower running costs [Li-
2000]. Furthermore, laser marking allows to realize permanent, high quality engrav-
ings, which cannot be removed or damaged by atmospheric influences, such as hu-
midity. This means, that compared to traditional barcodes, laser-markings guarantees
to be always readable [Sob-2015]. The process is very easy to automate, which re-
duces costs. Once it is set up, the same symbol can be reproduced multiple times with
rapidity and without errors. [Sob-2017] In addition, the engravings can be so small that
mechanical damages to the products are excluded [Sob-2015].
The disadvantages of laser marking are mainly related to the production infrastructure.
The costs of the machine as well as the protected environment can represent an eco-
nomic difficulty, especially for small companies. Furthermore, to set up and manage
the process, specialised workers are needed. This means that the employees need to
be trained in order to be able to understand this technology. [Sob-2017]
6.2 Identification Systems in Reverse Logistics
35
6.2.3 Electronic Methods
6.2.3.1 Near Field Communication
Near Field Communication (NFC) is a technology that works with electromagnetic radio
fields and allows two devices to communicate with each other. Both devices are
equipped with NFC chips. NFC operates in two different modes: active and passive
mode. In the active NFC, both devices generate Radio Frequency fields, which then
connect to each other. This allows them to exchange information and data. In the pas-
sive system only one device creates a Radio Frequency field, which powers the other
one. In this case, the active member is called ‘’reader’’, whereas the passive one works
as the ‘’tag’’. In this scenario, once the reader is posed in proximity of the tag, the data
saved on the tag is requested. The tag is attached to a specific object and the neces-
sary information is saved on it. The necessary range between tag and reader amounts
to 2-3 cm, but visual contact is not needed [Tha-2017]. Some of the applications of
NFC according to Jain [Jai-2015] are: ‘’Contactless Payment’’, ‘’Keeping record’’ and
‘’Transit and Ticketing’’. A frequent use is in smartphones, since persons always carry
them around, making them suitable to be employed in everyday life situations (Figure
6.9).
Figure 6.9: NFC use examples [Jai-2015, S. 7]
Although Reverse Logistics is not mentioned, it can be useful due to the high degree
of automatization. Because it is not necessary to face the tag to the scanner, the prod-
uct does not need to be moved and handled by a person. A further advantage, espe-
cially in the passive mode is the low energy consumption as well as the high bandwidth
6 Identification Systems
36
[Ye-2016]. Since one device powers the functionality of the tag, the necessary energy
to create the radio frequency filed is low. Furthermore, it is not necessary to set up a
manual connection, making it easy to handle even for persons who are less confident
with technologies [Jai-2015]. Another advantage is the small size of the tag [Jai-2015].
This allows to hide it in every product without limiting its functionality.
NFC has also its disadvantages; the most important one is the lack of information,
since it cannot store a big amount of data. A further aspect which is limiting its imple-
mentation concerns security. It can easily be exposed to attacks and, thus, many com-
panies are afraid of exposing private information. [Jai-2015]
6.2.3.2 Radio Frequency Identification
Radio Frequency Identification (RFID) is, as the name suggests, an Auto-ID System
based on radio frequency waves. It is composed by a tag and a reader, like NFC
(6.2.3.1). When the tag is irradiated, it sends back the information on it. The receiver
reads the returning radio frequency waves and passes the information on to a pro-
cessing device, for example a computer [Pay-2004]. The tag typology can be divided
into two different versions: active and passive [Asi-2011].
The active tag is battery powered and can send signals on its own, whereas the pas-
sive tag does not have a power source and can only send information when irradiated.
The passive version is only constituted by a chip, containing the stored information and
an antenna, which sends radio waves to the reader. Figure 6.10 illustrates on the left
side the components of a tag and their functionality. On the right image the size of the
tag can be perceived, which is very small. These are print on long rolls and can easily
be attached on the object.
Figure 6.10: RFID Tag [Nic-2016, S. 7]
Passive tags are usually smaller, since they don’t have a battery and this allows them
to be cheaper as well [Pay-2004]. The data that can be stored on a RFID Tag can
contain information regarding the manufacturer, item typology and sometimes it is
6.2 Identification Systems in Reverse Logistics
37
possible to measure atmospheric factors as for example the temperature [Wan-2006].
What distinguishes RFID from barcodes is the possibility to rewrite the information on
the chip, thus, allowing to reuse and update it [Che-2020]. The scanning procedure of
RFID can be done at greater distance, since its range is above 90 feet (≈28 meters)
[Pay-2004] and this facilitates warehouse management [Usa-2020]. RFID offers multi-
ple frequency systems. Passive tags are divided into: Low Frequency (LF), High Fre-
quency (HF) and Ultra High Frequency (UHF), while active tags operate in the spec-
trum of Medium Frequency (MF) [Hel-2009, S. 309].
The identity of every product is given by its EPC (Electronic Product Code), which is
recognised when scanned through RFID and associated to the corresponding data
[McC-2004].
In Reverse Logistics, RFID is strongly used to keep track of returning products. Since
it is possible to scan it without visual contact and from a higher distance, it is easy to
record the transit of items at every stage of the returning Supply Chain [Lee-2009].
Thanks to the wide range of available radio frequency signals, millions of tags can be
applied on products [Pay-2004]. According to Hompel [Hom-2008, S. 115], RFID can
be described using ‘’6-R’’, similar to those in Logistics. These ‘’6-R’’ are:
1. The RIGHT transponders (active, passive)
2. In the RIGHT place (case or item tagging),
3. With the RIGHT data (EPC, Identification data)
4. At the RIGHT place in the process (added value through quality and productiv-
ity in RFID-based processes),
5. With the RIGHT middleware (integration of material flow control, meaningful
tracking etc.)
6. At the RIGHT cost
The advantages offered by the implementation of a RFID system are multiple and ex-
plain the reason why this technology is strongly studied. It allows to trace recovered
objects and to simplify the operation of collection and sorting, since it is possible to
determine the identity of every product. Thanks to the identification, also the
6 Identification Systems
38
disassembly process is improved, due to the stored information. An advantage is also
the possibility to transmit data without physical and visual contact [Hel-2009, S. 309].
