Accepted Manuscript

Business orientation policy and process analysis evaluation for establishing third party
providers of reverse logistics services

Yongbo Li, Devika Kannan, Kiran Garg, Seema Gupta, P.C. Jha

PII: S0959-6526(17)33235-3
DOI: 10.1016/j.jclepro.2017.12.241
Reference: JCLP 11636

To appear in: Journal of Cleaner Production

Received Date: 19 February 2017

Revised Date: 14 December 2017
Accepted Date: 28 December 2017

Please cite this article as: Li Y, Kannan D, Garg K, Gupta S, Jha PC, Business orientation policy and
process analysis evaluation for establishing third party providers of reverse logistics services, Journal of
Cleaner Production (2018), doi: 10.1016/j.jclepro.2017.12.241.

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 ACCEPTED MANUSCRIPT
Business Orientation Policy and Process Analysis Evaluation for Establishing
Third Party Providers of Reverse Logistics Services

Yongbo Li1 Devika Kannan2* Kiran Garg3 Seema Gupta4 P.C.Jha3

1
School of Economics and Management, China University of Petroleum（east
China）, Qingdao, 266580, P. R. China

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2
Center for Sustainable Supply Chain Engineering, Department of Technology and
Innovation, University of Southern Denmark, Odense M, Denmark
3
Department of Operational Research, University of Delhi, Delhi

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4
Bhavan’s Usha & Lakshmi Mittal Institute of Management, K. G. Marg, New Delhi
*- corresponding author ([email protected])

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ABSTRACT

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The degradation of the environment, caused in part by end of life and end of used
products, necessitates the set-up of recovery networks. These networks may be owned
by the manufacturer or they can be outsourced to third parties. Most manufacturers
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prefer outsourcing, so this study proposes a benchmarked recovery process for third
party reverse logistics providers (3PRLP) by evaluating design criteria,
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implementation criteria, process control characteristics, and business orientation

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policies. Expertise efficiency of third party providers dictates their competitiveness

and/or survival. In an effort to help third parties enhance value recovery from the
process in the market, this paper seeks to establish a meaningful benchmark that will
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dictate best practices through quality function deployment (QFD). In particular, the
paper offers a theoretical background to measure the relative importance among the
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various types of criteria. The proposed technique also helps to establish guidelines by
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which to prioritize the various characteristics. This study finds that the main driving
factor regarding waste management centers on mandatory laws. It also concludes that
when government relaxes its policies, environmentally oriented businesses are able to
strengthen their systems.

Keywords: third party reverse logistics providers (3PRLP),

Benchmarking, Quality Function Deployment (QFD)
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1. INTRODUCTION

A couple of decades ago, supply chains used logistics to operate a range of activities, from
the purchasing of unprocessed raw material to the handing off of finished goods to their
ultimate customers. With increases in technological innovations, living standards, and
economic stability, however, a great influx of products now rapidly stream at the supply
chain end. This range of products has resulted in an obsolescence of many products in use or

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on shelves (Blumberg, 1999). Thus, a new stream is added to the traditional supply chain;
that new stream consists of returned products. Traditionally, returns are classified into three
kinds (de Brito and Dekker, 2004): manufacturing returns, distribution returns, and consumer

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returns. Manufacturing returns may be due to leftover raw material in the form of by-products
or to products that fail quality control. Distribution returns may occur because of product

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recall, commercial return, stock adjustment, and so on. Manufacturing and distribution
returns are sent for reengineering at manufacturing facilities. Customer returns consist of

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products returned under a guaranteed reimbursement period, a warranty period due to
dissatisfaction or due to the faulty functioning of a product. With these returns, customers
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benefit from the replacement policy of the business; they get their money back or a new
product as replacement. Customer returns re-enter the network for resale, either in “as is”
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condition or after a little rework.

The world today has a surplus of products that are no longer in use and can be considered
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at the end of life stage (Tavana et al., 2016, Prakash and Barua, 2016)and they have been
dumped into landfills, causing irreversible harm to the earth’s atmosphere and its inhabitants.
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Environmentalists and social activists pressure governments to compel manufacturing firms

to take account of returned products (Fleischmann et al., 2000;Dowlatshahi, 2000; Pokhral
and Mutha, 2009, Govindan et al., 2015).Unfortunately, the amount of surplus products
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occurs in every industry and continues to increase. The arrival rate of unused, end of life
returns increases faster than the rate of environmentally safe disposition.), which results in an
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excessive inventory of returned products. The significant cost of processing returned

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products, coupled with a lack of consumer confidence in recovery activities, requires

organizations to consider these returns as detrimental to their ability to secure a profit (Sarkis
et al., 1998;Meade and Sarkis, 2002;Klausner and Hendrickson, 2000; Kumar and Putnam,
2008).In 1992,Stock pointed out the use of Reverse Logistics (RL) as a means by which
returns might be handled more efficiently and effectively. RL was first defined by the
Council of Logistics Management (CLM) as “the role of logistics in recycling, waste
disposal, and management of hazardous materials; a broader perspective includes all
relating to logistics activities carried out in source reduction, recycling, substitution, reuse of
materials and disposal.” In this logistics system, products move in the reverse direction
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towards the manufacturers through a value recovery network(Rengel and Seydl, 2002). The
requirements of RL are complex and quite different from its forward logistics counterpart,
due to the underlying uncertainty in the amount collected and the remaining value in the
returns (Fleischmann et al., 1997;Prahinski and Kocabasoglu, 2006).
One of the central decisions that must be made with reverse logistics processes is the
choice of third party reverse logistics provider (3PRL). This choice influences financial,
technological, and operational investments in the recovery process (Sahay and Mohan, 2006;

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Zareinejad and Javanmard, 2013), so the selection of the most appropriate 3PRLP is of
utmost importance (American Shipper, 1993). Customer-to-business approach of 3PRL

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facilitates the particular outsourcing industry in fetching the good amount of business.
Moreover a benchmarked system has lot of opportunity in satisfying the service level of the

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company. The process of benchmarking in this paper requires determining basic RL standards
that must be evaluated for their impact on the enabling characteristics of the business
(Guarnieri et al., 2014) and on the basic control characteristics to select the most appropriate

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alternative. Because RL is industry specific, choosing the best 3PRLPwill depend on the size
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and type of industry it serves (Akdoğan and Coşkun, 2012).
This paper emphasizes the benchmarking of a 3PRLP’s recovery process by evaluating
basic design requirements to prioritize both implementation and process characteristics. For
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the benchmarking of the recovery process, we use analytic network process (ANP) integrated
Quality Function Deployment (QFD) decision method. ANP minimizes the impact of
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interdependence among the design and implementation characteristics. QFD is a

benchmarking technique which is more or less inclined towards customer requirements that is
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used in the design of products/services for a massive population (Haq and Boddu, 2014). The
integrated methodology determines total relative importance weights of implementation
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characteristics with respect to design requirements. The weights obtained are used to
determine the importance weights of process characteristics using QFD, and they are ranked
to reveal policy alternatives using TOPSIS (Technique of Order Preference by Similarity to
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Ideal Solution). The novelty of this paper lies in its collection of various characteristics that
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have been not unified in any previous study. They were chosen from extant literature reviews
through a search strategy based on relevant keyword selection. The rest of the paper is
divided as follows. A literature review is presented in section II, the problem definition and
its assessment are given in section III, a brief description of the solution methodology occurs
in section IV, a numerical illustration of the problem is established in section V, and the
resulting discussion and concluding remarks are given in sections V1 and VII, respectively.

2. LITERATURE REVIEW
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RL has attracted not only industrial practitioners but also academic research over last two
decades (Dekker et al., 2014; Rubio et al., 2008). A growing number of articles related to its
application in the supply chain and in extended supply chains provide evidence for the
increased interest in RL (Vestrepen et al., 2007). Existing research in RL covers multiple
characteristics. In this section, we present a brief literature review of the research articles in
the context of this proposed research only. To clearly indicate the research gap and the
novelty of this paper, we categorize the relevant literature into the three following sections:

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(A) Reverse Logistics, (B) Third Party Reverse Logistics Providers, and (C) QFD and its
Application.

