Reverse logistics for recycling: The customer service

do Valle, Patrícia Oom; Menezes, Joao; Reis, Elizabeth; Rebelo, Efigenio Article Reverse logistics for recycling: The customer service International Journal of Business Science & Applied Management (IJBSAM) Provided in Cooperation with: International Journal of Business Science & Applied Management (IJBSAM) Suggested Citation: do Valle, Patrícia Oom; Menezes, Joao; Reis, Elizabeth; Rebelo, Efigenio (2009) : Reverse logistics for recycling: The customer service, International Journal of Business Science & Applied Management (IJBSAM), ISSN 1753-0296, International Journal of Business Science & Applied Management, s.l., Vol. 4, Iss. 1, pp. 1-17 This Version is available at: https://hdl.handle.net/10419/190600 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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Journal of Business Science and Applied Management, Volume 4, Issue 1, 2009 Reverse logistics for recycling: The customer service determinants Patricia Oom do Valle Faculty of Economics, University of Algarve Edificio Ciencias I, Campus de Gambelas, 8005-139 Faro, Portugal Tel: +351 289800915 Email: [email protected] Joao Menezes ISCTE - Business School, Lisbon University Institute Avenida das Forcas Armadas, 1649-026 Lisbon, Portugal Tel: +351 217935000 Email: joao[email protected] Elizabeth Reis ISCTE - Business School, Lisbon University Institute Avenida das Forcas Armadas, 1649-026 Lisbon, Portugal Tel: +351 217935000 Email: elizabet[email protected] Efigenio Rebelo Faculty of Economics, University of Algarve Edificio Ciencias I, Campus de Gambelas, 8005-139 Faro, Portugal Tel: +351 289800915 Email: [email protected] Abstract Customer service is a central concern in the logistics practice and a study topic in the forward logistics research. This article investigates the elements of customer service and their importance in reverse logistics for recycling. Since consumer is the first intervenient in any reverse system that aims to recycle household residues, the provision of an adequate customer service gains an increased importance. Applying multivariate statistical methods (exploratory factor analysis, confirmatory factor analysis and discriminant analysis) to the data from a sample of 267 Portuguese citizens, this study identifies the levels of customer service in this reverse logistics chain and evaluates their relative importance in achieving consumers’ participation. The study finds that, as in forward logistics, the customer service in reverse channels for recycling also has a hard and a soft level, being the former more important than the later. The results of this research suggest important guidelines to improve such a complex logistics service. Keywords: reverse logistics, customer service, multivariate statistics Acknowledgements: The authors acknowledge Susy Rodrigues for providing proofreading support. Int. Journal of Business Science and Applied Management / Business-and-Management.org 2 1 INTRODUCTION Reverse logistics is the continuous logistic process through which shipped products move from the consumer back to the producer for possible reuse, recycling, remanufacturing or disposal (Johnson, 1998). The European Working Group on Reverse Logistics (RevLog, 2002) describes reverse logistics as “the process of planning, implementing and controlling the flows of raw materials, in process inventory, and finished goods, from a manufacturing, distribution or usage point to a point of proper disposal”. The purpose of a reverse logistics process is to regain the value of returned materials or provide the means for proper disposal (Rogers and Tibben-Lembke, 1999, 2001). Forward logistics, in contrast to reverse logistics, focuses on the flow of goods from the producer to the consumer. As Maltz and Maltz (1998) propose, customer service in the forward logistics channels is a multifaceted concept that can encompass either objective or perceptual elements. Objective elements correspond to basic customer service (or hard service) such as inventory availability, on time delivery and order cycle time reliability. Perceptual elements (or soft service) are those related to the suppliers’ ability to respond to specific customer requests such as after-sale service and effective handling of information requests. Several authors recognize that customer service is an issue of central concern in logistics research and practice (Byrne and Deeb, 1993; Emerson and Grimm, 1998; Fuller, 1978; Giuntini and Andel, 1995; Kopicki et al., 1993; Maltz and Maltz, 1998; Marien, 1998; Murphy, 1986; Stock, 1992; Zikmund and Stanton, 1971). Reverse logistics systems for recycling begin with the consumer and finishes with the end market (Jahre, 1995). These systems can be more or less complex depending on whether they possess intermediate levels, such as, the collection level, the transfer level and the processing level. Consumers have a particularly important role in this reverse logistics system since they are the first link in the overall logistics chain. Without consumer participation (through the sorting and disposing of