In the example of returning products to the manufacturers, RFID can help when the
pallets arrive at the facility. Instead of having human operators scanning every single
barcode, RFID readers applied above the gate can simply recognize every tag and
immediately transmit to the data centre which products are returned. Whereas this
process would require a long time when barcodes are used, RFID offers almost instant
data availability [Lee-2012]. The possibility to obtain data in a short interval allows to
improve inventory management also concerning uncertainties, one of the main tech-
nical challenges in RL (Chapter 4.1). Since every item is recorded at all stages of the
supply chain, the manufacturers can know in advance information regarding time, qual-
ity and quantity [Usa-2020]. By detecting the quantity of returning objects already at
the beginning of the returning network, it is possible to manage more efficiently
transport costs and the processing location [Asi-2011]. In addition, the automatization
of the identification process can save others costs, since it reduces time and manual
labour [Asi-2011] A further positive aspect, when it comes to a better identification,
concerns the quality of the remanufacturing results. If the sorting process is supported
by the knowledge of the object identity and its composition, it is possible to achieve a
higher product quality out of the remanufacturing process [Tho-2008].
Thanks to RFID customer satisfaction can also be improved [Bar-2016]. It allows the
consumer to have a better service [Jay-2008], because of the possibility to trace a
product in case of loss or theft. Nonetheless, this last aspect has sparked privacy con-
cerns, since people are afraid that they could be traced through RFID tags.
A major disadvantage when it comes to RFID is represented by its physical character-
istic. Radio frequency waves are disturbed by metal and fluids and thus RFID tags
cannot be used on these surfaces [Asi-2011]. Liquids absorb much of the radio waves
and successively the signal is detuned to unusable frequencies, since they are too low
[Kos-2012]. Metal surfaces instead deviate the radio waves making it impossible to
capture them [Hel-2009, S. 222].
Furthermore, costs still represent a challenge and a disadvantage over established
methods such as barcodes. Although tags are becoming always cheaper, there need
to be large investments in the RFID infrastructure, for example, in readers and espe-
cially in the data collecting systems [Usa-2020]. In addition, there is the risk that RFID
Tags get damaged, which means that they need to be replaced and that the chance to
identify the product is lost.
6.2 Identification Systems in Reverse Logistics
39
According to Gonzalez-Torre [Gon-2010], in order to achieve a good functionality of
RFID, there needs to be an information sharing network. From this point emerges a
further disadvantage of RFID. To allow each supply chain member to read the tags,
there needs to be a standardization of the system. This would allow anyone with a
reader to have access to sensitive information of a company and even to change it
[Sub-2020]. In addition, the standardization should allow all manufacturers of the same
item to be able to read the tag, since products do not always return to the original
producer [Pay-2004].
A further difficulty concerns the frequency used by the tags. Governments often regu-
late the usable spectrum for RFID. According to Angeles [Ang-2005], in many countries
the available frequencies are almost all used. This means that a tag operating on a
frequency in one nation could not be readable in a different country. This represents a
major challenge for all those companies the supply chain of which crosses one or more
borders.
6 Identification Systems
40
6.3 Identification methods in specific industries
The main identification method that is studied today in industries is Radio Frequency,
since it offers advantages in automatization. In order to improve its implementation and
the performances in data collection, the International Organization for Standardization
(ISO) and the International Electrotechnical Commission (IEC) have presented guide-
lines [ISO/IEC TR 24729-3:2009].
6.3.1 Automotive Industry
In the Automotive Industry many companies are focusing on the implementation of
RFID Systems. The development of RFID technology is allowing to tag almost every
product, innovating how physical objects interact with information systems [Ang-2005].
Using radio frequency tags helps companies to improve efficiency and the level of au-
tomation of supply chain processes, cutting costs of manual labour [Sta-2015]. The
possibility to track individual objects allows to better manage stages such as ware-
house management, distribution, production, security issues and recycling [Str-2005,
S. 181].
RFID can be useful along the entire Closed Loop Supply Chain as illustrated in Figure
6.11.
Figure 6.11: RFID in Automotive Supply Chain [Lin-]
At the production stage RFID allows to plan the tracking and incoming of components
from suppliers. In addition, due to the better stock management, also the quality of the
production process can be improved, especially in relation to time efficiency [Sta-
2015]. During the transportation stage, RFID brings multiple advantages. All products
6.3 Identification methods in specific industries
41
on a truck can simply be monitored by driving through a scanning gate, due to the very
short time needed to scan a tag. The possibility of automatization and data recording
leads to a clear documentation of activities and, hence, transparency. Consequently,
a well-managed production history can help in cases of recalls and when it comes to
Reverse Logistics of End-of-Life products. By knowing the item history, its value can
be established more effectively. Furthermore, a complex construction such as a car,
can be dismantled and recycled more efficiently with a clear understanding of its com-
ponents.
A major advantage mentioned by Stasa [Sta-2015] is the possibility to protect the com-
pany from plagiarism and thieves. Since every product can be equipped with a RFID
tag applied by the OEM, it is easy to verify the production history. This process avoids
managing items that are not in guarantee or are counterfeit, thereby saving costs. [Str-
2005, S. 185]
According to Strassner [Str-2005, S. 180], the major reason why many companies are
still not implementing RFID Systems is the lack of standardization, which limits the
functionality between supply chain members that use different technologies. A further
problem are the expenses, especially compared to much cheaper established identifi-
cation methods, such as barcodes.
6.3.2 Food Industry
When it comes to identification in the food industry, RFID represents the main topic of
discussion. Although the barcode is still the most established method, it cannot solve
some of the challenges which RFID tackles [Aba-2009]. A well-managed identification
process and the traceability of the products along the supply chain (Figure 6.12) allows
to intervene in case of food poisoning or fraud [Tur-2014].