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(A) Reverse Logistics
Reverse Logistics generated its initial recognition in the 1990s. In 1992, Stock

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acknowledged Reverse Logistics as a topic of societal interest. Then,RL, its set-up, practices,
and underlying opportunities were explored by Stock (1998) and Rogers and Tibben-Lembke

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(1999). As the topic has evolved, it has become clear that a RL’s network design is driven by
number of characteristics, such as the type and size of an industry. Thierry et al. (1995)
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described the importance of product design in the context of remanufacturing, repairing,
refurbishing, cannibalization, and recycling for the efficient and cost effective design of RL.
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Lee et al. (2002)identified the following six factors for the successful realization of the RL
process: return merchandise authorization control; transportation control; facility and
equipment configuration; workflow management control; information system management;
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and communication channel management. Chen et al. (2007) described logistics process,
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repair, refurbishment, recycling, e-waste, aftermarket call centre support, reverse fulfilment,
and field service as important drivers of a successful RL. Researchers from a variety of
industries have demonstrated interest in applying RL to their fields, including to carpet
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industry (Biehl et al., 2007), bottling sector (González-Torre et al., 2004), paper industry
(Ravi and Shankar, 2006), packaging firms (González-Torre and Adenso-Diaz, 2006), cell
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phone industry (Rathore et al., 2011),pharmaceuticals industry (A Narayana et al., 2014), and
battery recycling (Wang et al., 2014).
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Many of these studies support the implementation of RL in business. Some competitive

advantages of establishing a RL network include efficient product return (Stock andMulki,
2009), sustainable competitiveness (Richey et al., 2004), reuse of parts (Jayaraman and Luo,
2007; Jim Wu and Cheng, 2006), and the strategic importance in achieving economic and
corporate social goals (Huang et al., 2012; Kannan et al., 2012a). Mathematical modelling
hasled to some real-life abstract applications, and these studies present a mathematical
application of RL in many ways. For instance, see the work of Salemaet al. (2007), Mutha
and Pokharel (2009), Sasikumar et al. (2010), Chabbane et al. (2012), Kannan et al. (2012b),
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Devika et al. (2014), and Alshamsi and Diabat (2015). RL can also efficiently utilize
resources as it reuses parts of returned products (Xiangru, 2008; Efendigil et al., 2008). In
summary, RL supports achieving the requirements of sustainable development (Prakash and
Barua, 2015).
Most of the RL literature resources cited above represents its characteristic requirements,
and its design, benefits, and application. A second topic, however, focuses on the
complexities of integrating the RL network into the existing supply chains. Other researchers

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discuss some of the difficulties organizations may face. For instance, a business may be
incapable of handling returned products due to vagueness in the variety, quality, and quantity

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of the backward product stream. There may be a lack of competence in
disposition,uncertainty of demand for refurbished products, orno standard measurement of

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reverse logistics operations in place (Rosen, 2001;Krumwiede and Sheu, 2002;Skjott-Larsen
et al.,2007;Rogers and Tibben-Lembke, 2011).Thus, a number of researchers talk about
hiring of reverse logistic services from their third party providers (Efendigil et al., 2008; Min

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and Ko, 2008; Kannan et al., 2011; Liu and Lyons, 2011; Govindan et al., 2012; Bai and
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Sarkis, 2013; Anttonen et al., 2013;Guarniere et al., 2015; Prakash and Barua, 2016).

(B) Third Party Reverse Logistics Provider

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Effective management of returned products helps to satisfy customers more and increases the
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service level of company. However, integrating RL within the existing forward supply chain
does require lots of resources, modifications, and adjustments, an adequate infrastructure,
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advance information tools, and value added services in the network. Hence, many researchers
suggest outsourcing the recovery process from their third party providers. Outsourcing some
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or all RL operations from third party providers may benefit the company in reducing cost,
enhancing efficiency and performance, and greening the supply chain (Krumwiede and Sheu,
2002;Efendigil et al.,2008; Anttonen et al., 2013;McCarthy et al., 2013).
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A firm may outsource either a few elements or the whole recovery process depending on
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the requirements of value recovery. Third partiesmay specialize in one or more operations of
the RL process, such as dismantling, refurbishing, remanufacturing, and/or recycling
(Rogersand Tibben-Lembke, 1998).Regarding the collection of returned products, Barker and
Zabinsky (2008) describe utilizing a centralized collection and inspection site followed by
reprocessing at an outsourced facility due to lack of resources. Product recovery in the
electrical and electronic industry is most often focused on recycling due to the high rate of
technological obsolescence of refurbished products and constituent parts (White et al., 2003;
Walther et al., 2010). Electrical and electronic firms would prefer to outsource from
recycling-oriented third party logistics service providers (Lee et al., 2007). Moreover, a
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3PRLP needs to have flexible capacity of storage, processing, and transportation; they require
a different infrastructure with customized information tools to scrutinize the return process.
Suyabatmaz et al. (2014) showed the strategic importance of outsourcing RL activities from a
third party, and they presented a network design for 3PL under a supply uncertainty of
returns.
A 3PRLP may play a crucial role in a producer’s success due to the increasing
contribution of contracted allies (Hsu et al., 2013; Prakash and Barua, 2016). Seeing the

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strategic importance of outsourcing third parties for the RL process, Prakash and Barua
(2016) described that a good coordination with partners and the reliability of partners is very

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important. Thus, a wrong selection of an outsourcing company may lead to irreparable
damage (Gay and Essinger, 2000). Especially, in case of RL, the selection of the third party is

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a cumbersome task due to the individualized requirements of every firm (Prakash and Barua,
2016); the corresponding third party may not have a good business opportunity. This situation
requires a 3PRLP to be flexible enough to manage multiple criteria and the conflicting

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objectives of RL. Hence, a benchmarking framework is essential to establish a good
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coordination, and to enhance the trustworthiness of the partners (Joshi and Shankar, 2011).
Existing literature sources have a good number of studies that evaluate various decision
making modelsfor the selection of a third party (Meade and Sarkis, 2002; Hui and Yu, 2004;
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Min and Tao, 2006; Ronggang and Masu, 2008;Guangwei et al., 2010; Suyabatmaz et al.,
2014, Senthil et al., 2014, Kannan, 2015). However, no study pursues the critical
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requirements of a third party reverse logistics provider with respect to implementation

requirements. The novelty of the paper lies in establishing the benchmarking process for a
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company interested in establishing a third party that offers recovery process operations. This
study evaluates the basic design requirements to prioritize the implementation characteristics
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and then the process characteristics.

(C) Quality Function Deployment (QFD) and its application

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QFD was developed by Yoji Akao of Tokyo in 1966; it was first implemented at the Kobe
Shipyard of Mitsubishi in 1972. Later on, this technique was take on by some of the Japanese
firms such as Toyota. It recognizes the correlations between the customer requirements (CR)
and the design requirements (DR) of a product. Akao, in 1972 at Mitsubishi’s Kobe shipyard
site, defined QFD as “a method for developing a design quality aimed at satisfying the
customer and then translating the customer’s demands into design targets and major quality
assurance points to be used throughout the production phase.” Chan and Wu (2002) and
Sharma et al. (2008) presented QFD as a technique of translating customer needs into a
product’s technical requirements; these researchers recognize that new products and services
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must go through various stages of planning. Carnevalli and Paulo Miguel (2008) analysed
and reviewed the literature based on QFD, then Xu et al. (2010) reviewed the literature of
QFD published between 2005 and 2009 to exhibit a detailed view of the technique. Sharma et
al. (2008) presented an extensive review of QFD-based literature and categorised its
functional areas which include product development, quality management systems,
construction, food and cost, environmental studies and decision making. Thus, besides the
classical QFD approaches, QFD is a useful tool in supply chains because it combines the

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different issues that pertain to stakeholder requirements. Büyüközkan and Berkol (2011)
applied the integrated QFD approach to establish the effectiveness of various design

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requirements central to sustainable supply chains. Noorul Haq and Boddu (2014) used AHP
and a TOPSIS- integrated QFD approach to recognize market enablers for implementation.

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Their study lacks of a sound scientific basis; users may be motivated to integrate it with some
other techniques that can more consistently provide values for the weight of CR, DR, and
entries in the correlation matrix.