recyclable materials), this system would not be possible. By providing a convenient system, customer service becomes the touchstone in creating value for consumers as well as in securing their participation (Turner et al., 1994). As recently pointed out, most research in the reverse logistics field is essentially descriptive and based on subjective evidence rather than on theoretical bases (Alvarez-Gil et al., 2007). In terms of the reverse logistics systems for recycling, one gap that remains open is the comprehensive investigation of the main elements of customer service that explain the consumer involvement in selective-collection programs. This analysis would provide fundamental information about the most important customer service elements and, thus, that require more attention and investment. The contribution of this study lies in bridging this research gap. Data for this research results from the outcome of a structured questionnaire collected from a random sample of 267 Portuguese citizens. This study uses a three-step procedure to assess the elements that comprise customer service. First, an exploratory factor analysis identifies the main levels of customer service (both hard and soft) that shape consumer participation in the Portuguese recycling program. Second, a confirmatory factor analysis validates the underlying levels and the corresponding elements. Third, a discriminant analysis identifies the level of customer service that strongly predicts consumer involvement, in this way offering future guidelines for the reverse logistics system at the collection stage. The structure of this paper is as follows. Section 2 summarizes the background literature in terms of: (1) concept and origins of reverse logistics and (2) reverse logistics for recycling. Section 3 proposes a conceptual model that forms the basis for this research and puts forward a set of research hypotheses. Section 4 describes the research methods used including data information and statistical techniques. Section 5 presents the results and provides conclusions based on the research hypotheses. Section 6 discusses the study’s theoretical and managerial implications, identifies its limitations and proposes guidelines for further research. 2 BACKGROUND ON REVERSE LOGISTICS FOR RECYCLING Recycling is a resources recovery option that enables the use of part or all materials from returned goods, either by their original producer(s) or by other industries (RevLog, 2002). The recycling process essentially encompasses two stages (Jahre, 1995). The first is the collection service stage and includes all the necessary procedures that make recyclables possible for further reprocessing. The second is the reprocessing stage from the collection of materials to the replacement of primary raw materials. Table 1 lists the studies that explore particular issues on reverse logistics for recycling. Patricia Oom do Valle, Joao Menezes, Elizabeth Reis and Efigenio Rebelo 3 Table 1: Summary of articles on reverse logistics for recycling Reference Main topics investigated Material (in) Material (out) Driver(s) Guiltinan and Nwokoye (1975) Reverse logistics networks Recyclables in general Materials Social benefits Economic benefits Pohlen and Farris (1992) Reverse logistics networks Transportation issues Plastics (*) Environmental concerns Bronstad and Evans-Correia (1992) Purchase of recycled materials Paper Paper (*) Kopicki et al. (1993) Logistic implications of recycling (and reuse) programs Recyclables in general Materials Social benefits Economic benefits Gupta and Chakraborty (1994) Planning and control of recovery activities Glass scrap Raw materials Cost savings Jahre (1995) Reverse logistics networks Household waste Substitutes for primary materials Legislation Faria de Almeida and Robertson (1995) Incentives to stimulate recovery (timely and clear information) Batteries Materials (*) Spengler et al. (1997) Reverse logistics networks (private networks) Steel products Reusable products Disposal cost saving Public waste management Fuller and Allen (1997) Reverse logistics networks Post-consumer recyclables Substitutes for primary materials Legislation Yender (1998) Incentives to stimulate recovery (Easy and simple method of supply) Batteries Raw materials Batteries (*) Barros, Dekker and Scholten (1998) Reverse logistics networks (public networks) Construction waste Sand Waste disposal Environmental regulation Nagel and Meyer (1999) Information and communication for reverse logistics End-of-use refrigerators Plastics Metals No longer needed Legislations Costs savings Lowers, Kip, Peters, Souren and Flapper (1999) Reverse logistics networks (private networks) Carpets Fibres, etc. Image Expected legislation Economic advantages Realff, Ammons and Newton (2000) Reverse logistics networks (private networks) Carpets Fibres (*) Chang and Wei (2000) Reverse logistics networks (public networks) Household waste (*) Waste disposal Reducing costs Environmental concern Note: (*) Not mentioned. Although the concept of reverse logistics arises in the 1990s, the discussion on the structure of logistics channels begins much