The effect of uncertainty on economic performance of reverse logistic operation

Abstract

Sustainable management of end-of-life products is increasingly becoming a manufacturers' responsibility. Especially, under the duel drivers of legislative enforcement and economic profit, product recovery has been given greater attention by many manufacturers. However, the uncertainties within the reverse flow leads to a more complicated experience in operating product recovery networks. This paper aims to develop identification of the uncertainties within reverse logistics, and examine the effect of them on economic performance by developing a system dynamic model. The simulation result suggests that expanding the reverse logistics network, i.e. increasing collection points, will lead to profit up to a point, with the extent of this profit dependant on the number of collection points. However, this must be combined with legislative enforcement. The combined cooperation of customers, (re-) manufacturers, and government will shape the reverse logistics system, and gear it to success.