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Many researchers integrate QFD with existing multi-criteria decision making techniques
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such as Analytical Hierarchy Process (AHP) (Presley et al., 2007; Georgiou et al, 2008;
NoorulHaq and Boddu, 2014), Analytical Network Process (ANP) (Agarwal et al,
2006;Büyüközkanet al., 2004; Georgiou et al, 2008; Büyüközkan and Berkol, 2011),
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Technique of Order Preference by Similarity to Ideal Solution (TOPSIS) (Hoq and Boddu,
2014). Other researchers explore the performance measurements of RL networks (Xiong and
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Li, 2010; Huang et al., 2011 and 2012; Shaik and Kader, 2014). No researchers have worked
on a correlation between the design requirements and the implementation-enabling
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requirements of a reverse logistics process for third parties. In this study, we attempt to
organize the implementing enablers based on the design requirements of the 3PRLP. We use
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an integrated ANP and QFD approach to prioritize the implementation enablers by

considering the interrelationships among them as well as their relationship with the
interrelated design requirements of the 3PRLP. Next, this study prioritizes the process
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control criteria with the help of relative importance weights of implementation criteria and
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then ranks the business orientation policies for the cross-functional development of the
business.
The findings of the paper help in developing targets, understanding priorities and goals
through the establishment process of 3PRLP, and allowing enterprises to compare their
design layout with that of their competitors.

III Research framework for 3PRLP Benchmarking

a) Problem Definition
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The requirements of reverse logistics are complicated and need different forms of
information sharing and technical expertise from high-level management personnel. Many
manufacturers prefer to solicit the higher RL services from their third party outsourcing
enterprises. It is essential for these third party providers to be focused on the system’s
requirements and to manage the implementation characteristics of reverse logistics. In other
words, to capture the underlying opportunities, third party providers must efficiently evaluate
a system’s design requirements so that implementation enablers, process control

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characteristics, and orientation policies can be effectively prioritized. There are a number of
issues and processes that are taken care of by third parties while engaging in the business of

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RL services outsourcing. Krumwiede and Sheu (2002) identified six steps a 3PRLP takes to
determine the current and future potential of their business, despite the awareness that the

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recovery process very much depends on the company and industry it attempts to serve. The
3PRLP must establish a decision model that is feasible enough to implement reverse logistics
and to help them to generate a market for their RL services. The main problem faced by a

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third party is to determine the customer’s requirements and business strategies that would
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help establish a benchmarked system in general. In other words, they need to establish a
benchmarked system for their process along with selecting the best strategically-oriented
policy for long term benefits.
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b) Theoretical framework of Criteria Selection

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Benchmarking of the recovery process for third party providers needs to assess the
customers’ basic requirements and the relative importance of implementation characteristics.
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Customer requirements are nothing but the requirements necessary to be incorporated in the
system design for its success. Implementation characteristics are the criteria that could be part
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of the system for the successful realization of the customer’s requirements, but they are not
necessarily of equal importance. The importance of these implementation characteristics
affects the process control characteristics, which, in turn, determines the performance of the
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system. Moreover, the system’s performance is based on external and internal measures.
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External measures take care of outside operations, while the internal measures deal with the
operations performed within the company. For the RL service provider, the former measures
are customer involvement and the suppliers’ and manufacturers’ commitment. Conversely,
the latter measures include returns and their material, costs of the recovery process, and the
effectiveness of recovery processes such as refurbishment, dismantling, and recycling (Olugu
and Wong, 2012).
In view of the above points for an effective and efficient set-up of a RL provider, we need
to determine design requirements. In order to implement these design requirements, we will
also need to determine implementation requirements, or, in other words, how a company can
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put all the design requirements into effect. This paper seeks to determine these two kinds of
requirements based on our review of extant literature, but there is a gap in the literature with
regard to an evaluation of these two kinds of requirements. To ascertain the requirements of
3PRLP, we did not follow any set of rules; instead, we adopted a general way of choosing the
two requirements. We identified common elements, contrasting contexts, and time horizons
driven by specific keywords (reverse logistics drivers, etc.)and logical requirements (effective
product recovery) of the study. To improve the competence of the service provider, process

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benchmarking is done by choosing various criteria for establishing a 3PRLP. This study aims
to develop a system to help the decision maker in the evaluation and selection of basic design

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requirements for a third party provider who meets RL services and the characteristics
necessary for their implementation of effective processes. Criteria for the establishment of

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3PRLP were segregated under basic design requirements of process, process implementation
characteristics, process control characteristics, and business orientation policies.

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c) List of Criteria segregated under different categories
Based on the corresponding extant literature, a search reveals that the various criteria are
divided into several categories. A study byMede (2002) describes the operational functions of
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a reverse logistics service provider. Akdogan and Coskun(2012) identify economic reasons,
legislations, and corporate citizenship as the three drivers of reverse logistics activities. The
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economic driver of reverse logistics can be further explored from several angles, including
the decreasing use of raw material, the decreasing amount of waste material, the reclamation
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of valuable spare parts, realizing opportunities in second hand markets, objectives for green
marketing, and other strategies for competitors. Aguezzoul (2014) reviewed 67 articles based
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on third party logistics (3PL) selection and derived 11 key criteria important to the selection
of a logistics provider. Some of these criteria are present in the criteria search for the current
study, since logistics is an integrated part of the reverse logistics process and 3PLs can easily
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extend their services to it. Moreover, the selection criteria already identified by previous
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authors have been established as basic requirements for the third party provider.
To fulfil the motive of this study, the criteria listed in Table 1are termed as customer
requirements (CR). CR takes into account the defined and undefined voice of the customer.
These CRs are identified by one or more approaches or by a combination of techniques such
as surveys, direct discussion or interviews, observation, questionnaires, collected field data,
focus groups, or market research. Next, the potential technical features, named
implementation characteristics (IC) and process control characteristics (PCC), are given in
Table 2 and Table 3, respectively. Criteria in Table 1 and Table 2 are related to the functions
performed at different stages of the reverse logistics process and third party provider’s
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support and service schemes. These criteria offer multiple perspectives and they
comprehensively represent the following five factors: reverse logistics management targets,
product life cycles, organizational performance, reverse logistics functions, and re-use
channels. These factors are briefly described by Mede (2002). Criteria in Table 1 and Table 2
also address the requirements mentioned by Li-min (2006), namelythe level of service,
alliances, corporate strength, experience, and price.
Criteria in Table 3 and Table 4 are general and important criteria for making strategic

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decisions. Table 3 are process control criteria, and Table 4 represents policy alternatives that
are helpful in deciding the business’ orientation and its potential in the market. Business

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orientation depends on the purpose of the services it provides, and it may involve several
dimensions, including market, production, employers, customers, competitors, or otherwise

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(http://smallbusiness.chron.com/business-orientation-24274.html). The decision maker
chooses on the basis of available resources and the evaluation results of the internal and
external parameters of the organization, and the decision maker’s choice also acts as a

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directional strategy that influences the stability, growth, and retrenchment of the organization.
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Table 1:Customer Requirements from 3PRLP
S. Customer Description References
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No. Requirement
1 Driving forces Government directives, environmental Boyson et al.(1999), Kannan (2009),
(CR1) certification to industries, extended Langley et al.(2009), Lynch (2000),
producer responsibility along with waste Stock et al.(1998), Olugu et al.(2011),
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management norms has a very important Sahu et al. (2013), Mangla et al.
role in the establishment of such third (2016).
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party logistics.
2 Re-engineering of Various RL operations such as recycling, Krumwiede et al. (2002),Hung Lau
customer returns reuse, and remanufacturing results in the and Wang(2009), Pigossoet al.(2010),
(CR2) renovation of returned products. Akdogan and Coskun(2012), Mangla
et al. (2016).
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3 Set-up of efficient To decrease the ambiguity in the collection Krumwiede et al. (2002), Mutha and
collection network of returned products, a network for the Pokhral (2009), Senthil et
(CR3) collection of returned products should be al.(2014),Wang et al.(2011).
efficient.
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4 Awareness among Environmental perceptions among end Olugu etal.(2011), Tsoulfas and
end users (CR4) customers and their knowledge about RL Pappis(2008), Rahman and
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process is a key factor for the industries to Subramanian(2012), Shaik and

initiate RL practices. Abdul-Kader(2014), Abdulrahman
et al. (2014), Mangla et al. (2016).
5 Value recovery An efficient RL network offers recovery of Seuring and Müller (2008),
(CR5) value from used products by selling Akdoğan(2012), De Brito et al.(2004),
refurbished and remanufactured products. Senthil et al.(2014), Mangla et al.
It also helps in acquiring recycled (2016).
material.
6 Technology Adoption and advancement of technology Lambert et al. (2011), Shaik and
expertise(CR6) in RL initiatives make the recovery Abdul-Kader (2012), Aguezzoul
process more efficient. (2014), Mangla et al. (2016).
7 Access to utilities Easy access to power, water, and gas is Krumwiede et al.(2002), Olugu et
(CR7) required during the reprocessing and helps al.(2011), Lambert et al. (2011).
in adopting the complex process of
recovery.
8 Access to Bill of It brings visibility to all levels of RL Schatteman (2003), Kannan (2009),
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Material (CR8) process and makes it easier to implement Schwartz (2000), Mangla et al. (2016).
an efficient recovery process.

