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Int. J. Logistics Systems and Management, Vol. 10, No. 4, 2011 375

Copyright © 2011 Inderscience Enterprises Ltd.

Drivers on the reverse logistics: evidence from Malaysian certified companies

Tarig Khidir Eltayeb and Suhaiza Hanim Mohamad Zailani* School of Management, Universiti Sains Malaysia, 11800 Penang, Malaysia Fax: 604 6577448 E-mail: [email protected] E-mail: [email protected] *Corresponding author

Abstract: Reverse logistics becomes a major issue of concern due to its strategic importance in alleviating environmental problems and generating economic benefits for business organisations. However, little is known about the actual drivers that motivate business firms to adopt reverse logistics initiatives. This study utilised survey data to examine the effects of four drivers: regulations, customer pressures, social responsibility and expected business benefits on reverse logistics in the Malaysian manufacturing sector. The results suggest that reverse logistics is affected only by expected business benefits. This result indicates that business firms give considerable importance to the expected returns from reverse logistics initiatives as a major stimulator for the adoption of these initiatives. The results provide insight into why Malaysian firms adopt reverse logistics activities. They also provide managers and policy-makers with recommendations that can be used in setting up appropriate policies to encourage business firms to adopt reverse logistics initiatives.

Keywords: reverse logistics; supply chain management; Malaysia; manufacturing sector.

Reference to this paper should be made as follows: Eltayeb, T.K. and Zailani, S.H.M (2011) ‘Drivers on the reverse logistics: evidence from Malaysian certified companies’, Int. J. Logistics Systems and Management, Vol. 10, No. 4, pp.375–397.

Biographical notes: Tarig Khidir Eltayeb is a PhD Graduate from Universiti Sains Malaysia, Penang, Malaysia. He has a first degree in management. His research interest is on supply chain relationships and has participated in many international conferences.

Suhaiza Hanim Mohamad Zailani is an Associate Professor of Operations Management at the School of Management, Universiti Sains Malaysia. She has more than 150 research publications in international/national seminars and journals. Her areas of interest are supply chain, logistics and transportations by involving in few important projects, which are suited to her capability.

376 T.K. Eltayeb and S.H.M. Zailani

1 Introduction

As a result of mass industrialisation and consumption around the world, environmental concerns are becoming increasingly important and affect business, societies and governments (Bansal, 2005). There is a rapid consumption of natural resources, especially the non-renewable ones, such as oil, coal, metals and forests, to provide raw materials and energy for economic activities. Such rapid consumption of natural resources posits serious questions about the availability of these resources for the coming generations (Buchholz, 1998). Moreover, air pollution, water pollution, environmental degradation and waste disposal continue to be serious concerns for many governments and societies (Beamon, 1999). Numerous gas, liquid and solid pollutants are emitted by modern production and consumption activities that posit serious threats to human, animal and plant health and life. Of particular importance in this regard are end-of-life products and industrial wastes that are considered a significant source of pollution around the world.

Reverse logistics is a process whereby firms can become more environmentally responsible through recycling, reusing and reducing the amount of materials used in the forward system (Stock, 1992; Carter and Ellram, 1998). Traditionally, manufacturers did not feel responsible for their products after consumption. Most used or ‘end-of-life’ products were land filled or incinerated, causing considerable harm to the environment and loss of valuable materials (Ferguson and Browne, 2001). The concept of reverse logistics has become an attractive alternative over just incineration or landfill for end-of-life products. This concept has the potential to raise the environmental performance of organisations and to generate new profit opportunities and competitive advantages for supply chain participants (Talbot et al., 2007).

Reverse logistics programmes can result in significant cost savings when the proper systems are put into place (Schwartz, 2000; Richey et al., 2005). For example, AT&T Network System Division saved nearly $100 million in the 19 months it was operating a reverse logistics programme for its telephone switching equipment (Carter and Ellram, 1998). Reverse logistics can also generate economic returns (Stock et al., 2002). Rogers and Tibben-Lembke (1999) studied a retail company that obtained 25% of its profits from better management of its reverse logistics. Xerox implemented a programme to take back-used copiers as a source of material for new machines. Customers like the programme because they no longer worry about machine disposal. Xerox estimates “several hundred million” dollar savings annually (LMI, 2005). Reverse logistics activities can also result in significant environmental benefits. For instance, HP, through its LaserJet Toner Cartridge Recycling Program, was able to divert over 18 million pounds of material from landfills since 1990 by recycling every toner cartridge sent back to HP (Wu and Cheng, 2006).

