Supply Chain Management Journal
Lean, agile and Leagile Strategies Implementation in the Electronic Industry Cristinel VASILIU Mihaela DOBREA The Bucharest University of Economic Studies
[email protected] [email protected]
Abstract During the last period, the issue ‘reverse logistics’ has become of great interest, due to the growth of the environmental awareness, regulatory shifts and economic burden. Accordingly, almost each company started step by step to include the reverse flows of end-of-life and end-of-use products among their aim of logistics planning and control, in order to increase their performances and thus, efficiency and effectiveness but also with the purpose of creating more sustainable supply chains. The study issues emerge the moment when the reverse supply chain strategies are being considered, according to which strategies are both efficient and effective for the reverse supply chain, the main problem being finding out under which circumstances individual companies could apply these strategies in order to achieve cost-efficient and rapid answer in the reverse supply chain. In the same time, as already mentioned above, lately, debates and researches regarding supply chain strategies have encompassed two basic philosophies, respectively lean and agile supply chains, as well as their corroboration into the concept of leagile philosophy. Each concept will be presented offering a strong theoretical framework for achieving the objectives of the research in this article. Therefore, the first objective of this article is to explore the potential for individual companies to adopt and implement forwards supply chain methods into their reverse supply chains, out of which, the article will focus particularly on lean, agile and leagile strategies. The second aim is to establish under which conditions each strategy could be implemented respectively. The study is limited within electronic industry and addresses particularly to commercial returns for adjustments and maintenances. Empirical information was collected through several semi-introduced interviews with electronic retailers, interviews which disclose the present situation of commercial returns within the industry. The qualitative analysis and its findings were analyzed in cooperation with a diverse literature review of previous researches over this issue, according to which, conclusions to the study questions were produced and also suggestions for future studies. Key words: lean, agile, leagile, Supply Chain Management, electronic industry, strategy. Introduction The study issues emerge the moment when the reverse supply chain strategies are being considered, according to which strategies are both efficient and effective for the reverse supply chain, the main problem being finding out under which circumstances individual companies could apply these strategies in order to achieve costefficient and rapid answer in the reverse supply chain. Indeed, up to now, many researches and analyses have been carried out concerning strategies
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especially for the forward supply chain. Nevertheless, it should be noted that, according to the Reverse Logistics Executive Council (RLEC), there are big differences between forward and reverse supply chains in many features, among which we recall: “forecasting, distribution points, product quality, packaging and so forth”. (RLEC, 2005) Accordingly, reverse supply chains are supposed to be managed by distinctive business strategies in practice in comparison to the forward supply chains. In the reverse supply chain field there have been done many researches
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concerning the RL models design, still only some have been focusing on exploring the particular strategies that are to be used in the process of management and control of reverse supply chains. Johnson (1998) has made some studies concerning the industrial reverse logistic applications in the field of recycling system of ferrous scrap. Among the features he examined and assessed, were: the roles of various functions inside the system, their particular contributions and in the end he developed six volume-based approaches for controling the reverse logistics system. (Johnson, 1998) More recently, Álvarez-Gil et al. (2007) opened a debate about the reasons for companies to adopt reverse logistics systems and proposed that the probability of reverse logistics adoption is highly dependable on the stakeholder reputation, existance of resources and a growing strategic posture of the leader. Also, Wikner & Tang (2008) considered from their research that there is a possibility to extend the classical client order de-coupling point structure for forward supply chain so that is can cover the reverse flows. Other researchers, Banomyong, Veerakachen, & Supatn (2008) studied first, the implementation of the ‘leagile’ concept in the reverse logistics process, which is in fact the mixture of ‘lean’ and ‘agile’ paradigms1, and second, its consequences on both time and cost, emphasizing mainly the product return operation from endclients to the service location. In spite of all these researches, there are however plenty of unexplored field regarding both efficient and effective strategies for reverse supply chain management and in the same time, there is little analysis concerning the adoption of forward supply chain strategies into the reverse supply chains. Starting from the research conducted by Banomyong et al. (2008) concerning the implementation of ‘leagile’ concept in the reverse logistics process, there is also a necessity to ask 1