Figure 6.12: Food Traceability in Supply Chain [Tur-2014]
6 Identification Systems
42
A key aspect for the use of RFID in the food supply chain is that tags can be scanned
with no visual contact and even through materials, which means that data can be read
without opening the food packaging. In addition, there is the possibility of equipping
RFID tags with thermometers and humidity sensors, which means that the agri-food
supply chain management can achieve the tracing and controlling of the food produc-
tion till the consumption and once food safety issues arise, it is possible to intervene
immediately [Yan-2016].
The research behind RFID in the food industry supports the idea of a future agriculture
supply chain in which every product can be traced at any time during its life cycle. This
possibility allows to estimate its quality and prevent food waste and the consumption
of unsafe products [Aba-2009]. Therefore, RFID systems can help companies to im-
prove their product quality and guarantee freshness. This increases consumer loyalty
in the brand and confidence in the food logistics [Aba-2009].
If RFID can bring obvious advantages to the forward supply chain as mentioned in this
chapter, it can also guarantee positive aspect in Reverse Logistics. In order to use
RFID for the whole Closed Loop Supply Chain, the tags can be useful for tracking
returning packages and reducing waste, which accounts to 15% of municipal solid
waste (MSW) [Acc-2020]. Furthermore, different packaging materials should be stud-
ied and implemented, such as wood or leaves, to protect our environment. Today in
supermarkets we can observe an impressive quantity of materials used to protect the
food, mostly plastic. For this reason, Reverse Logistics should be only a part of an
activity which aims to reduce waste and pollution. When it comes to the food itself,
Reverse Logistics can only be partially implemented, due to the durability of the prod-
uct quality. An efficient use of returned food can be as fertilizers in the food industry,
in order to close the cycle.
6.3.3 Other Industries
Identification systems play a vital role in every industry that needs to improve the per-
formance of the entire production and distribution processes. Especially in the pack-
aging and container traceability, an effective identification can lead to economic bene-
fits. According to Hong-Ying [Hon-2009], in year 2009 Barcode technology seemed to
be the future trend for warehouse management. It allowed to reduce manual labour
and easily determine identity as well as quantity and further information with a scanner.
Today, the logistic industry is moving towards RFID, because it guarantees technical
advantages as for example automatization and readability without visual contact
(Chapter 6.2.3.2). In the logistics industry, especially when it comes to warehouse
management, the information transferred thanks to RFID can offer an interesting
6.3 Identification methods in specific industries
43
advantage. This can be achieved particularly through a strong collaboration among
supply chain members [Zhu-2012]. Radio frequency technology allows to improve ef-
ficiency of shipment organization and container logistics, thanks to the tags, which can
be read quickly and in a fully automated manner. This leads to a better inventory, also
because multiple tags can be scanned at the same time. It also avoids the accumula-
tion of containers or packages since their position can constantly be monitored. An
important issue in warehouse management, which can be solved by RFID, is the lost,
damage and theft [Tho-2009]. According to Kern [Ker-2007, S. 126], stolen goods
amount to 1.8% of total revenue. This means that avoiding the container and packing
to be lost, leads to a less frequent purchase of new ones, which saves costs [Tho-
2009].
These advantages in the Supply Chain management also have implications for Re-
verse Logistics. Thanks to the possibility to trace a container or a pallet, it is easier to
plan the returning process and mitigate the challenge of uncertainties. In addition,
RFID enables an effective routing [Zhu-2012], reducing costs of transportation and al-
lowing to constantly monitor the maintenance and status of the products [Mad-2016].
Despite the advantages of RFID, many companies are still using more traditional sys-
tems, especially when it comes to Reverse Logistics. One of the main industries that
returns products is the bottle production. These companies mainly use camera-based
identification systems to recognize the label on a bottle-packaging. This process is
performed through the comparison of an image of the incoming product with a picture-
catalogue of possible returning models. Thanks to this solution it is possible to under-
stand the needed remanufacturing process. The downside of this technology concerns
the degradation of the label. If the identification camera is not able to properly recog-
nize the product, a human operator needs to process it manually, which is time con-
suming. [Sys-]
The identification through RFID also plays a crucial role when it comes to steel pro-
duction. The German company ThyssenKrupp Steel became the first in its industry to
establish radio frequency identification [Fei-2008]. It decreases the identification time
of each item, leading to a bigger throughput and optimizing the implementation of work-
ing equipment as cranes. In order to further improve its use, standardization is needed.
This means regulating and controlling it, which allows the customer to overcome pri-
vacy and security concerns. Standardizing RFID would also improve its availability and
the costs linked to its implementation. [Fei-2008]
Using RFID on metal means facing the issue of radio frequency waves reflecting and
thus being extremely difficult to use. A possible solution is to divide the tag and the
6 Identification Systems
44
metallic surface either by an air layer or a dielectric shield. Otherwise, low frequencies
(LF) are used as well as active tags (Chapter 6.2.3.2). The latter do not need to be
irradiated from a reader but can send waves autonomously and, thereby, increase the
probability to be captured. Tests performed by ThyssenKrupp Steel and Accenture
demonstrated that ultra-high frequency (UHF) waves are the best for tagging slabs and
coils. [Fei-2008]
The main benefits of RFID in this sector can be observed with its use in a big number
of products, since it allows to easily manage and trace them along the entire supply
chain, which would be more difficult with the use of more traditional methods, such as
barcodes. Furthermore, RFID reduces costs by accelerating the inbound and outbound
processes and because of its high level of automatization. [Fei-2008]
45
7 Visions for improving Reverse Logistics
7.1 Introduction to Smart Reverse Supply Chain (SRSC)
DHL’s Trend Radar [Küc-2020] depicts which topic will have a higher impact than oth-
ers and in which period of time, relatively to logistics. Among these, some are being
stronger studied and discussed due to their accessibility and potentials. The idea of
merging these new tools with Reverse Logistics is the meaning of Smart Reverse Sup-
ply Chain. In order to solve the challenges of Reverse Logistics (Chapter 3) as well as
of Identification systems, technologies such as Internet of Things (IoT), Big Data,
Blockchain and Artificial Intelligence are applied. These can be used independently or
even together, in order to strengthen the network.