earlier. Guiltinan and Nwokoye (1975) identify the main types of logistics structures, functions and members that form part of the distribution channel. The study also points out a number of key factors for the future development of recycling channels, such as “[the need to expand] efforts in identifying potential markets and buyers of recycled materials; more extensive contact with, and promotion to, final buyers; [in expanding] capacity for moving increased volumes of material to achieve and maintain scale economies; and [in improving] flexibility in transportation” (Guiltinan and Nwokoye, 1975: 35). While the study of Guiltinan and Nwokoye (1975) does not focus specific recyclable materials, Table 1 presents other contributions that address particular reverse logistic networks for recycling. Int. Journal of Business Science and Applied Management / Business-and-Management.org 4 Pohlen and Farris (1992), for instance, analyze the set-up of recycling networks for plastics and propose a more complex structure for the reverse channel when compared to the general Guiltinan and Nwokoye (1975) approach. Pohlen and Farris (1992) discuss the main issues that affect reverse logistics channels for recycling, namely, efficiency improving factors in terms of existing channels and common forms of improving recyclables. As Table 1 shows, some of the studies that address the organization of recycling networks focus on public networks, while others describe private systems. In the first case, environmental concerns and waste disposal legislation are the main motivations underlying reverse logistics. Contrary to this notion are private reverse logistics networks that handle residues or end-of-life products in which recycling is economically more attractive. Private processors finance the transportation of these materials as well as the recycling process itself. For recycling to be economically viable, a significant amount of discarded products (or parts) need to be processed. The reverse logistics literature for recycling also explores the planning and control of recovery activities (i.e., the decisions about what to collect, disassemble and process, and in what quantities, how, when and where), the available information and communication systems (e.g., software, data requirements), the logistical implications of recycling, and the implementation of programs to increase the demand of recyclable materials. As Table 1 shows, the studies examining these issues explore only one type of recyclable material. Finally, the scope of this research explores the incentives that may stimulate a desired behavior in specific members who form part of the reverse channels. These incentives look for encourage / impose cooperation either in terms of reception or delivery of goods for recovery. In the first case, companies may have some goods that they wish to dispose of, and, through incentives, influence others (e.g., the goods’ providers) in accepting such requests, in order to avoid high disposable costs. The second case includes situations in which the purpose is to encourage others (final consumers) to take part in efforts which allow companies to manage goods (products, parts, packaging) for recovery. Table 1 identifies three types of non-economic incentives: timely and clear information, general convenience, and an easy and simple method of supply. Table 1 evidences that only two studies on reverse logistics for recycling have specifically focused on household residues and they address the topic of how to design and manage the logistics networks (Jahre, 1995; Chang and Wei, 2000). In other words, despite the significant amount of research on reverse logistics during the last years, no study has so far identified what elements of customer service are important predictors of consumer involvement in the reverse logistics system for recycling. To fulfil this research gab is the overall objective of the current study. 3 CONCEPTUAL FRAMEWORK AND RESEARCH HYPOTHESES Incentives are of particular relevance in the context of encouraging consumer to separate and properly dispose of household packaging residues for recycling. In this case, the consumer is the starting point of any reverse logistics for recycling household waste and, therefore, his or her participation is a needed condition for a recycling system to exist. Although this topic has not been explored in the reverse logistics literature, in the field of environmental social-psychology, some studies address the predictive effect of a convenient recycling program in articulation with other potential determinants of environmentally friendly behavior. Essentially, the review of the literature shows that an increase in consumer involvement can result from the following aspects: (1) closer proximity of disposal recipients, (2) minimal complexity in storing and storage of recyclable materials, (3) accessible information on what is recyclable and the location of collection points, and (4) reliable frequency of collection. Table 2 summarizes the main characteristics and conclusions from these studies. Patricia Oom do Valle, Joao Menezes, Elizabeth Reis and