“Leagile” paradigm positions “the de-coupling point into the supply chain system so as to best suit the need for responding to a volatile demand downstream yet providing level scheduling upstream from the de-coupling point.” (Banomyong et al., 2008)
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another question regarding the feasibility to implement the lean and agile strategies in the logistics system. Therefore, the aim of this article is to study the opportunity for sole companies to implement the lean, agile and leagile strategies so that it can manage and control the supply chain, this indeed concerning not just the forward supply chain but also the reverse supply chains. There should be noted that under this conditions they should be choose relatively. Therefore, the main question emerging from the study that is to be answered further on in this article is formulated as: “Is there a pattern how companies ought to choose business strategies used in the reverse supply chains for achieving and keeping their efficiency and effectiveness?” For answering this major study question, several sub-questions have been developed in a very particular manner: “-Is it achievable to implement the business strategies for forward supply chains, such as lean, agile and leagile strategies, in the reverse supply chains for achieving and keeping their efficiency and effectiveness?” “- If this proves right, in what conditions, lean strategy is beneficial? In what conditions, agile strategy is beneficial? And last but not least, in what conditions, the leagile concept is beneficial?” This article is structured mainly following an international accepted organization for a business research report, recommended by Robson (2002). It is comprised of several chapters including: Introduction, Theoretical framework, Methodology of the study, Empirical findings, Analysis and Conclusions. 1. Supply Chain Strategies 1.1 Supply Chain Strategy Selection Nowadays, companies have understood the importance of the supply chain management (SCM). First, it leads individual companies to great success, second, it makes them gain sustainable
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competitive advantages and third, it offers constant profitability for channel representatives of the supply chain. (Ballou, 2004) An usual manner for achieving the objective is to increase its efficiency and effectiveness in the same time, offering the agreement between cost and quality, and also between price and client service on the stage. (Jacobs & Chase, 2008) As soon as the agreement takes place, appropriate supply chain strategies need to be selected in conformity with the company’s strategy which encompasses the whole aims of the company. (Ballou, 2004) An effective and feasible supply chain strategy is most of the times implemented according to the business aims of the company and clients' requests, which usually targets cost cuts off, capital investments cuts off and client service development, regarding not just the forward commercial supply chain but similarly the reverse supply chains. (Jacobs & Chase, 2008) Some scholars argued that, when choosing the most appropriate supply chain strategies, the company must affiliate them with the features of a certain product and the market request. As an example they offer the product life cycle, request forecasting, product diversity, and market accepted models for lead periods and service. (Lee, 2002; Jacobs & Chase, 2008) Further on, Fisher (1997) considered that a separation of products could be made into two types as fundamentally operational products or cutting-edge products in concordance with the product
life cycle and request forecasting. People's fundamental necessities can be fulfilled by fundamentally operational products, which have usually constant, easy to foretell request and long life cycles. Meanwhile, due to the low request unpredictability, menacing competition is brought into the market of operational products and therefore conducts to quite low profit margins. Therefore, cutting-edge products are added to the products by companies in fashion or technology in order to obtain increased profit margins and in order to get the competitive advantage within the industry. Nevertheless, the request of cutting-edge products has the tendency to prove even more unstable, and therefore, their life cycle turns into much shorter ones. Further on, Fisher (1997) suggested two basic supply chain organisations for every type of products: efficient supply chain wanting to offer low costs products, and responsive supply chain wanting to offer velocity of response. In the same time, he also proposed a suitable affiliation of various products to these supply chain strategies. (See table 1) Efficient supply chains tend to be preferred for operational products, having as a major objective to achieve stable request at the lowest available costs, meanwhile the responsive supply chains are usually more appropriate for cutting-edge products which demand rapid responses to the unstable requests and short life cycle periods, in order to reduce stock-outs and out of date inventories.
