Characterization of Reverse Logistics Networks for Outsourcing Decisions
Strategic decisions about reverse logistics (RL) are complicated by the uncertainty of product returns. To aid firms in deciding whether to outsource RL activities, a characterization of RL networks according to two critical factors is proposed. These factors are the length of the product life cycle, which affects variability of expected returns over time, and the uncertainty of the rate of returns in each time period. Even if changes in the average return rate according to the life cycle are well understood, the variability in returns relative to the known average differs significantly depending on the product characteristics, as well as the length of each stage in its life cycle. Some of the most important RL networks in the U.S. market are classified in the proposed categories. Finally, as a first step in outsourcing decisions, several Third Party Reverse Logistics Providers that actually offer their services in some of the proposed categories are described.