Efigenio Rebelo 5 Table 2: Customer service elements as predictors of recycling behavior Consumer-service levels Reference Variable under analysis Participants Finding (*) Proximity of disposal recipients De Young (1990) Self-reported recycling Residential households + Folz (1991) Participation in recycling Residential households + Folz and Hazlett (1991) Participation in recycling Residential households + Vining and Ebreo (1992) Self-reported recycling Residential households + Pelton, Strutton, Barnes and True (1993) Willingness to participate in a recycling program Residential households + Margai (1997) Self-reported frequency of recycling and observed amount of collected materials Residential households + Ludwig, Gray and Rowell (1997) Participation in recycling College students + Saphores, Nixon, Oladele, Ogunseitan and Shapiro (2006) Self-reported recycling Residential households + Minimal complexity in separating and storing Gamba and Oskamp (1994) Self-reported recycling Residential households + Reliable frequency of collection Jacobs, Bailey and Crews (1984) Participation in recycling Residential households + Foshay and Aitchison (1991) Amount of collected material Residential households + Folz (1991) Participation in recycling Residential households 0 0’Connor (1993) Amount of collected material Residential households + Availability of information about Luyben and Cummings (1981-82) Amount of collected material College students + what to recycle and where Jacobs, Balley and Crews (1984) Participation in recycling Residential households + Burn and Oskamp (1986) Participation in recycling Residential households + De Young (1989) Self-reported recycling Residential households + De Young (1990) Self-reported recycling Households from communities with recycling education programs + Diamond and Loewy (1991) Observed participation in recycling College students + Hopper and Nielsen (1991) Self-reported frequency of recycling Residential households + Folz (1991) Participation in recycling Residential households 0 Folz and Hazlett (1991) Participation in recycling Residential households 0 Austin, Hatfield, Grindle and Balley (1993) Amount of collected material College students + Thogersen (1994) Self -reported and observed recycling Residential households + Nyamwange (1996) Self-reported frequency of recycling Residential households + Leroux (2000) Rate of waste reduction Residential households + Note:(*) Legend +: significant positive relationship; -: significant negative relationship; 0: non-significant relationship. Int. Journal of Business Science and Applied Management / Business-and-Management.org 6 Based on the literature review, Figure 1 depicts the proposed model of consumer involvement in the reverse logistics system for recycling. The model establishes a direct causal-effect relationship of customer service in terms of consumer involvement. The following hypothesis establishes this connection: Figure 1: Conceptual model of customer service in the reverse logistics system for recycling Hypothesis 1: Customer service explains consumer involvement in the reverse logistics system for recycling household packaging. In terms of forward distributor channels, Maltz and Maltz (1998) state that the concept of customer service includes two common levels: (1) hard level that corresponds to objective or basic customer services, and (2) soft level that refers to perceptual customer service elements, besides those of basic service. The logistics literature widely accepts this classification of customer service levels (Dadzie et al., 2005; Mentzer et al., 1989; Stock and Lambert, 2001). Earlier research is clear about the meaning of basic customer service in forward reverse logistics. As Dadzie et al. (2005) summarize, this construct includes in-stock availability and cycle time. The literature on reverse logistics for recycling does not address this issue. This study proposes that the hard elements of customer service lie in the accessibility to the selective collection recipients. By providing this basic element to consumers, the reverse logistics system for recycling can operate. The remaining customer service elements that Table 2 presents depend on this element, that is, they are important only if communities have specific recipients for separated materials at their disposal. Consumers may perceive the separation process as satisfactory, understand how and why to separate, believe that, in general, the collection frequency is adequate, but without a collection service in place (well located and not too distant) they will not participate in the recycling program. The second research hypothesis represents these considerations: Hypothesis 2: The hard level of customer service in the reverse logistics system for recycling household packaging consists in the access to the selective collection facilities. Identifying the soft elements of customer service in the forward reverse logistics systems is not as clear as identifying hard elements. According to the definition proposed by Dadzie et al. (2005), soft elements are those other than in-stock availability or time cycle, that