SRSC is able to improve the timeframe of the information exchange between logistics
partners and reduce the uncertainties and difficulties in returning products [Xu-2011b].
According to Xu [Xu-2011b], each item needs to be equipped with a RFID tag to be
associated with a unique identity and to be able to communicate with other devices.
Each product is assigned an EPC, which is stored in the EPCIS (EPC Information Ser-
vices) server and can be read by a scanner. The main characteristics of SRSC are the
possibility to allow almost instantaneous and synchronized data transfer, improvement
of system integration and organization and better managing of the supply chain. Espe-
cially a Closed Loop Supply Chain can be strongly upgraded thanks to better tracea-
bility. [Xu-2011a]
The main aspects that must be efficiently managed to improve SRSC are the following
[Xu-2011a]:
Identification tools: In order to implement a well-organised Smart Reverse Logistics,
it is necessary to establish appropriate identification methods such as RFID, 3-D
and 4-D Barcodes (Chapter 6.2), to permit the recognition of incoming and handled
object and the communication between them
Standardization: To allow every member of the Closed Loop Supply Chain to pro-
cess and identify the products, it is necessary to establish a standardization of the
used technologies. Although there is the EPC, which uniforms the identity of every
item, also the reading technologies need to be standardized
7 Visions for improving Reverse Logistics
46
Middleware: SRSC is a complex system composed of multiple technologies. In or-
der to guarantee a good collaboration between not only physical entities, but also
technological ones, such as identification devices and data server, the development
of the middleware is needed
Digital services: Thanks to the possibility of giving each product an identity and
successively the chance to interact between each other, there needs to be a new
data-base architecture.
Security challenges: Since SRSC networks are composed of inter-connected de-
vices, creating a complex structure, it is difficult to establish a central managed
security system. A solution to protect the identity and the data of every connected
item is needed.
7.2 Internet of Things (IoT)
The expression Internet of Things (IoT) was coined by K. Ashton in 1992 [Rog-2019]
and describes a network, in which every physical product has a virtual identity and is
linked to a connection. It represents one of the main pillars of the revolution of Industry
4.0 [Gar-2020]. The IoT is considered as the key that allows objects, such as RFID
tags or sensors, to communicate with each other and with humans [Giu-2010] and to
create a connected network (Figure 7.1).
Figure 7.1: IoT Network [ABI-2019]
An example for the use of IoT is the monitoring of product availability. As soon as the
quantity falls under an established number, the order is automatically processed with
the use of RFID in a virtual cloud [Dev-2020]. According to Wanganoo [Wan-2020] the
7.2 Internet of Things (IoT)
47
structure of IoT is based on four layers. These are: data storing (RFID), communica-
tion, service, and display layer.
IoT can bring significant opportunities to Reverse Logistics. Through the establishment
of a connected network of products, the information infrastructure is strongly improved
[Gar-2020]. The possibility of connecting each item to the internet allows to perform
product identification, well-managed delivery, and improved processing [Xu-2011a]. In
addition, the possibility of instantaneously exchanging data between products and ma-
chines, allows to reduce the timeframe of decision making, enabling the Reverse Sup-
ply Chain to react more dynamically to changes [Wan-2020]. The use of RFID tags on
every item creates a considerable amount of data to be processed, so called Big-Data,
since every product is scanned at every logistics stage. An effective use of this data
can lead to improved planning models and networks [Rog-2019].
One of the advantages of IoT consists in the possibility of preventive maintenance,
instead of repairing, which is defined as reactive maintenance. Due to the ability of the
machine to communicate with a main server, it can illustrate the real status of a com-
ponent and in case suggest to replace it [Rog-2019]. IoT also enables to remotely
manage the operations of machines, improve communication and collaboration be-
tween supply chain partners and enforce decision-making based on accurate infor-
mation [Wan-2020]. Furthermore, since especially in Reverse Logistics there is a lack
of expertise, the high degree of automatization allows to reduce manual labour [Rog-
2019]. A key opportunity offered by IoT is the chance of dynamic and personalised
supply services for the consumer, since orders can be placed automatically without
dealing with product shortage [Küc-2020].
An important challenge when it comes to IoT concerns costs. According to DHL Trend
Radar [Küc-2020], it is necessary to achieve a continuous indoor and outdoor tracea-
bility system at a minimal expense of deployment. In addition, the complex structure of
the supply chain requires investments in standardization and data exchange in order
to use the potential of the Big-Data.
7 Visions for improving Reverse Logistics
48
7.3 Blockchain
Blockchain is a digital technology that facilitates the recording of transactions and
traceability of a resource. The resource can be either physical, such as a car or any
other product, or abstract, for example a patent or money [IBM-]. It is especially known
for being used with Bitcoin and other cryptocurrencies, since it allows to improve the
record of each transaction. The transferred data can be imagined as a block, which
contains all the relevant information and passes from one user to the other. The trade
needs to be approved by the network, which checks the information and validates it.
This allows to ensure transparency and security. Since all the members of the network
need to verify a trade and allow it, a fraud can hardly be committed. The new record is
added to a block, that contains a unique code, named hash. It also contains the code
from the previous block and is successively added to a chain of blocks (Figure 7.2).
Figure 7.2: Blockchain Structure [Bac-2017]
The main idea of Blockchain is to handle information in a decentralized system, in
which each transaction is shared among all members and thus, instead of being ap-
proved by a single entity, is verified by everyone [Rog-2019].
When it comes to supply chain and Reverse Logistics, Blockchain can be used to im-
prove the system under multiple aspects. The decentralized structure allows each lo-
gistics member to keep almost real-time track of a product and it increases the reliabil-
ity of the data [Zhu-2019]. The transparency enabled by Blockchain rises the security
7.3 Blockchain
49
of a trade, preventing fraudulent items entering the supply chain and avoiding the use
of products from unreliable regions [Rog-2019]. In addition, Blockchain can remove
intermediate steps from transactions, reducing costs and time in supply chain [Zhu-
2019]. By allowing supplier and consumer to trade directly with each other with the
approval of the network, financial institutions are avoidable.