Table 1.Lee's Matrix for Supply Chain Strategy
(Source: Lee,H., 2002, modified by the author) Different supply chain strategies must be adopted for every type of products, and dissimilarities could conduct to diverse problems within the supply chain. (Fisher, 1997; Jacobs & Chase, 2008) Christopher and Towill (2002) advanced the theory that, the choosing of a
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suitable supply chain strategy must be in accordance with the market features, higher level of client receptivity and lower total costs in the supply chain. In the same time, they also argued that special conditions for lean and agile doctrine implementations in the supply chains are needed. Therefore, a
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categorization of three-dimension approach has been suggested for the supply chain strategy selection activity, which includes products (fundamental or innovative), request instability (constant or volatile), and replenishment leadduration (short-term or long-term). Still, the dimension of product features is, as a matter of fact, strictly related to the request unpredictability in practice. For instance, on the one hand, since they are standard, the products are standardized in creating and producing
process and their request is really predictable, with a likely-to-happen long life cycle. On the other hand, an innovative product has often been modified where request is more unstable and life cycle has the tendency to be shorter. Therefore, the taxonomy is capable to be reduced into two types: request stability and replenishment leadduration, as in table 2. (Christopher & Towill, 2002; Christopher, Peck and Towill, 2006)
Table 2.Christopher's Matrix for Supply Chain Strategy
(Source: Christopher et al., 2006, modified by the author)
Probable common supply chain strategies have been analysed as well for each quadrant in the matrix above. The moments when the product request is easy to anticipate and replenishment lead period is short, permanent replenishment represent the perfect solution for supply chain management and merchant managed inventory could prove to be one attainable manner for adoption. If the replenishment leadduration of the product with easy to anticipate request proves to be really long, the suitable strategy could prove to be the lean supply chain which has as a direct goal the reduction or even elimination of waste in the supply chain through long term planning and programming of the supply chain actions. At the right side of the above matrix, product requests tend to be even more unforeseeable. With the mixture of unforeseeable requests and short leadperiod, agile supply chain is called to be done grounded on quick response. The fourth quadrant presents an extreme condition where request proves
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unforeseeable and lead time is really long. In this particular case, there is a special requirement for a 'hydrid' lean/agile strategy, the so-called leagile supply chain, which targets to implement the delay concept in the supply chain for keeping strategic inventory and in the same time, for delay/postpone some production process until the actual request is made. (Christopher et al., 2006) 1.2. Lean, Agile and Leagile Philosophies As it has been already mentioned, lately, debates and studies concerning supply chain strategy have focused around two basic philosophies: lean and agile supply chains, but also around their mixture - leagile doctrine. Further on, each concept will be critically presented, for better understanding, implementation in the supply chain and study in reverse supply chains, offering stronger theoretical groundings for the research to come in this article.
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1.2.1. Lean Supply Chains The concept of 'lean thinking' has been analysed by Womack and Jones (1996), and firstly originated at first from the Toyota Production System proposed by Taiichi Ohno, former executive within Toyota. Lean thinking usually focuses on the cutting off or complete elimination of muda, term designating different types of waste that does not add value with resources, particularly with human processes. (Womack & Jones, 2003) According to Ohno (1988) the muda can be classified into different groups such as: imperfections in production, overproduction, inventories, unneeded processing, unneeded movement of humans and goods, and delaying time for human resources within the company. Apart from these, Womack & Jones (1996) comprised the products and services which do not reach the customers' necessities into the category of muda as well. Lean thinking targets first, to make up an integrated system of processes for reducing and even annihilating all wastes in all approaches of a business, comprising period, materials, and costs, and second, to cultivate values from the clients point of view. (Ballou, 2004) It therefore recommends that no product will be made until it is requested by the clients, which other way round signifies that production is generated by the actual request for each particular product. (Jacobs & Chase, 2008) Thus, lean thinking aims to achieving more and more outputs by using less and less inputs, which can be represented either by less employees efforts, or by less equipments, or even shorter periods and lower costs. (Womack & Jones, 2003) Nowadays, the lean thinking appears to be involved both in internal producing processes and in the whole supply chains. (Oliver, Delbridge, & Lowe, 1993) It is proposed therefore, that the lean theory has the benefit to be applied where the product request is highly constant and foreseeable, in order to eliminate (1) all types of wastes within the network, (2) cost cuts-off and (3) efficiency ameliorations in the supply
