As legislations have become stricter and the competition on markets is getting stronger, companies facing return flows strive for the implementation of efficient and cost-effective reverse logistic procedures. At the same time, when managing reverse logistics, they are not only confronted with a high degree of uncertainties concerning the quality, quantity and timing or the product returns, but also with a dynamically changing environment. Various aspects, such the increasing amount of return flows, shorter repair and lead times as well as increasing disposal costs, affect the reverse logistic system and need to be managed proficiently. Additionally, handling product returns requires supportive computer aided modelling tools that are capable of handling the dynamic and complex characteristics of the reverse logistic system and allow an improved estimation of the impact of a changing environment and management decisions. For the purpose of this study, the system dynamics modelling approach has been identified as particularly suitable for illustrating the system in question with a special focus on understanding the dynamic behaviour over time. A generic system dynamics model has been exemplarily created and simulated using the program iThink. The model comprises end-to-end processes of the main reverse logistic activities related to customer returns and has been used for studying the strategic design and optimization of the reverse logistic system. In order to consider relevant uncertainties as well as environmental concerns and economic efficiency, representative policies have been applied where, inter alia, with the help of the graphical illustration of the processes, effective strategies could be implemented. A general evaluation of the system dynamics methodology has revealed the significant advantages of using supportive modelling techniques for strategic decision making. Particularly for complex systems that change over time, such as reverse logistics, applying appropriate computer aided modelling tools in order to anticipate the overall effect on processes caused by varying surroundings has proven essential. An effective utilization of system dynamics may significantly reduce the forecasting and planning risks within individual frameworks, such as capacity planning. Moreover, the generic approach allows the application of the model to any other industry that is characterized by uncertain capacity utilization and varying technical, economical and legal conditions.

Textprobe: Chapter 3.1.2, Optimizing Approaches to Processes for Reverse Logistics: Even though the term ‘process’ is well-known nowadays, many definitions can be found in literature. Hence, before focusing on the issue how the reverse logistic process can be optimized, giving a well-suited to the purposes of this paper definition of the term is a must: ‘[process is] a series of actions or steps taken in order to achieve a particular end’. Clearly, per definition, not only several steps are involved in a process, but also a particular performance is desired as an end when conduction these actions. Achieving this performance defines the end of the progression. Additionally, when discussing how to optimize the reverse logistic process, it is useful to define the term ‘optimize’ precisely. Here, optimize means: ‘[to] make the best or most effective use of a situation or recourse […or] to improve efficiency of retrieval or processing’. Thus, for the scope of this study, optimizing a process within the field of reverse logistics is to be understood as achieving a better performance and hence improving the efficiency of the reverse logistics process with regard to the predefined objectives. These objectives have been defined to some extend by literature and are exemplary characterized later on. As already described in Chapter 0, reverse logistics is affected by various barriers which are in return characterized by a strong presence of uncertainties. Overcoming these barriers may therefore lead to process improvements. The following aspects have been proposed by surveys, as being most relevant when striving for sustainable improvements. Since handling of return flows is very costly, effective gatekeeping is identified as a major factor for making flows manageable and profitable. As the positive impact of the effective gatekeeping has already been described in Chapter 2.2.3, it will not be analyzed further again. Nevertheless, it should be mentioned once more that the goal here is to significantly reduce the return rates. This can for instance be achieved by preventing unwanted product returns. Next, an accurate process control is recommended, primary when focusing on the process dimension of organizations (see Chapter 3.1.1). It is in particular necessary to create end-to-end process solutions since the reverse supply chain activities are cohesive (see Chapter 2.2.4.5). Moreover, it is important to consider fluctuations concerning quantity and timing of returns. This can be achieved by an appropriate supporting management tool that can help in predicting these fluctuations. The majority of the survey respondents regards the role of forecasting as being very important for a successful reverse chain management. Furthermore, it is necessary to improve the ability of organizations to track and trace the returned merchandises in order to make measuring KPIs, such as cycle times, easier. Finally, it is suggested to develop management systems that are capable of measuring the true performance of the reverse supply chain including the hidden costs (see Chapter 2.2.4.5). In sum, managing the reverse supply chain is a challenging task for organizations and should be considered from a strategic point of view. In addition to various external parameters influencing the return flow of goods, such as legal regulations and market trends, the involved reverse logistic activities are strongly dependent on each other. Coordinating both the incorporated activities and the varying external parameters turns out to be a key factor towards an integrated solution. Several process-focused approaches have been proposed to face the resulting challenges and to overcome the previously mentioned barriers in order to improve the performance of processes within the field of reverse logistics. However, the above-mentioned approaches predominantly refer to isolated issues, without sufficiently taking the independencies between the relating objectives into account. Moreover, the impact of the external variables and the interaction of the reverse logistic activities lead to a dynamic problem which has been basically neglected so far. The following example clarifies the above described problem. When deciding whether the use of recycled products is profitable, further information about the sufficient access to these goods is required. On the other hand, such information strongly depends on the reverse logistic system, as it determines the related recycling process. Furthermore, due to long-term validly of structural decisions temporal vertical independencies are also significant. The basic condition for a reasonable recycling seen from an economical and ecological point of view can already be determined at an early stage of the product development. Thus, the general conditions when products are returned differ from those when the products were developed. The decision what recycling option is the most reasonable one is then taken at the level of operation. At this point several criteria are relevant for the further proceedings, such as: the environmental legislation, the available technology and costs, the supply of recycled products and the demand for remanufactured products and product components. These criteria are not static throughout the whole product life-cycle but change dynamically. Consequently, both the amount of returned merchandises and the demand for remanufactured products and product components depend on the corresponding life-cycle of products. This dynamics character affects, for instance, the range of disassembling and the disposition of the used products. In case these interdependencies and the described dynamics of the reverse logistic system are neglected, organizations may be confronted with significant economical losses. It is necessary to mark that the designed approaches for managing reverse logistic processes do not generally meet the above mentioned requirements, as they do not sufficiently take the described dynamic and independencies into account. Hence, there is no adequate management supporting tool that can provide appropriate recommendation on how to respond to unexpected changes in order to achieve the desired objectives. The existing approaches are mainly based on methods related to the field of operations research where in particular optimization models are developed. Such models have their strengths in the support of planning tasks in which the operational and business processes, the decision rules to guide the system and the material and information flows are mainly known. For organizations dealing with managing return flows it is further important to have appropriate and robust solutions that can be developed in a reasonable period of time even if no relevant data is available. Within this framework there is a need for system-oriented concepts and management supporting tool, which fulfils the clarified requirements.

• Reverse Logistics

• System Dynamics

• Uncertainties

• Recycling

• Muda

Martin Bonev is a doctoral candidate at the Technical University of Denmark. His research is focused within the area of product and process modeling, product modularization and business process development. He has studied industrial engineering at the Leibniz University of Hannover, with a specialization in production management and logistics. During his studies, the author gained further experience within his research field through various internships and through his accomplishment of external research projects. Being in particular fascinated by the Japanese culture and its peculiar research tradition, the author has spent some time at the University of Tokyo, which is famous for its long tradition and excellent research. His study of the specific research methods in Japan motivated him to combine his research focus in production management and logistics with the applied methodologies in site. As a result, the presented work is based on a collaboration project between universities in EU and Japan. The practical part of this work has been primarily carried out on site, whereas the theoretic elaboration has been completed at the corresponding institute at the Leibniz University of Hannover.