Although identification technologies such as RFID and barcode have long been used
in Reverse Logistics, these methods only allow to transmit the information to single
members, instead of multiple stakeholders [Rog-1999]. With the use of IoT and espe-
cially Blockchain, the gathered information can be inserted into the supply chain net-
work [Zhu-2019]. This allows to keep track of information such as the reprocessing
cycle, the production date and the objective value of a product [Kou-2018]. This would
solve one of the main economic challenges of Reverse Logistics, which is the financial
evaluation of a product. Identifying a returning object can be difficult, especially be-
cause labels can be damaged or unreadable. By relying on the economic transaction,
and, thus, on Blockchain, also when the customer sends its product back, it can be
easily recognized [Sub-2020]. This would help to mitigate uncertainties. Blockchain
can help understand the quality of a product and how it should be reprocessed, by
simply accessing to its life-cycle information. In addition, it can help understand where
inaccuracies happened during the entire Closed Loop Supply Chain, such as late de-
livery or documentation errors, by analysing the performed transactions concerning a
product. [Sub-2020]
A general concern which is solved by Blockchain is the creation of a system that allows
to securely manage transaction information. Thanks to mathematical algorithms the
network’s security is guaranteed. This aspect allows, especially in a complex system
such as CLSC, to trace and protect authenticity of the product along every step. [Yan-
2016]
According to Yang [Yan-2016], the biggest challenge of implementing Blockchain tech-
nology is its current state of development. The number of transactions is restricted to
7 per second due to the limited size of a block. This aspect limits its use in the field of
Reverse Logistics, where the number of performed transaction every second is con-
siderably higher. For this reason, VISA is still preferred since it can handle more than
47 000 records each second.
7 Visions for improving Reverse Logistics
50
7.4 Artificial Intelligence and Machine Learning
The implementation of Artificial Intelligence in logistic processes is strongly increasing
thanks to the development of Machine Learning and Big Data analytics, combined with
cheaper high-performance computing hardware, capable of efficiently handling such
resource intensive algorithms. Its employment aims to improve supply chain by using
prediction capabilities and better automatization processes, moving closer to the con-
sumer necessities. [Küc-2020] Logistic companies strongly depend on the network,
both physical and digital, which have to co-work in order to reduce problems and in-
crease profitability. For example, a fluent data exchange between Reverse Logistics
members allows to keep track of the product and manage the returns. AI has the abil-
ities to improve these mechanisms due to the efficient use of Big Data and its prediction
capabilities.
AI is a wide scientific topic which analyses and develops human-imitating intelligence
and autonomous learning abilities. In order to understand the different terminology
around Artificial Intelligence, Figure 7.3 can be useful.
Although AI represents multiple technologies, such as Propositional logic, evolutionary
algorithms and Fuzzy systems, its main area of interest for logistics management is
Machine Learning (ML).
Figure 7.3 AI Diagram
7.4 Artificial Intelligence and Machine Learning
51
Machine Learning describes a set of computer-algorithms that improve automatically
in relation to a given task by converging on an objective function through optimisation
methods based on training data. It is divided into three categories: Supervised, Unsu-
pervised and Reinforcement Learning [Ges-2018]. The distinction between the three
branches is based on the type of used data and how it is processed. When labelled
data is available, i.e., data with precise indications, Supervised Learning (SL) is ap-
plied. Based on methods like regression and classification, it is able to predict the label
of new incoming data. In Unsupervised Learning (USL), unlabelled data is divided by
clustering, recognizing main similarities [Jai-1999]. Successively to the clustering of
the initial data, thus diving it into categories, new data can be assigned to a cluster,
according to its features. USL can also work with unlabelled data through Regression.
In Reinforcement Learning the data is constantly generated through the interaction with
a specific environment. An Agent, which can be anything that takes decisions, such as
a person or an algorithm, constantly monitors the situation after each performed action.
Through a reward system, it is possible to guide the Agent towards a determined result.
This strategy belongs to the field of behavioural science and describes the learning
pattern of an intelligent being. Punishments and rewards lead the individual to the lean-
ing process.
Whereas Reinforcement Learning is less relevant to logistics, since it is mainly used in
robotics, Supervised and Unsupervised Learning play a decisive role. An example of
USL use in Reverse Logistics can be data about returning products. Based on the initial
input, USL could predict life cycle and End-of-Life characteristics of the object, as well
as other useful information. Deep Learning can optimize the functionality of regression,
classification, and clustering. It is performed through the use of deep Neuronal Net-
works. This defines a set of algorithms that imitate the human brain. Through inputs
and their single weight, as well as a bias, it is able to offer an output [Kav-2020]. The
most common structure is composed by three or more layers: input, output and one or
more hidden layers [Sil-2017]. Deep Learning algorithms take advantage of Neuronal
Networks with more than three layers, which are called deep Neuronal Networks. In
commonly used deep-forward Neuronal Networks, the information flow is pointed in
one direction [Kav-2020]. Neuronal Network is a tool which is used to approximate non-
linear functions, in particular to increase the performance of Machine Learning algo-
rithms. Deep Learning is used when a wide amount of information is available or a
complicated task is to be solved, and commonly used Machine Learning algorithms
result insufficient.
The main challenges to implement prediction technologies, such as SL and USL, in
the supply chain system concern costs, ethics and labour resistance [Küc-2020]. An
industry which desires to establish ML systems needs to face the high expenses
7 Visions for improving Reverse Logistics
52
related to technological infrastructure as well as human expertise able to use it. In
addition, there are ethical concerns about the misuse of consumers’ data. Although
these functionalities of ML are still at their initial phase of implementation, the media,
in particular, has created a general mistrust towards it, depicting a catastrophic sce-
nario for human beings [Ges-2018]. A further difficulty is the resistance from workers’
unions and regulatory entities towards the automation of tasks, as it could affect man-
ual labour employment rates.