9 Collaboration with Collaboration with supply chain associates Olugu et al.(2011),Lambert et al.
suppliers (CR9) may affect in the successful (2011),Rahman and Subramanian
implementation of recovery process. (2012),Mangla et al. (2016).

10 Efficient It will be crucial from the perspective of Kim et al. (2007), Koc et al.
disassembly attracting industries due to its critical role (2009),Turner(2012), Kang and Hong
process (CR10) in value recovery. (2012).
11 Demand from It increases the revenue generation and Akdoğan(2012), De Brito et. al.(2004),
secondary market incentivizes the reverse process. Saen (2011), Garg et al. (2015),

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(CR11) Govindan et al. (2016).

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Table 2: Implementation Characteristics
S. Engineering Description References
No. Requirement

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1 Govt. incentives (IC1) Various tax relaxations and financial De Brito et al.(2004), Kannan (2009),
support motivate industries to start Langley et al.(2009), Olugu et
with environmentally friendly al.(2011), Sahu et al. (2013), Mangla et
business practices. al. (2016), Govindan et al. (2016).

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2 Management The overall effort and initiatives Schatteman (2003), Olugu et al.(2011),
commitment (IC2) employed by the management of an Dowlatshahi (2005), Abdulrahman et
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organization for reverse logistics. al. (2014).

3 Technical/ Re- Re-engineering capability means the Turner(2012), Abdulrahman et al.

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engineering capabilities requisite technologies and their (2014), Mangla et al. (2016).
(IC3) application.
4 Value-added services Enhances the overall functionality. De Brito et al.(2004), Hung Lau and
(IC4) Wang (2009), Pigosso et al.
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(2010),Akdogan and Coskun(2012).

5 Customer involvement Helps to determine the level of Boyson et al. (1999),Kannan

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(IC5) customer intention, cooperation, and (2009),Lynch (2000),Olugu et

willingness of returning the unused al.(2011).
and/or end of life products.

6 Incentive-based returns The level of incentives paid for Mutha and Pokhral (2009), Senthil et
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(IC6) collecting the returns motivates the al.(2014).

third party to engage in returning
products. Incentives reduce the level
of uncertainty.
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7 Transportation Transportation is a big factor Krumwiede et al.(2002), Diabat et al.

management (IC7) contributing in the national gross (2013), Senthil et al.(2014), Garg et al.
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product for the most part of the (2015).

world. It accounts for operations
efficiency and service effectiveness.
8 Appropriate site This is a strategic and crucial Özcan et al. (2011), Amin and Zang
location (IC8) decision as it measures the level of (2013), Senthil et al.(2014), Govindan
efficient execution of the recovery et al. (2016).
process.
9 Information technology Measures the level of information Lambert et al. (2011), Shaik and
applications (IC9) used in developing the reverse Abdul-Kader (2012), Senthil et
logistics system. al.(2014).

10 Regulation towards Leads the organization to set a Hung Lau and Wang (2009), Chio et
waste management and standard of greening during the al.(2012), Akdoğan(2012), Olugu et
resource conservation optimization of its processes to al.(2011).
(IC10) reduce environmental impact.
11 Industry support (IC11) Industry should support the use of Akdoğan(2012), Hsu et al. (2013),
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and demand for RL products. Prakash and Barua (2016).
12 Assembly process Quality of assembled parts and Altekin et al. (2008), Ege et al. (2009),
quality (IC12) modules helps in disassembly Turner(2012), Ozceylan et al. (2015).
process in reverse chain. A well-
assembled product makes recovery
process much easier.
13 Disassembly line Cost effectiveness of 3PRL Kang and Hong (2012), Turner(2012),
balancing (IC13) operations requires well-functioning, Olugu etal. (2011), Senthil et al.(2014).
balanced disassembly line to
separate usable and valuable parts
from the returned products.
14 Quality of raw material Quality of raw material increases the Kannan (2009), Hung Lau and

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in manufacturing profit share in recovery process and Wang(2009), Lambert et al. (2011),
process (IC14) brings more visibility to the recovery Seuring and Müller(2008),Akdogan
process. andCoskun(2012).
15 Market share/ The establishment of a new business De Brito et al.(2004), Knemeyer et al.

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competitiveness (IC15) should be feasible so that it can be (2002), Subramoniam et al. (2009),
sustained for a long time. Chio et al. (2012), Giannetti et al.
(2013), Mangla et al. (2016).

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Table 3: Process Control Characteristics

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S. Process Planning Description References
No. Requirement
AN
1 Adoption of Public policies help in complying with Akdoğan(2012), Olugu et al.(2011),
public policies government rules and regulations and Boyson et al.(1999), Kannan (2009),
increase the trust of customers in the Langley et al.(2009), Lynch (2000), Stock
company. et al.(1998), Sahu et al. (2013).
2 Level of technical Strong technical processes fulfil the Lambert et al. (2011), Shaik and
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specifications service level assured by the company Abdul-Kader (2012), Aguezzoul (2014),
and require a good amount of Mangla et al. (2016).
investment in the process.
3 Level of non- This measures the composition and Olugu et al.(2011).
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technical effect of the materials in the returned

specifications products.
4 Operational Operational specified process leads to a Olugu et al.(2011).
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specifications recovery process where recycling,

remanufacturing, and reprocessing
preferably overtake the process.
5 Managerial Determines the proper execution of Schatteman(2003),
specifications business policies, balancing all aspects Olugu et al.(2011).
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of doing business
6 Manufacturing This type of business needs to force Akdoğan (2012), Hsu et al. (2013),
specifications manufacturers to use reusable parts and Prakash and Barua (2016).
materials with a specified assembly
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process.
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.
Table 4: Policy Alternatives
S. No. Policy Alternatives
1 Industry Oriented
2 Competition Oriented
3 Customer Oriented
4 R & D Oriented
5 Environmentally Oriented

d) Methodology Selection
The motive of paper is to establish a framework for establishing a 3PRLP which could
fulfil the requirements of specified industry while considering the importance of
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implementation and process characteristics. To successfully achieve the objective of this
paper, we have adopted a benchmarking technique called Quality Function Deployment
(QFD). QFD is a cross-functional quality management technique that systematically deals
with customer needs and their expectations (Dikmen et al., 2005).
This decision framework model selected integrates an analytic network process (ANP)
with QFD technique to establish the importance of Implementation Characteristics (ICs) with
respect to Customer Requirements (CRs). ANP take cares of the inner and interdependencies

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during pair-wise comparisons among different factors, and the QFD process builds a ‘house
of quality’ (HOQ). This HOQ translates CRs into ICs by evaluating the importance of ICs

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with regard to CRs and subsequently arranging them in the organizational function’s
decision-making process to satisfy customer needs (Lam and Lai, 2014). HOQ identifies the

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level of importance of ICs (the “how”s), which are derived by the relative important weights
of the CRs (the “what”s) and relative importance between CRs and ICs. Thus, a traditional
QFD, modified using the ANP method, provides aggregated weights of customer

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requirements, implementation characteristics, and a correlation matrix in the house of quality
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(HOQ) where weights of CRs and ICs are calculated by the ANP technique. Then, the
weights of ICs were used to calculate the relative importance of PCC by building HOQ for
the next stage. The normalized relative important weights of PCC were used in ranking the
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business orientation policy alternatives using TOPSIS. TOPSIS identifies the best alternative,
the top priority, by identifying the solution closest to the positive ideal solution and farthest
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from the negative ideal solution. The remaining alternatives are arranged in order of their
distance from positive and negative ideal solutions. Thus, TOPSIS reduces the subjectivity in
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decision making by using the normalized weights and distance measures. We prefer TOPSIS
over other MCDM techniques such as ELECTRE or multi-objective techniques. Figure 1
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represents a schematic representation of the methodology network.