is, those that are not basic service. These elements are not objective but instead perceptual and result from suppliers’ ability to respond to specific customer requests (Maltz and Maltz, 1998). In forwards reverse logistics systems, soft customer service elements include error correction, follow up on customer complaints, after sales services, and effectiveness in the handling of information (La Londe and Zinszer, 1976). The current study on the elements of customer service in reverse logistics for recycling follows a similar approach and considers that the soft elements go beyond just basic service, that is, beyond the easy access to specific disposal recipients for recyclable materials. As Maltz and Maltz (1998) refer, soft elements result from consumers’ perceptions about customer service rather than from the objective characteristics of this service. Therefore, soft elements should necessarily include the perceived Customer service Hard level (Access to disposal containers) Consumer commitment Soft level (Elements other than accessibility to disposal recipients) H1 H2 H3 H4 H4 Patricia Oom do Valle, Joao Menezes, Elizabeth Reis and Efigenio Rebelo 7 complexity in storing and separating the recyclable materials, the availability of information on how to recycle and where to dispose of the recyclable materials and a reliable periodic collection. Table 2 summarizes the existing research on these elements. Besides these elements, this study explores whether hygiene, design and security at the disposal locations, as well as available support and claim services have an important soft elements of customer service. Based on this discussion, the study establishes a third research hypothesis: Hypothesis 3: The soft level of customer service in the reverse logistics system for recycling household packaging includes all elements beyond accessibility to the selective collection facilities. As Table 2 shows, research has focused mostly on the proximity element of disposal recipients and, according to studies, has a consistent and positive effect on consumer participation in terms of recycling. This Table also suggests that the effect of the remaining elements (soft elements, as this study looks to show) on consumer participation is only moderately apparent. In fact, some studies show that the more complex the sorting process is, together with limited recycling information, the lower the recycling participation rates. However, a small number of studies find a non-significant relationship between these variables. Given these considerations, and the fact that soft level of customer service can only exist after the provision of the hard level, the final research hypothesis is as follows: Hypothesis 4: The hard level of customer service is the main determinant for consumer to commit to the reverse logistics systems for recycling, followed then by the soft level. 4 METHODS 4.1 Setting The Green Dot Society (GDS) is a private company, created in 1997 with the purpose of managing the Integrated Recovery System of Packaging Waste Management (IRSPWM). Currently, GDS is the only company that develops this type of activity in Portugal. GDS is essentially a reverse logistics aggregator with a shareholder structure composed of three holdings that represent almost 200 companies. The first holding represents the packagers/importers, the second represents the distribution and retail trade, and the third represents the manufacturers and recyclers of packaging material. In compliance with national legislation, GDS aims to recover 60% of the overall packaging weight and recycle 55% of this material by the end of 2011. Recyclable materials include glass, paper/cardboard, lightweight packaging (plastic, metal) and wood. With the exception of this last type of material, dropoff systems, often referred to as eco-points, allows for the collection of packaging residues. As in other European countries, the IRSPWM relies on the principle of shared environmental responsibility. Packers and importers finance the system, based on the polluter-pays principle in which the amount and weight of the corresponding packaging material, commonly known as the green spot value, regulates the fee they must pay. In turn, packers and importers receive permission to mark their packaging with the Green Spot symbol, which shows that these companies transfer their recovery responsibility to GDS and the IRSPWM. The distribution role ensures that their commercial confines only sell non-reusable packaging through the Integrated System. The GDS’s business structure does not include municipalities though they are responsible through contract agreement for the multi-material collection and sorting of household packaging residues. Consumers should necessarily separate and dispose of their packaging waste at the eco-point. The packaging manufacturers complete the cycle by securing the recycling of collected household packaging. The GDS’s overall mission is to manage the reverse supply chain, finance and guarantee the functioning of the entire system. This corporation invests a major part of its annual overall income to compensate for the additional costs that municipalities incur with multi-material collection and sorting. GDS also sub-contracts transportation services that handle packaging residues for recycling companies and ensures that they receive, store and recycle recovered material. 