Despite the challenges, the chance of efficient data use creates the possibility to adjust
a service to consumers’ necessity. Predictive Logistics can help companies to improve
last-mile delivery. Through the use to data it becomes possible to manage efficiently
multiple variables such as fuel consumption as well as traffic and route optimisation,
while being able to offer the customer time-window estimations. [Küc-2020]
In order to improve Predictive Logistics, unsupervised learning is needed, since it de-
scribes a system that automatically develops through information. Especially since the
introduction in logistics of Auto-ID Technologies such as RFID, there is a big quantity
of available data, which is further increasing with IoT [Cho-2009]. This information,
generally defined as Big Data, can relate to orders, transactions, and sensors’ activi-
ties, for example the scanning moment of a RFID Tag. Data deriving from customers’
activities, such as the use of a website, is often referred to as Digital Shadow or Digital
Footprint. The idea of USL in logistics is to extract the knowledge from passed pro-
cesses to better develop future supply chain tasks. This is possible thanks to the ca-
pability of USL to use gathered data to predict future activities. The strategy requires
data collection in an initial phase, based on established key performance indicators
(KPIs). Successively, the system needs to use this knowledge to develop the appro-
priate matching supply chain processes. An advantage of this solution is that the pro-
cess can be adapted to each consumer, in order to supply a personalised customer
service. [Kno-2016]
Furthermore, acquired data can also optimize Reverse Logistics. The information gath-
ered from customers and external factors, such as traffic and sensors, can improve
returning networks. This would increase the profitability and especially reduce uncer-
tainties from returning products. The aim of Predictive Logistics, which is to deliver a
product to a customer before he even orders it, based on his usual consumption, can
help companies to understand when the consumer will be returning the used item and
thus optimising Reverse Supply Chain. [Küc-2020]
Despite these possible benefits, the use of consumer’s data still leads to scepticism
about privacy. Since the necessary tools to develop such predictive processes are
7.4 Artificial Intelligence and Machine Learning
53
information regarding the habits of every single customer, there is a general feeling of
being controlled and manipulated. In order to further develop this technology, it is nec-
essary to regulate it to avoid misuse.
54
55
8 Opportunities in Reverse Logistics
8.1 Technical Opportunities
When it comes to Reverse Logistics, technical opportunities are secondary to eco-
nomic and environmental ones. Although there is the need to establish new technical
processes, these do not necessarily provide an advantage. It is still possible to con-
sider as technically beneficial some aspects of a Closed Loop Supply Chain. According
to Badenhorst [Bad-2012], Reverse Logistics allows to redevelop technical and busi-
ness processes, which leads to establish efficient returns processes and meanwhile
improve Forward Logistics. The products need to be designed providing simplicity in
disassembly [Kum-2008]. This means that the general construction should be less
complex, which would also simplify the production process. In addition, by remanufac-
turing used products, which can often occur with little intervention and thus economi-
cally, it is possible to reduce costs due to fewer raw material needed [Sch-2009,
S. 24,44]. Furthermore, this activity leads to a reduced dependency from raw material
providers, which gives more freedom in organizing the Supply Chain Management and
avoids interrupting the chain if one of the suppliers has a problem. Especially with the
phenomenon of outsourcing, many OEM are dependent from distributors in other coun-
tries. In case of a problem in one region, the entire logistics process can be interrupted.
Thanks to the availability of returned products, OEM can always have a stock of ready-
to-use materials.
The possibility to receive returned items leads to an improved warehouse management
[Gra-2014]. There is the possibility to keep stocks filled and, hence, to meet service
requests faster, for example in case of a product recall, which may affect numerous
items at the same time. Returned materials, which can be reused immediately or with
little adjustments, avoid consuming raw resources, permitting to reduce manufacturing
time. In addition, a good Reverse Logistics process allows to always supply distributors
with the most recent products and returning the ones which are losing value, avoiding
markdowns [Gra-2014]. A further technical advantage, which is also beneficial from an
economic and environmental perspective, is the reduced energy and material con-
sumption. According to Smith and Keoleian [Smi-2004], the remanufacturing of en-
gines allows to reduce the energy consumption by 83% and decrease the use of raw
material by 26-90%.
A technical benefit underlined by Lasch [Las-2018, S. 344] is the possibility of gaining
further information about clients requirements. Especially since data acquisition plays
a central role in today’s business, by offering a wider range of products, with different
8 Opportunities in Reverse Logistics
56
characteristics, it is possible to obtain a better understanding of the market requests.
This successively moves the offer, and, thus, the technical supply, closer to the con-
sumer. As underlined in chapter 7.4, the acquisition of data will be assuming a decisive
role with the development of new technologies.
8.2 Economic Opportunities
The economic opportunities are the main aspects which concern the implementation
of Reverse Logistics. Brito [Bri-2004, S. 11] has divided the economic gains into direct
and indirect. The first ones are related to the value represented by returning products.
Thanks to Reverse Logistics it is possible to reduce costs of raw materials and of dis-
posal operations and in addition, add value to recovered products. Thanks to sustain-
able operations several indirect gains can be achieved. Through Reverse Supply
Chain operations, companies reduce competition from other manufacturers. By pre-
venting their product to enter the second-hand market, OEM can reduce the possibility
to give competitors access to their technology. Furthermore, the green image achieved
through sustainability activities allows to improve the relation to the customer and build
brand loyalty. [Bri-2004, S. 11]
Since, according to Sisodia [Sis-2007], evidences demonstrate that climate-friendly
operations lead to a better customer service and to better financial performances of
the company, the green image has become a main marketing strategy [Fle-1997]. The
major aim of companies that establish Reverse Logistics processes is to reduce costs
and increase profits [Gra-2014]. This is achieved by obtaining value from returned
products, which means saving costs on raw materials, and in the meanwhile taking
advantage of the opportunity to sell items at a higher cost thanks to their environmental
and social responsibility [Lee-2012]. In fact, efficient managed Closed Loop Supply
Chain can considerably influence the bottom line of an industry in a positive way, by
taking advantage of the value of returning products [Lee-2012].