C
AC
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Goal: Establishing
Effective and efficient
system for 3PRLP

Importance

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of CRs ANP: No inter dependence

ANP: Inter dependence

HOQ 1

RI
Importance
of ICs
ANP: Inter dependence

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HOQ 2
Importance
of PCCs

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Ranking of orientation
alternatives
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Fig. 1: Schematic representation of solution methodology

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IV Solution Methodology: Application Procedure

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To successfully establish a third party reverse logistics provider organization for an industry,
this paper develops a research framework that uses as elected ANP-integrated QFD and
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QFD-integrated TOPSIS methodology. Initial decisions include the customer requirements

(CR), the set of implementation characteristics (IC), the process control characteristics
(PCC), and business orientation alternatives which may act as potential factors required to
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meet CRs. The brief description of step-wise procedure for the same is described as follows:
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1. First choose a group of specialist and ask them to use 1-9 scale to establish pair-wise
comparison matrices (Saaty, 1994) as follows: Let A represents an n × n pair-wise
comparison matrix.

‘1’ at diagonal places represent the comparison of criteria with itself only, and the
‘aij’ on the left and right sides of the diagonal element represent the relative
importance of the ith element when compared to the jth element.
aij = 1 , where aij > 0, i ≠ j
a ji
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2. After establishing the pair-wise comparison matrices by aggregating the experts’
weights, check the consistency of matrix ‘A’ as follows:
(i) Calculate the degree of importance of attributes by normalizing the geometric mean
and represent the column vector as W=[wi], where wi represents the degree of
importance of ith criteria and
n 1/ n
( ∏ j =1 aij )
w = n
i
∀i, j = 1, 2, .., n
n 1/ n

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∑ ( ∏ j =1 aij )
i =1 (1)
(ii) Conduct a consistency check of each pair wise comparison matrices, using the column

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vector C, where C=A.WT (2)
‘C’ represents the weighted degree of importance of each criterion. Obtain consistency

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values λi = ci / wi ∀i = 1, 2, .., n

n
∑ λi
Maximal Eigen value λmax ; λmax = i =1

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∀i = 1, 2, ..., n (3)
n
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Calculate consistency index, CI= ( λmax -n) / (n-1). (4)

Calculate consistency ratio, CR=CI/RI, (5)

Where, RI is the average random index. The value of RI depends on the order of the
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matrices (Saaty, 1980). If CR < 0.1, then matrix is consistent and acceptable; if not,
specialists have to reassess their estimation.
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3. Determine column Eigen vector W1 of CRs w.r.t CRs assuming no interdependence

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among CRs. Establish pair-wise comparison decision matrices for CRs as explained
in step 2 and further proceed as explained in step 4.
4. Determine column Eigen vector W2 of ICs w.r.t CRs. Identify the correlations
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between IC criteria and CR criteria and establish pair-wise comparison decision

matrices are conducted similar to step 2 and further proceed as explained in step 5.
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5. Determine inner dependence matrix W3 of CRs w.r.t CRs. Identify the inner relations
among CRs with respect to each CR. Establish pair-wise comparison decision matrix
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as explained in step 2 and further proceed as explained in step 6.

6. Determine inner dependence matrix W4 of ICs w.r.t ICs. Identify the inner relations
among ICs with respect to each IC. Establish pair-wise comparison decision matrix as
explained in step 2 and further proceed as explained in step 7.
7. Form the super matrix of the QFD model as follows:

0 0 0 
 
W =  W1 W3 0 
0 W2 W4 

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8. Calculate the inter-dependent weight vector WC of CRs by using the formula
Wc = W1 ×W3
9. Calculate the inter-dependent weight vector WA of ICs by using the formula
WA = W2 ×W4
10. Determine overall priorities of the ICs WANP vector is calculated which reflects the
interrelationship within HOQ by the formula WANP = WA × Wc

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11. Build House of Quality as follows (see Fig. 2).

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AN
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Fig. 2: House of Quality

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12. The ratings of HOWs (DRs) in the HOQ indicates the degree to which HOWs are
related to all WHATs (CRs). These HOWS will act as WHATs in the second phase of
QFD. These new WHATs translate the implementation characteristics into process
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control characteristics (HOWs) using another HOQ.

13. Establish a relationship matrix B= [bij]mxn, between ‘m’ implementation characteristics
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and ‘n’ process control characteristics using a scale of 1=weak, 3=medium,

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5=relatively important, 7=important, and 9=strongly important. Scores are to be

decided by the team of experts chosen earlier to form the following relationship
matrix:
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14. Calculate the relative importance of process control characteristics using simple
m
additive weighting formula pi = ∑ f j *r ji ; i = 1, ...n , where f are the weights of
j =1 j

implementation characteristics calculated in step 12.

15. Collect data for the decision matrix B=[bij]pxn, where bij represents the percentage of
resource allocation to jth PCC for ith alternative orientation policy. These values are to
be decided after discussions with the team of experts.

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16. Determine the weighted normalized decision matrix V=[vij]pxn; using the following
formula: vij = bij * p j , p j is the weight of jth PCC and ∑ pj =1.

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j

17. Calculate positive ideal solution (PIS) and negative ideal solution (NIS) using the

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weighted normalized decision matrix:
+ + +
∆ = {v1 ,..., vn } = {(max vij | i ∈ I ), (min vij | i ∈ I )}
' "
j j
−

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− −
∆ = {v1 ,..., vn } = {(min vij | i ∈ I ), (max vij | i ∈ I )}
' "
j j
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' "
I associated with benefit criteria and I is associated with cost criteria of the
sustainability requirements of vij.
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18. Calculate the separation distance for each competitive alternative from PIS and NIS
respectively using Euclidean distance method as:
+ + 2
D j = ∑ in=1 ( vij − vi ) , j = 1, 2, ..., J
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− 2
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−
D j = ∑ in=1 ( vij − vi ) , j = 1, 2, ..., J

19. Calculate the relative closeness to the ideal solution for each alternative. The relative
closeness of jth alternative w.r.t ∆ + is as follows:
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+
Dj
*
Cj = + −, j = 1, 2,.., J
Dj + Dj
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20. Rank the preference order of competitive alternatives by ranking their relative
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closeness to the ideal solution in order of greatest value of relative closeness.

V Numerical Validation of Approach

The electronic & electric equipment manufacturing industry assumes a substantial returns rate
due to newly implemented return policies in distribution and e-retailing. If a company’s
return rate is low (4-5%), then a company targeting Rs. 20000cr business would expect Rs.
800-1000cr worth of returned goods. These returned goods cannot be simply discarded;
instead, they need to be handled carefully so that the company may benefit from them.
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Benefit can be in the form of profit generation, enhancement of customer relationships, or
compliance with green movement. But reclaiming the products’ remaining value, through an
environmentally safe disposition, is likely the best solution. The rapidly increasing size of
industry forces original equipment manufacturers (OEMs) to think about outsourcing such
services from their third party providers. Hence, a company like the Reverse Logistics
Company (RLC) may be selected to repair, restore, refurbish, and dispose these products
before a new home is found for them. The establishment of a benchmarked 3PRLP could be a

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great opportunity as a business. This section of the paper tries to validate the approach of the
current study based on data collected from top managers of companies in Delhi and NCR that

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are involved in the manufacturing of various electrical and electronic equipment.
A team of experts from the selected companies is formed to collect the data required.

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These experts are directing managers of finance, HR, logistics, operations, marketing,
Information technology, or public relations departments of the selected manufacturing firms.
Each of them was asked to complete the required pair-wise decision matrices provided to

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them using the scales standard for the procedure. The relative importance of the CRs is
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determined by asking the following question to each expert: ‘Which CR should be
emphasized more in designing an efficient & effective reverse logistics process, and how
much more with the assumption that there is no dependence among the CRs?.’ Their
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aggregate scores were used for final calculation. A final pair-wise comparison decision
matrix was used to determine W1 as presented in Table 5.1.The last column of Table 5.1 is
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placed in the last column of HOQ1 in Fig. 3.