4.2 Questionnaire Data of this research result from personal interviews performed in April and May of 2006 based on a structured questionnaire (appendix 1). The questionnaire design took into account an extensive review of scientific and practitioner publications on recycling behavior, interviews on key elements of GDS management and benchmark studies carried out in other European countries (Spain, Italy and Belgium). The questionnaire encompasses three sections. Section 1 conducts an inquiry of the sociodemographic characteristics: gender, age, educational qualification, marital status, occupation, Int. Journal of Business Science and Applied Management / Business-and-Management.org 8 residence type, home ownership and family monthly income. Section 2 involves eleven elements (included in the earlier study) characterizing customer service in the reverse logistics system for recycling: (1) location of disposal recipients, (2) frequency of waste collection, (3) distance to the disposal recipients, (4) number of disposal recipients, (5) cleaning and maintenance of disposal recipients, (6) local safety, (7) emptying regularity, (8) available information, (9) support and claim service, (10) system adequacy to lifestyle, and (11) number and type of suitable waste materials. A Likert five-point scale assesses these elements, ranging from 1 – very unsatisfied to 5 – very satisfied. Section 3 looks to measure consumer involvement in the recycling program and considers two questions. The first measures the self-reported household recycling behavior (scale: 1 – separates and selectively discards recyclable waste, 0 – does not separates and selectively discards recyclable waste). The second evaluates the frequency of separation and disposal of recyclable materials at the eco-points (scale: 1 – never, 2 – sometimes, 3 – always). 4.3 Sample and data The study population encompassed the adult Portuguese citizens living in Faro city. Faro is the capital of Algarve, located in the southern Portugal, comprehending six parishes. Faro has a total population of 58 350 inhabitants and its most important economic activities are tourism and services. From this population, the study selected a random sample of 267 citizens. The calculation of the sample used the most conservative estimate for a single proportion (p = 0.5), a confidence level of 95% and a maximum error of 6%. The study used stratified sampling and the distribution of the interviews according to parishes was proportional to the resident population. In each parish the most important shopping street was selected as the location to perform the interviews. College students administered the questionnaires to respondents in those streets, with respondents chosen at random, according to a systematic procedure. A questionnaire was delivered to the first person (older than 14) passing near the interviewer at a defined hour. Then, a sampling interval of 5 people was established in order to select the remaining respondents and, thus, to fill the sample stratum defined to each parish. Each respondent received an explanation of the nature of the questionnaire. Table 3 summarizes the socio-demographic characteristics of the respondents along with some household features and participation patterns. Around 61% of respondents replied as being active participants in the recycling program. The profile of the respondents corresponds roughly to that in the previous national study (GDS, 2000). Most respondents were females (59.4%), between the ages of 26– 35 (27.2%) and 36–45 (18.2%), married (51.1%) and university degree holders (34.2%). Table 3: Characteristics of the sample Variables Distribution of answers Gender 59.4 % female 40.6% male Age 14 – 25: 15.1% 26 – 35: 27.2% 36 – 45: 18.2% 46 – 55: 17.0% 56 – 65 :11.0% 66 – 94: 11.5% Education level 4 years: 10.1% 6 years: 7.3% 9 years: 9.0% 12 years: 26.7% technical/ professional: 12.7% College or higher: 34.2% Median education level: 12 years Occupation Farmer/fisher: 1% Workman: 14.1% Services worker: 22.4% Public worker: 8.2% Teacher: 7.3% Liberal worker: 5.4% Manager: 9.2% Retired: 5.1% Housewife: 4.3% Student: 18.0% Other: 5.1% Marital status Married: 51.1% Single: 34.0% Divorced: 9.8% Widow:5.1% Residence type Apartment: 63% House: 27% Farm: 10% Home ownership Own/are buying: 75% Renting: 18% Familiar: 7% Monthly family income Less than 324 €: 2.1% 324 € – 499 €: 10.3% 500 € – 999 €: 39.3% 1000 € – 1999 €: 31.2% 2000 € – 2999 €: 11.7% At least 3000 €: 5.4% Self-reported recycling behavior Uses to separate and selectively dispose of: 61% Do not separate nor selectively dispose of: 39% Frequency of separation and disposal of recyclable materials Never: 22% Sometimes: 27% Always: 51% Patricia Oom do Valle, Joao Menezes, Elizabeth Reis and Efigenio Rebelo 15 REFERENCES Alvarez-Gil, M. 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