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chain. (Christopher et al., 2006) As it has already argued in the first section, application of the lean doctrine as a supply chain strategy is quite different from the lead duration of product replenishment. Thus, for products which involve a short lead time, permanent replenishment is best appropriate for the supply chain (Ibid.) In order to permanently ensure replenishment, the company needs to apply real-time data sharing within the supply chain network with the help of World Wide Web and IT&C tools, among which can be mentioned: EDI and RFID. Achievable procedures for the adoption could prove to be, according to Yao & Dresner (2008): Continuous Replenishment Programs (CPR), Vendor Managed Inventory (VMI), and Collaborative Planning, Forecasting and Replenishment (CPFR). However, as far as the long replenishment lead duration, the programming and execution strategy is favoured instead. (Christopher et al., 2006) In the supply chain, companies collaborate for programming and pre-scheduling the manufacturing process ahead of request in order to be very efficient. (Ibid.) Request foreseeing is needed in these companies and this can be done with help of, i.e. Enterprise Resource Planning system (ERP) or Material Requirement Planning (MRP). (Herrin, 2010) For using the lean doctrine in the reverse supply chain, it needs a large extent of data sharing, great foreseeing over product requests, and effective collaborative work among all members in the supply chain. Therefore, IT&C and request foreseeing are included as absolute necessities for adopting a lean supply chain.
1.2.2. Agile Supply Chains For those contexts when request is neither constant nor foreseeable, and implies delivering wide-market products that are customized, agile supply chains need be brought out, mainly because they focus mostly on the tolerance of the system. (Christopher et al., 2006) Agility was mainly used as a business concept in malleable manufacturing activities. The doctrine that resides in the agile
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paradigm has as scope the improvement of client services by quicker answer to their requests. (Harrison & van Hoek, 2008) This obliges companies to implement market knowledge and virtual corporation in order to take advantage of profitable opportunities in an uncertain market. (Banomyong, Veerakachen, & Supatn, 2008) Another prerequisite for implementing agile thinking in the supply chain refers to a short replenishment lead time of the products. As the agile thinking aims to maximize the customer services, it is clear that the focuses of an agile supply chain lie in the customer and market, indicated by customer satisfaction level and capabilities of the companies. (Harrison & van Hoek, 2008) For the agile supply chain to act successfully, it has to be market sensitive, which relates to the ability to perform according to the current demand in the market. The efficient answer to the market request demands the information catching from the retailers and individuals through the use of IT&C, instead of foreseeing based on previous sales information. With the support of IT&C and data sharing, companies within the supply chain are capable to work on the same data for market request throughout all the activities in the supply chains. (Christopher & Towill, 2000) As far as the reverse supply chain is concerned, it is of crucial importance to guarantee the agility and receptiveness of the return system, these two representing in the same time the core elements for decentralized reverse supply chain model. Within a decentralized reverse supply chain model, the easiness or point for control and evaluation of the circumstances of returned products has been shifted to the point of seller/shopkeeper or reseller. Afterwards new and unused products are immediately moved to be re-stocked for either resale or reuse, and in the same
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time, products in quite bad conditions or non-valuable products are transmitted to be thrown away and disposed into the surrounding, and just the products in need for further examinations and reconditions will be remitted to the principal test and restore facility. (Blackburn et al., 2004) In this regard, responsiveness of the return system is improved, at least over the reusable and scrapped products, which increases the customer satisfaction instantly. Blackburn et al. (2004) consider that the decentralized reverse supply chain is more suitable for the high MVT products, other way round, the agile supply chain is more suitable for the reverse supply chain design of the high MVT products, as the velocity for recovery turns into a major element which has to be kept the sooner the better in order to prevent the important value losses because of lengthy delays. (Ibid.) 1.2.3. Leagile Supply Chains Both lean and agile supply chains are considered to be capable to support different objectives and designs of various supply chains. However, in practice, when the product request is unforeseeable and replenishment lead duration is rather long, no single strategy is able to accomplish the scopes of single companies or the whole supply chain; thus an assimilation of the two doctrines being needed under these conditions. By mixing both lean and agile doctrines, the so-called 'leagile' supply chain tries to introduce a 'de-coupling' point (D.P.) into the network, and practices the lean and agile theories at various stages according to the different situations, as shown in Figure 1. (Banomyong, Veerakachen, & Supatn, 2008)
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Supply Chain Management Journal
Figure 1. Leagile Supply Chain with de-coupling point