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Table 5.1: Pair-Wise comparison decision matrix between CRs assuming no interdependence
W1 CR1 CR2 CR3 CR4 CR5 CR6 CR7 CR8 CR9 CR10 CR11 W1
CR1 1 3 2 2 5 4 2 4 4 4 5 0.203
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CR2 0.33 1 0.33 0.25 2 2 0.2 2 4 2 5 0.072

CR3 0.5 3 1 0.25 3 3 2 3 6 2 5 0.131
CR4 0.5 4 4 1 5 5 2 4 6 2 7 0.200
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CR5 0.2 0.5 0.33 0.2 1 2 0.17 0.33 5 0.13 3 0.038

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CR6 0.25 0.5 0.33 0.2 0.5 1 0.17 2 3 1 5 0.048

CR7 0.5 5 0.5 0.5 6 6 1 5 5 3 3 0.149
CR8 0.25 0.5 0.33 0.25 3 0.5 0.2 1 3 0.5 2 0.045
CR9 0.25 0.25 0.17 0.17 0.2 0.33 0.2 0.33 1 0.33 1 0.021
CR10 0.25 0.5 0.5 0.5 8 1 0.33 2 3 1 3 0.071
CR11 0.2 0.2 0.2 0.14 0.33 0.2 0.33 0.5 1 0.33 1 0.022
RIW: Relative Importance Weight

Moving ahead, the relationship among various implementation characteristics with respect to
each CR is decided by the team of experts; each of them was asked to fill 11 pair-wise
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comparison decision matrices to determine W2 corresponding to the correlated criteria of ICs
w.r.t CRs. One of them, presented in Table 5.2, corresponds to the first CR (namely, Driving
Forces). The absence of the remaining ICs in Table 5.2 is due to the lack of any relation
between them and driving forces. Then, for the remaining CRs the degree of relative
importance of the ICs are calculated in the same way and the matrix W2 obtained is presented
in Table 5.3. Cells corresponding to value ‘0’ represent no relation between the
corresponding IC and CR. Transposing the data shown in Table 5.3 is placed in the body of

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HOQ.

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Table 5.2: Relative importance of ICs w.r.t. to Driving Forces (CR1)
CR1 IC1 IC2 IC3 IC5 IC11 IC15 RIW

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IC1 1.00 0.25 2.00 0.33 4.00 0.17 0.093

IC2 4.00 1.00 2.00 0.33 5.00 0.50 0.185

IC3 0.50 0.50 1.00 0.33 2.00 0.33 0.083

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IC5 3.00 3.00 3.00 1.00 4.00 0.50 0.262
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IC11 0.25 0.20 0.50 0.25 1.00 0.33 0.048

IC15 6 2 3 2 3 1 0.329
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Table 5.3: Column Eigen Vectors of ICs w.r.t. to CRs

W2 CR1 CR2 CR3 CR4 CR5 CR6 CR7 CR8 CR9 CR10 CR11
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IC1 0.093 0.091 0 0 0.270 0 0.040 0 0 0.242 0

IC2 0.185 0 0 0 0 0 0.133 0 0.037 0 0
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IC3 0.083 0.342 0 0 0.042 0.165 0 0 0 0.180 0

IC4 0 0 0 0.418 0 0.056 0 0 0.268 0.319 0.303
IC5 0.262 0 0.122 0.269 0 0 0 0 0 0 0.093
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IC6 0 0 0 0.062 0 0 0 0 0 0 0.048

IC7 0 0 0.232 0 0 0 0.139 0 0.109 0 0
IC8 0 0 0.093 0 0 0 0.084 0 0 0.040 0.157
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IC9 0 0 0.203 0.145 0.185 0 0 0.517 0 0 0

IC10 0 0.037 0 0 0.030 0 0.260 0 0 0 0.400
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IC11 0.048 0.111 0.049 0 0 0.237 0.344 0 0.065 0 0

IC12 0 0.110 0 0 0.210 0.541 0 0.359 0 0.121 0
IC13 0 0.080 0 0 0.134 0 0 0 0.171 0.040 0
IC14 0 0.227 0 0 0.053 0 0 0.124 0.029 0 0
IC15 0.329 0 0.301 0.106 0.076 0 0 0 0.321 0.058 0

Then the inner dependence matrix among CRs with respect to each CR is decided by the team
of experts by establishing a pair-wise decision matrix. One of them, presented in Table 5.4,
corresponds to the first CR (namely, Driving Forces). The absence of the remaining CRs in
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Table 5.4 is due to that they do not have impact on the Driving Forces and are not included in
the comparison matrix.Then, for the remaining CRs the degree of relative importance of the
CRs is calculated in the same way and the inner dependence matrix W3 obtained is presented
in Table 5.5. The CRs that are independent are assigned zero value in the eigenvector
column. Similarly, the inner dependence matrix among ICs was calculated using pair-wise
comparison and depicted in Table 5.6.

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Table 5.4: Relative importance of CRs w.r.t. Driving Forces
CR1 CR2 CR4 CR5 CR7 CR8 CR11 RIW
CR1 1.00 3.00 2.00 5.00 2.00 4.00 5.00 0.280

RI
CR2 0.33 1.00 0.14 1.00 0.20 2.00 4.00 0.071
CR4 0.50 7.00 1.00 4.00 0.25 4.00 3.00 0.174
CR5 0.20 1.00 0.25 1.00 0.17 2.00 2.00 0.063
CR7 0.50 5.00 4.00 6.00 1.00 8.00 7.00 0.326

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CR8 0.25 0.50 0.25 0.50 0.13 1.00 4.00 0.052
CR11 0.20 0.25 0.33 0.50 0.14 0.25 1.00 0.032

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Table 5.5 Inner dependence matrix of CRs
W3 CR1 CR2 CR3 CR4 CR5 CR6 CR7 CR8 CR9 CR10 CR11
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CR1 0.28 0.00 0.00 0.00 0.00 0.19 0.07 0.03 0.27 0.00 0.17
CR2 0.07 0.33 0.00 0.00 0.15 0.20 0.00 0.12 0.08 0.07 0.00
CR3 0.00 0.04 0.45 0.00 0.00 0.00 0.35 0.00 0.00 0.00 0.08
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CR4 0.17 0.00 0.16 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.21
CR5 0.06 0.00 0.00 0.00 0.31 0.00 0.00 0.13 0.04 0.14 0.00
CR6 0.00 0.12 0.00 0.00 0.08 0.39 0.00 0.07 0.00 0.10 0.00
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CR7 0.33 0.00 0.26 0.00 0.25 0.16 0.18 0.00 0.19 0.05 0.00
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CR8 0.05 0.13 0.00 0.00 0.07 0.00 0.00 0.41 0.00 0.30 0.00
CR9 0.00 0.00 0.06 0.00 0.10 0.06 0.09 0.00 0.42 0.00 0.00
CR10 0.00 0.07 0.00 0.00 0.04 0.00 0.32 0.23 0.00 0.34 0.00
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CR11 0.03 0.31 0.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.55

Table 5.6 Inner dependence matrix of ICs

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W4 IC1 IC2 IC3 IC4 IC5 IC6 IC7 IC8 IC9 IC10 IC11 IC12 IC13 IC14 IC15

IC1 0.22 0.24 0 0 0.28 0.11 0.06 0.06 0 0 0 0 0.15 0.05 0

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IC2 0.18 0.06 0.24 0 0 0.08 0.12 0 0 0 0 0 0 0 0.28

IC3 0 0.21 0.32 0.31 0 0 0 0 0.11 0 0.05 0.05 0.04 0 0

IC4 0.11 0 0 0.06 0 0 0 0.18 0.04 0 0.19 0.13 0 0.18 0

IC5 0 0 0 0 0.24 0.04 0 0.1 0 0 0 0 0 0 0.15

IC6 0.07 0 0 0.02 0.2 0.27 0 0 0 0 0 0.04 0.07 0.07 0.07

IC7 0 0.18 0 0.1 0 0 0.36 0 0 0 0.3 0 0 0 0

IC8 0 0 0 0 0.05 0 0.09 0.34 0 0 0 0 0.08 0 0

IC9 0.05 0.03 0.06 0.1 0.09 0 0.37 0 0.32 0 0 0 0 0.28 0

IC10 0.03 0.08 0 0 0.07 0.17 0 0.32 0 1 0 0 0.06 0 0.12

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IC11 0.33 0.08 0 0.06 0 0.02 0 0 0.35 0 0.34 0.23 0 0 0.04