A further economic benefit derived from Reverse Logistics, is the opportunity to create
financial revenue from secondary markets [Lee-2012]. Reconditioned and recycled
products can be sold as second-hand opportunities, guaranteeing the same quality
derived from the OEM’s traditional products for a reduced price. This allows to maxim-
ise the profits from returned items. The usable parts can be applied in the primary
production line, whereas the unnecessary or obsolete parts, instead of being disposed,
can be sold with a different purpose or repaired with little costs and interventions [Fle-
1997]. By keeping track of the used products and recycling them independently, the
OEM avoids that competitors to gain access to the used technology. An example is
8.3 Environmental Opportunities
57
IBM, which uses Reverse Logistics in order to recover value from returned product and
in the meanwhile prevents its technology to be accessible in secondary markets. This
process is especially established with those products that the company itself can re-
manufacture, without the need for third party enterprises [Gra-2014].
An economic opportunity derives from the possibility to reduce the number of logistic
providers and suppliers. By implementing a Reverse Supply Chain, a company can be
less dependent from the logistics network. Using efficiently the returned products can
reduce the need for raw materials and for suppliers, and it allows to reduce waste.
Decreasing waste avoids to collaborate with companies which deal with the disposal
[Gra-2014].
According to Lasch [Las-2018, S. 344], through Reverse Logistics a company would
be more committed in the after sale business. This guarantees multiple economic ad-
vantages. New clients are attracted by the offer, either by the environmental aspect or
because of the lower price. In addition, more job opportunities are created, and the
brand is able to widen its range of products.
It is difficult to establish numbers for the economic benefits of Reverse Logistics, since
the return process allows to cut costs on the production side. This means that the
activity of recycling does not directly lead to a financial benefit but creates opportunities
in other sectors. For this reason, many managers as well as stakeholder are hesitating
to invest in these strategies, as underlined in 4.2. With the rapid growth of e-commerce,
also returns are expected to increase. According to Bimschleger [Bim-2019], the fore-
casted value of annual returns is estimated to reach $573 billion in 2022. This consid-
eration is key in order to understand the size of the Reverse Logistics market and the
opportunity it offers.
8.3 Environmental Opportunities
The environmental opportunities offered by Reverse Logistics are strictly linked to the
economic ones, since they are used by companies in order to reach financial profits.
This means that businesses try to convey a sustainable image as marketing strategy
in order to increase the cost of the products [Fle-1997]. By doing so they approach
programs which can lead to environmental benefits. Due to the issues of municipal
solid waste (MSW) and especially plastic disposal and landfill, which are strongly hurt-
ing the ecosystem, customers expect a commitment from the industry [Sri-2006]. Ku-
mar [Kum-2008] used the saying “from cradle to cradle”, in order to describe the activity
of reusing a material instead of disposing it. Xerox for example can remanufacture 90%
8 Opportunities in Reverse Logistics
58
of its equipment. By applying this strategy, the company was able to reduce landfill
resources of 300 million kilograms in a year [Gui-2002].
The benefits of Reverse Logistics associated to the environment have introduced the
concept of Green Supply Chain Management [Cha-2012]. In order to achieve these
opportunities, the entire value chain of a company is affected. The main environmental
benefits are:
Waste reduction: Through the remanufacturing and reselling of returned ob-
jects, waste disposal and landfill can be reduced. As seen with the example of
Xerox, managing Reverse Logistics leads companies to design their products
in a more sustainable method, by considering the reutilisation of every compo-
nent. In addition, many industries encourage consumer to reduce waste by col-
laborating with recycling initiatives.
Decrease of used energy: Returning products allows to use them in the produc-
tion of new items with little to no intervention. This, besides reducing manufac-
ture time, leads to a lower use of energy, since raw materials do not need to be
assembled and processed. The remanufacturing of engines for example, per-
mits to reduce energy consumption of about 83% [Smi-2004]. By reducing op-
erational processes thanks to returned materials, also CO2 levels in the air can
be decreased. As seen in the Keeling Curve [Har-2010], emissions are strongly
rising, which leads companies to approach multiple strategies concerning en-
ergy. On one hand they try to use electricity from renewable resources, and on
the other hand they are trying to redesign the entire production and logistic pro-
cess by optimizing the use of Reverse Logistics products.
Saving natural resources: An important environmental benefit of Reverse Lo-
gistics concerns the reduction of the consumption of natural resources. Since
products are remanufactured, fewer primary materials are extract from nature.
This can also lead to decreased emissions. According to Smith [Smi-2004], re-
using an engine saves 26-90% on raw resources. Although reprocessing alu-
minium can be more energy consuming than extracting natural ores (increase
of about 5% [Gra-2014]), it is more beneficial for the environment.
In order to understand how implementing environmentally friendly processes can also
lead to financial benefits, B-Corporations are a good example. These companies are
defined as hybrid firms since their ambition is both to make financial profits and to be
socially responsible. They are subjected to an assessment test from the non-profit or-
ganisation B-Lab, that evaluates their awareness of topics such as environment,
8.3 Environmental Opportunities
59
governance, and community. According to a study from Romi [Rom-2018], thanks to
the improved employee satisfaction and the resulting increased productivity, these
companies can achieve better financial results. These economic benefits are also ex-
plained by the network formed by all B-Corporations. Customers that are more and
more dedicated to environmental and social issues are attracted by the label of these
companies and prefer them to more traditional ones [Pae-2020]. This example shows
how striving for environmental benefits, and thus implementing Reverse Logistics in
the value chain of a company, can lead to economic benefits.
60
61
9 Conclusion
9.1 Summary
Due to the environmental issues and the rising social responsibility towards a more
sustainable way of living, topics such as circular economy gained a pivotal role in many
companies. In the supply chain management, Reverse Logistics can be the strategy to
close the circularity of the products’ life cycle. Reverse Logistics is the process that
deals with the collection and remanufacturing of used or unnecessary items. From the
supplier point of view, Reverse Logistics’ drivers are legislations, which oblige them to
manage the remanufacturing of sold products, environmental concerns, strictly linked
to the demand of customer to have more sustainable products, and economic benefits,
since a returned item can easily be sold instead of producing a new one from raw
materials.