(Source: Banomyong et al., 2008; modified by the author) The introduction of de-coupling point into the reverse supply chain network symbolizes the application of delay or postponement strategy. It tries to adopt lean theory for foreseeable standard products or compounds and agile theory for unforeseeable, innovative products or compounds. More specific, the lean theory is applied from the manufacturer side until the decoupling point for the aim of waste annihilation, while in the same time, the agile theory is used from the de-coupling point downstream to the client in order to guarantee quicker answers to the uncertain market request and increase the client satisfaction. Therefore, the leagile reverser supply chain model takes advantages from both theories, for instance total lead time and cost cutts off, and client service improvements. (Christopher et al., 2006) A diversity of de-coupling point places in the leagile reverse supply chain is to be found in Figure 1. The introduced de-coupling points act as service places for products fixings and maintenances, having as a major purpose the ability to handle the fluctuated client requests. Almost every returned product is being tested, dispersed, controlled and fixed at the service spots, which to a large extent conducts to a decrease in lead time and waiting period for maintenances. Most often, the nearer the place of service spot is to the clients, the bigger adaptability and receptiveness the system can achieve. Instead of the agile strategy as from the maintenance service spots, from the manufacturer site until the de-coupling points, a lean
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strategy is implemented for decreasing the transportation costs by a rather large scale, as the requests for additional parts or products are reinforced in the service locations and therefore can be measured and in the same time stable and foreseeable. Nevertheless, in the same time, it leads also to inventory at the locations of repair services which would normally conduct to some extra costs and accordingly it requests a solid forecasting on the requests of spare components or products. Indeed, a research done by Banomyong et al. (2008), regarding the comparison between the former existing reverse system and the newly adopted leagile reverse logistics process, proved that the transportation costs and location rental costs for repair places have been cut off, while extra operation costs and inventory holding costs have been added, which resulted in a high amount of savings from the leagile reverse supply chain structure. (Banomyong et al., 2008) However, the adoption of leagile strategy in a reverse supply chain design can be achieved under some conditions. In practice, it requires generic modular product designs and productions for different products to support the adoption of leagile theory, in which manner, the holding inventories in the repair service locations, other way round - the de-coupling points, could be minimized to certain extents. Therefore, particular product designs are required. Also, in parallel with the establishments of service locations, IT&C system has to be implemented for keeping up-to-date the whole amount of data on sales, request and inventory level for every
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spare components or products at every spot for fixing and maintenances. (Christopher et al., 2006; Banomyong et al., 2008)
out unexpected and insightful data which will in turn enrich the empirical findings of this study. 3. Empirical findings
2. Methodology of the study This article aims to analyse the possibility to implement lean, agile, leagile strategies into the reverse logistics system, and to understand in which conditions a particular strategy is suitable. According to the research scope, in this article, exploratory research has been chosen for particular study designs. Due to the lack of knowledge and researches about the suitability of the lean, agile and leagile theories in reverse supply chain, new innovative management methods and strategies in the field of reverse supply chain need to be implemented through several methods such as: theoretically data collecting, literature reviews and practically, by making in-depth interviews. In this respect, qualitative approach was seen as more suitable for this article, mainly because it offers comprehensive descriptions of the present development of reverse supply chain from the theoretical and practical point of view in the electronic industry. Semi-structured interviews, can point
This section will briefly present the empirical findings that resulted from the interviews conducted with two electronic retailers in Romania, referring to Flanco Ltd. and Altex Ltd., and their websites, annual reports, with the major objective to pave the way for deeper analysis regarding the research questions mentioned in the introduction. 3.1. Flanco International ltd. Flanco International ltd. is a brand of Flamingo International Ltd. (subsidiary), with area of activity retail sale of other household goods in specialized stores. Regarding the reverse logistics, product returns does exist in each product category, still, the primary types are claimed to be in accordance with the principle products categories as well, due to the fact that commercial returns can be encountered usually in products such as: communication products, laptops and other digital products. (Liana, interview, 2012-03-13)
Figure 3.Reverse Supply Chain Process of Product Returns for Refunding and Exchanges in Flanco
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For achieving high quality client service as its major goal, Flanco group has proposed several strategies regarding the product backwards flow for returns, exchanges, fixing and maintenances, as a manner to increase client satisfaction and achieve efficiency and effectiveness of their company. The processes of the reverse supply chain in
Flanco ltd. vary from case to case, but in general they can be categorized by product returns for refunding and exchanges (PRE), and products for repair or maintenances (PRM). (Liana, interview, 2012-03-13) Reverse supply chain activites at Flanco of the returned products for refunding and exchanges is to be found in figure no. 3.