IC12 0 0.05 0.04 0.17 0 0 0 0 0 0 0.08 0.29 0.25 0 0

IC13 0 0 0.18 0.13 0 0 0 0 0 0 0 0.17 0.34 0 0.08

IC14 0 0 0.14 0.05 0 0.24 0 0 0 0 0 0 0 0.42 0

IC15 0 0.09 0 0 0.07 0.06 0 0 0.17 0 0.04 0.09 0 0 0.25

Then, the interdependent weight vectors WC of CRs are calculated using the equation from

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step 8 of the solution methodology and obtained as follows:

 0.087 
 0.065 
 

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 0.115 
 0.261 
 0.041 

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 
Wc =W3 ×W1 =  0.041 
 0.152 
 

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 0.062 
 0.037 
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 0.088 
 
 0.050 
WA = W4 ×W2
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Then, the interdependent priorities of the ICs, WA, are calculated as follows:
0.14 0.04 0.05 0.08 0.08 0.0 0.05 0.01 0.04 0.06 0.04
0.14 0.10 0.11 0.03 0.08 0.04 0.03 0.00 0.10 0.10 0.00
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0.07 0.12 0.03 0.15 0.05 0.11 0.04 0.08 0.10 0.16 0.09
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0.02 0.09 0.03 0.03 0.07 0.12 0.08 0.09 0.03 0.07 0.05
0.11 0.00 0.08 0.08 0.01 0.00 0.01 0.00 0.05 0.01 0.04
0.08 0.03 0.05 0.09 0.05 0.02 0.00 0.02 0.04 0.04 0.04
0.05 0.03 0.10 0.04 0.00 0.08 0.18 0.00 0.09 0.03 0.03
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0.01 0.01 0.06 0.01 0.01 0.00 0.04 0.00 0.02 0.02 0.06
0.04 0.09 0.16 0.11 0.09 0.02 0.06 0.20 0.08 0.05 0.04
0.08 0.05 0.08 0.04 0.06 0.00 0.30 0.00 0.05 0.03 0.46
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0.08 0.09 0.10 0.08 0.21 0.21 0.14 0.27 0.05 0.13 0.02
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0.02 0.08 0.00 0.07 0.10 0.19 0.04 0.10 0.10 0.11 0.05
0.04 0.11 0.03 0.06 0.10 0.13 0.00 0.06 0.12 0.11 0.04
0.01 0.15 0.00 0.04 0.03 0.03 0.00 0.05 0.03 0.04 0.03
0.12 0.01 0.12 0.08 0.07 0.06 0.03 0.12 0.09 0.03 0.01
Following that, overall priorities of the ICs (WANP) are obtained by multiplying WA and Wc.
The transpose of this vector is placed in the last row of HOQ 1in Fig. 3. These weights are
also used in evaluating the importance of PCCs.
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 DR1 
 DR 2 
 0.064   DR 3 
 0.063   
 0.096   DR 4 
 0.055  DR 5 

 0.048   DR 6 
 0.049   
 0.066   DR 7 
 
=  0.023  = DR 8
ANP
= W A × Wc
W
 0.093   

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 0.104   DR 9 

 0.115   DR10 
 0.064   DR11 
 0.060   

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 0.032   DR12 
   DR13 
 0.067   
 DR14 

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 
 DR15 
HOQ IC1 IC2 IC3 IC4 IC5 IC6 IC7 IC8 IC9 IC10 IC11 IC12 IC13 IC14 IC15 RIW of CRs

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CR1 0.093 0.185 0.083 0 0.261523 0 0 0 0 0 0.048 0 0 0 0.329 0.203
CR2 0.091 0 0.342 0 0 0 0 0 0 0.037 0.111 0.110 0.080 0.227 0 0.072
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CR3 0 0 0 0 0.122 0 0.232 0.093 0.203 0 0.049 0 0 0 0.301 0.131
CR4 0 0 0 0.418 0.269 0.062 0 0 0.145 0 0 0 0 0 0.106 0.200
CR5 0.27 0 0.042 0 0 0 0 0 0.185 0.030 0 0.210 0.134 0.053 0.076 0.038
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CR6 0 0 0.17 0.056 0 0 0 0 0 0 0.237 0.541 0 0 0 0.048

CR7 0.04 0.133 0 0 0 0 0.139 0.084 0 0.260 0.343998 0 0 0 0 0.149
CR8 0 0 0 0 0 0 0 0 0.517 0 0 0.359 0 0.124 0 0.04
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CR9 0 0.037 0 0.268 0 0 0.109 0 0 0 0.065 0 0.171 0.029 0.321 0.021

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CR10 0.242 0 0.180 0.319 0 0 0 0.040 0 0 0 0.121 0.040 0 0.058 0.071

CR11 0 0 0 0.303 0.093 0.048 0 0.157 0 0.400 0 0 0 0 0 0.022
Importance of ICs0.064 0.063 0.096 0.055 0.048 0.049 0.066 0.023 0.093 0.104 0.115 0.064 0.060 0.032 0.067
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Fig. 3: HOQ1 depicting the relationship between CRs and ICs

Weights obtained in HOQ1 indicate the degree to which ICs are related to CRs. To build
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the second phase of HOQ these ICs and their weights are used to translate the ICs into the
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importance of process control characteristics. For that a relationship matrix B= [bij]mxn,

between 15 implementation characteristics (IC) and 6 process control characteristics (PCC),
is established by aggregating the responses of 15 selected experts using the scale described in
step 13 of the solution methodology. The final matrix obtained is represented by Table 5.7.
The RIW of ICs in the second column of Table 5.7 is the vector WANP.
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Table 5.7: HOQ2 determining the correlation between ICs and PCCs
RIW of ICs PCC1 PCC2 PCC3 PCC4 PCC5 PCC6
IC1 0.064 9 5 5 3 1 5
IC2 0.063 7 5 5 7 9 5
IC3 0.096 3 9 5 9 3 9
IC4 0.055 5 7 7 7 3 9
IC5 0.048 3 3 7 3 9 7
IC6 0.049 1 5 5 7 5 7

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IC7 0.066 3 5 9 3 5 1
IC8 0.023 7 1 9 7 3 1
IC9 0.093 7 3 9 5 7 5

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IC10 0.104 9 5 3 7 1 7
IC11 0.115 7 7 3 7 9 7
IC12 0.064 5 7 1 9 3 9

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IC13 0.060 5 9 1 9 3 7
IC14 0.032 5 5 5 7 1 7
IC15 0.067 7 3 9 3 7 1

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To translate the ICs into the PCCs, the importance of PCCs to establish 3PRLP is determined
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using the correlation of HOQ2 as follows:

Importance of PCC1=
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0.064*9+0.03*7+0.096*3+0.055*5+0.048*3+0.049*1+0.066*3+0.023*7+0.093*7+0.104*9
+0.115*7+0.064*5+0.060*5+0.032*5+0.067*7=5.780105
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Similarly, the importance(s) of the remaining PCCs have been calculated. The corresponding
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importance vector is P = (5.780105, 5.584583, 5.264947, 6.27915, 4.82007, and 6.052238).

After calculating the importance of PCCs through two phases of QFD, five alternatives of
business orientation policies have been ranked through TOPSIS. To evaluate the order of the
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preferred alternatives, data collected for the five alternatives have been presented in Table
5.8. Table 5.8 represents the percentage of total budget allocated to each process control
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characteristics corresponding to each alternative. The budget division is given for the amount
to be invested in controlling the process of the third party provider.
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Table 5.8: Data of five alternatives with six PCC

Business Orientation Alternatives PCC1 PCC2 PCC3 PCC4 PCC5 PCC6
Industry oriented 0.1 0.15 0.1 0.3 0.2 0.15
Competition oriented 0.2 0.15 0.15 0.15 0.2 0.15
Customer oriented 0.15 0.25 0.1 0.25 0.15 0.1
R & D oriented 0.05 0.25 0.2 0.25 0.1 0.15
Environmentally oriented 0.3 0.25 0.1 0.15 0.1 0.1
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To determine the ranking of alternatives, the PCCs’ importance weighting vector is
normalized and the normalized weighting vector obtained is P*= (0.171086, 0.165299,
0.155838, 0.185791, 0.142846, 0.179141). This normalized weighting vector is multiplied in
Table 5.8 to get the normalized decision matrix represented in Table 5.9.