In order to fulfil the purpose of this research, which is to analyse the challenges and
potentials, especially technical, of Reverse Logistics, it is necessary to understand the
structure of this process. Products are collected from the consumer, identified, and
classified and successively remanufactured. Since this procedure is started by the cus-
tomer, who delivers his product into the returning channel, it is difficult for the manu-
facturer to establish when the items will be returning as well as their quality and quan-
tity. Despite the product-based difficulties, also establishing a network, and thus the
information flow between supply chain members, represents a challenge. Economi-
cally, the lack of knowledge about Reverse Logistics and the uncertainties lead to hes-
itation from stakeholders and executives in investing in it. This hesitation is increased
by the lack of political support. Although there are laws obliging to recycle, companies
are not financially encouraged to implement Reverse Logistics, and neither is there an
international standard which would help to institute guidelines along the entire supply
chain. The missing social awareness concerning Reverse Supply Chain and the deriv-
ing mistrust towards recycled objects make it more difficult for companies to establish
returning networks.
In order to overcome the main technical challenge of Reverse Logistics, uncertainty,
companies need to focus on identification systems. Based on the product typology and
the financial resources, every firm must understand which Auto-ID technology suits
them better. Whereas barcodes are cheap and easy to implement but require manual
labour participation in the scanning process, RFID can be easily automated. A possi-
bility to improve barcode is represented by laser marking, which would prevent the
damage of the label.
9 Conclusion
62
An implementation of technologies such as IoT, Blockchain and Machine Learning
would allow to improve the functionality of Reverse Logistics and overcome the chal-
lenges. Although these technologies can be expensive to be implemented and require
much expertise, they offer possible solutions, especially with the use of RFID. Tracea-
bility, transparency, and prediction possibility are the main benefits of Smart Reverse
Supply Chain (SRSC).
The advantages deriving from Closed Loop Supply Chain are especially economic and
environmental. Thanks to the availability of returned products and the reduced depend-
ency from suppliers, a company can save costs on raw material as well as in ware-
house management. By acquiring an environmentally friendly image it is possible to
increase the value of a product and establish a brand loyalty with consumers. Environ-
mentally, the remanufacturing of products leads to a reduced landfill as well as a de-
crease of used energy. By saving natural resources and reducing production pro-
cesses, the pollutant emissions are strongly cut.
9.2 Final Consideration and Outlook
The lessons learned from the presented research can help to understand the main
challenges of Reverse Logistics and which instruments can be used in order to reach
its benefits. A company willing to implement a returning network needs to face the
challenge of uncertainty as well as the economic investments. Since the uncertainties
are linked to the missing identification of the products, the implementation of Auto-ID
technologies is pivotal. It needs to be underlined that every Auto-ID method has its
own benefits. Therefore, the evaluation of the appropriate identification method must
consider the products’ characteristics. Today, RFID seems to be the most interesting
identification method due to its possible automatization and, thus, usability in Industry
4.0.
An important consideration is the future role of new technologies in Reverse Logistics.
The mentioned visions (chapter 7) need to be further developed and researched, in
order to understand their financial feasibility and the technical contribution. These rep-
resent a very wide research field and could not be explored in depth in this analysis.
Especially when it comes to Predictive Logistics, further study is required. There is still
distrust towards Artificial Intelligence as well as privacy concerns, and only few com-
panies have the necessary data to implement these technologies, for example Ama-
zon.
9.2 Final Consideration and Outlook
63
A major outlook concerns the political involvement in Reverse Logistics. Although leg-
islations are being introduced in order to decrease waste production and encouraging
recycling (chapter 1.1), missing political support still represents a challenge. Govern-
ments should be engaged in developing legislations and financial incentives. On the
one hand, laws should drive companies to invest more in CLSC, by, for example, lim-
iting Planned Obsolescence and proposing guidelines. Reverse Logistics could be pro-
moted by setting a limit on the extraction of raw materials. On the other hand, economic
resources could help to overcome the hesitation towards environmental strategies, ex-
plained by the unclear benefits.
Since the industry is customer-driven, a social request for more commitment from the
industry to the climate cause, would drive more companies to change their business
model. The example of B-Corporations (see 8.3) clearly shows that it is possible to
make revenues while focusing on socially relevant aspects. These are companies that
decided on their own to change their priorities and are hopefully used as example by
others.
In our society, which is increasing the focus on environmental concerns, it is of pivotal
importance that industries shift to a more sustainable approach. Reverse Logistics has
the potential to be a game changer in the implementation of sustainable business.
Topics such as Circular Economy (CE) and recycling are frequently discussed in the
social debate, but the resources and the willingness to achieve these results are still
missing. Reverse Logistics, if adequately organized, can help reaching this circularity.
64
65
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List of Figures
Figure 4.1: Centralized and Distributed Network [Boy-2014] 14
Figure 5.1: Audi R8 dismantled [Rob-2018] 21
Figure 5.2: Circular Economy in Food Supply Chain [Jur-2016] 23
Figure 6.1 Reverse Logistics Process [Chi-2018] 27
Figure 6.2 Auto-ID Systems 29
Figure 6.3: OCR [Ata-2017] 30
Figure 6.4: EAN-13 [Act-a] 31
Figure 6.5: QR Code [Act-b] 31
Figure 6.6: 3D Barcode [Sym-] 32
Figure 6.7: 4D Barcode [Hei-] 32
Figure 6.8: Laser Marking [Sob-2015] 34
Figure 6.9: NFC use examples [Jai-2015, S. 7] 35
Figure 6.10: RFID Tag [Nic-2016, S. 7] 36
Figure 6.11: RFID in Automotive Supply Chain [Lin-] 40
Figure 6.12: Food Traceability in Supply Chain [Tur-2014] 41
Figure 7.1: IoT Network [ABI-2019] 46
Figure 7.2: Blockchain Structure [Bac-2017] 48
Figure 7.3 AI Diagram 50