Figure 4. Reverse supply chain Process of Product Returns for Repair and Maintenances in Flanco
The above figure shows the manner how reverse supply chain develops when the products are returned for fixing or maintenances in Flanco due to their low quality. 3.2. Altex ltd. Considering products as its major service and client satisfaction as its last objective, Altex puts many efforts into the after-sale service development doing its best for expanding and improving its services and also for offering to the cleints more professional and trustable services. One strategy that Altex uses in their reverse supply chain is localization of its after-sale service. Thus, it has made the after-sale service network so that it can cover the entire country and thus transmit to it’s clients that “wherever someone finds a retailing store for electronic appliance, he/she will
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find at least one repair location nearby.” The localization strategy secures that Altex is capable of answering to the product returns from end-customers for fixing and maintenance within 24 hours from the complaint and achieve the tasks within less than 48 hours. In practice, Altex distinguishes the reverse supply chain from the commercial forward supply chain network. Instead of the regional distribution centers and local distribution centers, up to 2012, Altex has established 80 after-sale service centers and almost 1,800 aftersale locations in its reverse supply chain. Clients are encouraged to go in any after-sale service location to return products, for different problems encountered, such as: refunding, exchanging or for fixing and maintenances. (Altex, 2012; Mihai, interview, 2012-03-20)
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Figure 5. Reverse supply chain Process of Product Returns for Repair and Maintenance in Altex
Concerning the product returns for repair and maintenance, the reverse supply chain works as presented in figure 5. 4. Implementation of Agile and Leagile Approaches
Lean,
On the one hand, in the same manner as in the commercial forward supply chain, in reverse supply chain, lean theory is adopted for annihilating all the wastes in the process and for achieving the economies of scale in processing and transportation. On the other hand, the agile theory needs to be implemented to enhance the agility and receptiveness of the return process; Somewhere in between lies the adoption of the hybrid 'leagile' reverse supply chain which offers advantages for the company by leading to costs cuts off and growing receptiveness. Christopher et al. (2006) have created a matrix for the supply chain strategy selection in accordance to the ability to foresee requests and replenishment lead-time, presented in section 1.1. Therefore, when the product request can be predicted, lean approach
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should be adopted no matter the lead time is short or long. With the combination of unpredictable requests and short lead period, agile supply chain is needed to be executed based on speed answer. On the contrary, when request is not easy to predict and lead time is expected to be long, the leagile strategy needs to be adopted into the supply chain. Starting from Christopher's matrix for supply chain strategy selection and from the features of the analyzed products in this article, it looks like agile theory needs to be selected as the most appropriate strategy for the reverse supply chain in the electronic appliance retailing chains. Nevertheless, at a closer glance at the reverse supply chain activities of product returns in the analyzed retailers (Altex and Flanco), it became obvious that no agile reverse supply chain has been adopted throughout the whole process. “Considering we order every single spare compound for fixing and maintenances from the manufacturers as soon as the controlling and disposition have been done in the sub-logistics location, and we send back the
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recovered product as soon as we reproduce it, the transportation costs and activities costs will be so high that the company could hardly afford them.” (Liana, interview, 2012-03-13) For solving this problem, Flanco consolidates the recovered products at the sublogistics location to certain amount and distributes them together back to the retailing shops. Apart from this, the
spare components for product fixing are delivered from the manufacturers to sub-logistics locations on a monthly basis in order to eliminate additional transportation. From a general point of view, a leagile reverse supply chain has been implemented in Flanco's reverse system, as can be seen in figure 6, which implements a de-coupling point at the sub-logistics locations.