Table 5.9 Normalized Decision Matrix

Business Orientation Alternatives PP1 PP2 PP3 PP4 PP5 PP6

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Industry oriented 0.0171086 0.024795 0.015584 0.055737 0.028569 0.026871
Competition oriented 0.0342172 0.024795 0.023376 0.027869 0.028569 0.026871
Customer oriented 0.0256629 0.041325 0.015584 0.046448 0.021427 0.017914

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R & D oriented 0.0085543 0.041325 0.031168 0.046448 0.014285 0.026871
Environmentally oriented 0.05132579 0.041325 0.015584 0.027869 0.014285 0.017914

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The positive ideal solution (PIS) and negative ideal solution (NIS) vectors are obtained from
the Normalized Decision Matrix on the basis of cost and benefit factors (to be decided by the

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team of experts). These numbersare depictedinTable 5.10.
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Table 5.10: Positive Ideal solution (V+)and Negative Ideal Solution (V-)
V+ 0.05132579 0.041325 0.031168 0.055737 0.028569 0.026871
-
V 0.0085543 0.024795 0.015584 0.027869 0.014285 0.017914
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The separation distance vectors for each competitive alternative from PIS and NIS
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respectively using Euclidean distance method are as follows:

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Dj+=(0.041072, 0.037461, 0.033451, 0.046041, 0.036108)

Dj-=(0.033677, 0.031679, 0.031018, 0.030684, 0.045855)
Then these separation measures are used to determine the rank of alternatives as described in
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Step 19 and 20 of the solution methodology. The final table of relative closeness to ideal
solution and priority ranking is represented in Table 5.11.
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Table 5.11: Relative Closeness to Ideal Solution and Ranking

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Business Orientation Alternatives Cj* Rank

Industry oriented 0.45053193 4
Competition oriented 0.45818909 3
Customer oriented 0.48113243 2
R & D oriented 0.39992277 5
Environmentally oriented 0.55945661 1

VI Discussion of Results and Managerial Implications

Results obtained from the study are not subjective; the criteria used in the evaluation
process are selected from extant literature relevant to product recovery, third party providers,
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reverse logistics, and strategic business policies. Required data is collected by forming a team
of experts and the results obtained were discussed with them. The case study discussed above
came with a number of managerial insights, and it provided new managerial aspects to
establish joint outsourcing product recovery services. All results are anticipated to prove
effective and efficient for the industry.
At first, correlations among the CRs (Table1) are used to determine the importance of
each IC(Table2) in order to establish a third party RL services provider to a number of

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organizations. CRs are compared but any interdependence among them are ignored. The
relative importance weights vector (W1), obtained through AHP, suggests the following

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sequence in decreasing order of their importance: Driving forces, Awareness among end
users, Access to utilities, Set-up of efficient collection network, Re-engineering of

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customer returns, Access to utilities, Access to utilities, Set-up of efficient collection
network, Re-engineering of customer returns, Efficient disassembly process Technology
expertise, Access to bill of material, Value recovery, Demand from secondary market,

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Collaboration with suppliers. The relative importance weight vectors of the criteria are, in
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order, 0.203, 0.200, 0.149, 0.0131, 0.072, 0.071, 0.048, 0.045, 0.038, 0.022, and 0.021. The
above results show that set-up of such a network is driven by law instead of by customer
demand. In other words, it is an obligatory reaction to regulatory mandates; this kind of
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business comes into existence in order to comply with regulatory laws. The relative important
weight vector also indicates that the importance of laws and consumer awareness is 9-10
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times greater than the demand for refurbished products by consumers and suppliers. Experts
agree with these results and approve the study’s approach.
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The overall priorities of ICs (WANP) are given next. The degree to which implementation
characteristics are related to customer requirements is illustrated by the following decreasing
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order of characteristics, as follows: Industry support (IC11), Regulation towards waste

management and resource conservation (IC10),Technical/Re-engineering capabilities
(IC3), Information technology applications (IC9), Market share/competitiveness (IC15),
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Transportation management (IC7), Assembly process quality (IC12), Govt. incentives

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(IC1), Management commitment (IC2), Disassembly line balancing (IC13), Value-added

services (IC4), Incentive-based returns (IC6), Customer involvement (IC5), Quality of
raw material in manufacturing process (IC14), and Appropriate site location (IC8). This
result indicates that to fulfill the CRs of the system, support from the industry and a sensible
compilation of regulations are the two most important factors. If an industry is not ready and
obliged to commit to such a process, a third party cannot successfully implement it on its
own. Thus, we can state that the spirit of 3PRLP lies in the industry and policy makers’
discipline, and this statement seems particularly apt in the Indian scenario. The characteristics
that displayed the least importance during the implementation are site location for the
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business and the quality of raw material used during manufacturing. The corresponding
weight vector indicates that Market share/competitiveness (IC15), Transportation
management (IC7), Assembly process quality (IC12), and Govt. incentives (IC1) have almost
equal importance.
Moving ahead, the correlation between ICs and PCCs suggests that the recovery process
design of the 3PRLP should be largely controlled by the Operational specifications (PPC4) of
the reverse logistics and the Manufacturing specifications (PPC6). These two factors are

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followed by Adoption of public policies (PP1), Level of technical specifications (PP2), Level
of non-technical specifications (PP3), and Managerial requirements (PPC5). The importance

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orders of PPCs are well matched with the importance orders of CRs and ICs, because if
industry supports the establishment of a recovery process, then the Operational specifications

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of RL and the Manufacturing specifications would serve as the most important controlling
criteria for the operations of the third party. Experts were also pleased with these results due
to the good correlation among the characteristics of CRs, ICs, and PCCs. Hence, we can say

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that after aggregating the scores entered by experts, the various comparison matrices obtained
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are valid enough to apply on the case study.
The weight vector obtained through HOQ2 has been normalized to determine the
preference order of alternatives for the strategic business orientation policy through TOPSIS.
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To rank the orientation policies alternatives using TOPSIS, the weight vector obtained in
HOQ2 has been normalized. The results of the TOPSIS analysis suggest that the
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establishment of a 3PRLP business should be environmentally oriented, which seems to be

quite apt, because consciousness about environmental degradation is widespread and is a
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primary cause behind product recovery. The results of the numerical illustration validate the
approach of the current study in selecting the business orientation policy after evaluating the
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process for 3PRLPs.

VII Conclusion
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With global competition and instability in today’s market scenarios, businesses cannot
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afford to deviate much from their ultimate goal. Hence, most businesses prefer to outsource
some of the services that are not vital to their fundamental performance. Reverse logistics is
one such service. In this paper, we presented a theoretical framework by which to establish a
third party reverse logistics provider and we described the underlying competencies of the
trade in the market. After an extensive literature review, we extracted basic customer
requirements, implementation characteristics, and process control characteristics of reverse
logistics for third party providers. The motive of the study is of strategic importance; in order
for a new business to be successful, it must evaluate implementation and process control
 ACCEPTED MANUSCRIPT
characteristics. The criteria search selection technique and the methodology selection
generalizes the approach of the study and can be applicable to wide range of industries. One
cannot access all of them as per their need, but should prioritize them through the perspective
of determining their most vital requirements.
This study’s approach is validated through required data collected from top managers of
the companies relevant to the study. The relative importance weighing vectors of the CRs
suggest that driving forces is the most important design criteria, followed by technical design

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requirements. The most important characteristics to implement the design criteria are
industry support, followed by regulation towards waste management, and resource

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conservation. After analysing all the results, it is clear that the factors of environmental
consciousness, along with regulatory compulsion on manufacturers, are most vital for design

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and their implementation in the business of 3PRLP. Results also suggest that to successfully
accomplish the most preferred design and implementation requirements, 3PRLP businesses
must be environmentally-oriented; this process is specified in operational requirements.

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The results of this study also reveal a few limitations, and these points might be
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addressed in future studies. The results obtained are general in their application. Future
studies may wish to collect data from a wider range of industries such as textile, food, etc.
which were not explored in the current study. Moreover, future studies may wish to explore
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techniques to lessen ambiguity and/or stochastic aspects (if any) that may be present in the
minds of experts. A final limitation of the study centers on the second least important, the
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Appropriate site location, characteristic (one of the ICs). This characteristic seems well
attuned to the environmental-oriented business policy and may benefit from further
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examination.
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Acknowledgement:
The work funded by National Social Science Foundation of China. Grant Number: 14 BJL045; The
Fundamental Research Funds for the Central Universities of China. Grant Number: 15CX05006B
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