Figure 6. Implementation of Leagile Approach in Reverse Supply Chain by Flanco
Upstream flows from the decoupling point are managed with lean approach, where the requests are quite stable compared to the clients' side, and therefore easily to be predicted. Thus, the flows of returns from retailing shops to sub-logistics locations and the flows of spare components from manufacturers to sub-logistics locations are consolidated before being delivered, this conducting to cost cuts off through the economies of scale in transportation. Downstream flows from the de-coupling point are quite attached to agile reverse supply chain, which helps Flanco to establish the client-orientation objectives. In this part of reverse supply chain,
Flanco tries to answer to clients' requests as quickly as possible and manage the processing period within 15 days, no matter of costs involved. In the same time, Altex discovers from its experience that “the biggest majority of the returns for fixing and maintenances are just easy problems which most of the time can be fixed without professional experience and complex equipments”. (Mihai, interview, 2012-03-20) This is why they have proposed a localization strategy over the commercial returns and set up a large number of after-sales service points in the entire country.
Figure 7. Implementation of Leagile Approach in reverse supply chain by Altex
When evaluating the reverse supply chain process used by Altex, it is also a leagile adoption with a decoupling point introduced at the aftersale service location, as seen in figure 7. Under this organization, the established
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after-sales service locations are provided with professionals and machinery for easy fixing and maintenance tasks to complete a majority of commercial returns locally at the service locations. It secures the customer that Altex is
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capable of solving the product returns for refunded and exchanging within either four hours, or 12 hours if the given product is out of stock. In addition it also ensures the client that Altex can answer to the product returns from endcustomers for fixing and maintenance within 24 hours and finish the tasks within less than 48 hours. From the de-coupling location, where the after-sale service points are to be found, an agile strategy is implemented downstream to cope with the uncertain client requests and ensure the receptiveness to clients' necessities. As in most cases, the commercial returns are exchanged and fixed at the service locations, the lead time of recovery and clients’ expectation time in the reverse supply chain for fixing and maintenances have been diminished to a quite low level. In some particular cases, a small part of returns need to be sent back to the after-sales service location or even the primary manufacturers. In order to keep up a high client service level, Altex will send a new product to the clients instead of making them expect until the achievement of reconditions. On the other hand, this measure also helps the company to adopt lean theory upstream from the de-coupling point, targeting to diminish transportation and processing costs, and ultimately to keep the balance between costs and services. Conclusions Since the purpose of this article was set as to study the application of lean, agile and leagile concepts in the reverse supply chain of companies implied in the electronic industry, the research has been done in concordance with the research question which was formulated in the beginning of this article as: “Is there a pattern how companies ought to choose business strategies used in the reverse supply chains for achieving and keeping their efficiency and effectiveness?” To answer this study question, not only the probability of adopting lean, agile and leagile strategies in reverse supply chain had to be analysed, but also which were the conditions for each
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of the three above mentioned strategies and which would be preferable of them. Besides, the objective of this research was delimited to the commercial returns of electronic products for refunding, exchanging, fix and maintenance. Bearing this in mind, a theoretical framework was constructed where core definitions theories in existing literature were analysed and critically compared in terms of various supply chain strategies. It has been shown that the choosing of strategy is closely related to the features of the products, for instance, request predictability, product life cycle and others. Empirical information was afterwards collected by conducting semistructured interviews with two electronic retailers in Romania, namely Flanco Ltd. and Altex ltd., which showed their logistics system for commercial returns. The empirical findings, together with the theoretical framework constructed earlier, conducted to a further analysis on the chosen subject. Criteria for strategy choosing were further discussed and the adoption of the lean, agile and leagile concepts in the two electronic appliance retailers were studied. When choosing the proper strategies, the nature and features of the returns need to be carefully taken into account, including the market request predictability, product life cycle, and replenishment lead duration. When the product request is predictable, lean approach has to be implemented no matter if the lead duration is short or long. With the combination of unforeseeable requests and short lead time, agile supply chain is called to be executed due to its’ feature of very quick response. Where request is unforeseeable and lead duration is long, the leagile strategy is implemented into the supply chain. Based on the analysed Christopher's matrix for strategy choosing, agile supply chain is the most appropriate one for the products with a short life cycle and short replenishment lead duration, which features the analyzed commercial returns in the electronic industry. Nevertheless, from the study on the reverse supply chain
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activities carried out by Flanco and Altex, a leagile reverse supply chain is more likely to be applied in practice, since it enables the retailing companies to diminish unnecessary transportation costs meanwhile it achieves quick receptiveness to the clients' requests, and eventually to realize and keep the efficiency and effectiveness of the whole supply chain. References Alvarez-Gil, M. J., Berrone, P., Husillos, J., & Lado, N. (2007). Reverse logistics, stakeholders' influence, organizational slack,and manager's posture. Jounal of Business Research, 60, pp. 463-473. Ballou, R. H. (2004). Business Logistics/Supply Chain Management (5th ed.). Pearson Prentice Hall. Banomyong R., Veerakachen, V., & Supatn, N. (2008, February). Implementing leagility in reverse logistics channels. International Jounal of Logistics: Reserach and Applications, Vol.11 (No.l), pp. 31-47. Blackburn, J., Guide, V., Souza, G., & van Wassenhove, L. (2004). Reverse Supply Chains for Commercial Returns. California Management Review, 46 (2), pp. 6-22. Christopher, M., & Towill, D. (2000). Supply Chain Migration from Lean and Functional to Agile and Customized. International Journal of Supply Chain Management, 5 (4), pp. 206-213. Christopher, M., & Towill, D. (2002). Developing market specific supply chain strategies. International Journal of Logistics Management, 13 (1), pp. 1-14. Christopher, M., Peck, H., & Towill, D. (2006). A Taxonomy for Selecting Global Supply Chain Strategies. International Journal of Logistics Management, 17 (2), pp. 277-287. Fisher, M. (1997). What is the right supply chain for your product? Harward
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Business Review, March/April, pp. 105116. Harrison, A., & van Hoek, R. (2008). Logistics Management and Strategy Competing through the supply chain (3rd ed.). Harlow: Pearson Education Limited. Herrin, R. (2010). The Politics of Forecasting. The Journal of Business Forecasting , pp. 18-19. Jacobs, F., & Chase, R. B. (2008). Operations and Supply Management The core. New York: McGraw-Hill/Irwin. Johnson, P. (1998). Managing value in reverse logitics systems. Transportation Research Part E: Logistics and Transportation Review, 34 (3), 217-227. Lee, H. (2002). Aligning supply chain strategies with product uncertainties. California Management Review, 44 (3), pp. 105-119. Liana, J. (2012, 03 13). Reverse supply chain in Flanco. Mihai, H. (2012, 03 20). Reverse supply chain in Altex. Oliver, N., Delbridge, R., & Lowe, J. (1993). World Class Manufacturing: Further Evidence from the Lean Prodction Debate. Oxford: Blackwell. RLEC. (2005). Retrieved March 4, 2012, from Reverse Logistics Executive Council: http://rlec.org/index.html Robson, C. (2002). Real World Research (2nd ed.). Oxford: Blackwell. Wikner, J., & Tang, O. (2008). A structural framework for closed-loop supply chains. The International Jounal of Logistics Management, Vol.19 (No.3), pp. 344-366. Womack, J., & Jones, D. (1996). Lean Thinking: Banish Waste and Create Wealth in Your Corporation (1st ed.). New York: Simon and Schuster. Womack, J., & Jones, D. (2003). Lean Thinking: Banish Waste and Create Wealth in Your Corporation. Sydney: Simon & Schuster
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