Despite the growing body of literature covering topics related to reverse logistics management (Carter and Ellram, 1998; Guide et al., 2003), the discipline is still perceived as underdeveloped and largely unexplored by the academic community (Alvarez-Gil et al., 2007; Prahinski and Kocabasoglu, 2006; Talbot et al., 2007). Most of the research to date has been exploratory, focusing on explaining the concept and benefits of reverse logistics, and often consists of anecdotal evidence (Carter and Ellram, 1998). A majority of logistics literature mainly deals with forward logistics. Reverse logistics is far under-researched (Wu and Cheng, 2006). Also, in the industrial community, the discipline is still fairly new and reverse logistics initiatives are not widely

Drivers on the reverse logistics 377

adopted, especially in developing countries (Seitz and Wells, 2006). Wu and Cheng (2006) found that reverse logistics is not widespread and still in its early stages in the publishing industry in China, Hong Kong and Taiwan.

Whereas many drivers are suggested in the literature that motivates firms to adopt reverse logistics such as environmental regulations and customer demand (Carter and Ellram, 1998) and the true drivers that motivate firms to adopt reverse logistics are not clear. Drawing on literature, this study proposes that reverse logistics are affected by four drivers: regulations, customer pressures, social responsibility and expected business benefits. Empirically, the study assesses the impact of these drivers in the Malaysian manufacturing industry. The study utilised survey data obtained from the ISO 14001 certified manufacturing firms in Malaysia. The remainder of this paper is organised as follows. Section 2 illustrates the concept of reverse logistics and its importance in Malaysia. Section 3 reviews literature about the drivers for reverse logistics and develops the research hypotheses. Section 4 develops the methodology of the research. Section 5 presents the results of the study. Section 6 provides a discussion of the results. The study ends with Section 7, which provides the conclusions to the study, managerial implications of the study and directions for future research.

2 Concept and importance of reverse logistics

Stock defined reverse logistics as “the role of logistics in product returns, source reduction, recycling, materials substitution, reuse of materials, waste disposal and refurbishing, repair, and remanufacturing.” (Stock, 1998, p.20)

This definition indicates that reverse logistics encompasses the traditional logistic activities of transportation and inventory management, but its focus is to get products back from customers rather than move products to customers (Dowlatshahi, 2000; Goldsby and Stank, 2000; Mollenkopf and Closs, 2005). However, Carter and Ellram (1998, p.85) emphasised the environmental aspect of reverse logistics and defined it as “the process whereby companies can become more environmentally efficient through recycling, reusing, and reducing the amount of materials used”.

These definitions illustrate that the two most common ways of defining reverse logistics differ in one key aspect. Either reverse logistics is seen as a pure process of physically moving goods and products in reverse to the conventional forward flow of materials and products (Rogers and Tibben-Lembke, 2001), or, reverse logistics can be viewed as activities primarily motivated by environmental considerations such as recycling, reuse and source reduction (Carter and Ellram, 1998). The ultimate goal of these activities is to recapture value from waste and used products and to divert end-of-life products away from landfill (Schwartz, 2000; Richey et al., 2005). However, for the purpose of this study, reverse logistics is defined as the process of taking back end-of-life products to appropriate points in the forward supply chain for the purpose of recapturing value or proper disposal. Therefore, this study looks to reverse logistics as an effort to reduce environmental impacts of end-of-use materials and products.

Reverse logistics focuses primarily on the return or take-back of products and materials from the point of consumption to the forward supply chain for the purpose of recycling, reuse, remanufacture, repair, refurbishing, or safe disposal of the products and


materials (Alvarez-Gil et al., 2007; Carter and Ellram, 1998; Stock, 1998). Used or end-of-life products are returned into the forward supply chain for three main purposes (Beamon, 1999; Wells and Seitz, 2005):

• Reuse, which is the process of collecting used products from the field, and distributing or selling them used. Thus, although the ultimate value of the product is reduced from its original value, no additional processing is required.

• Remanufacturing, which is the process of collecting a used product or component from the field, assessing its condition, and replacing worn, broken, or obsolete parts with new or refurbished parts? In this case, the identity and functionality of the original product is retained.

• Recycling, which is the process of collecting used products, disassembling them (when necessary), separating them into categories of like materials (e.g., specific plastic types, steel, glass, paper, etc.), and processing them into recycled products, components, or materials. In this case, the identity and functionality of the original materials is lost.

Figure 1 illustrates reverse logistics activities. The activities start with collecting end-of-life products. The collected products are then tested to evaluate their condition. According to the result of evaluation, the products are disposed of (if they contain no reusable, remanufacturable, or recyclable components), reused, remanufactured, or disassembled to extract recyclable components from them. The reusable and remanufactured products, in addition to the recyclable components, re-enter into the forward supply chain at appropriate point of entry (Jayaraman and Luo, 2007; Tibben-Lembke, 2002; Talbot et al., 2007).

Figure 1 Reverse logistics activities (see online version for colours)

Source: Adapted from Geyer and Jackson (2004, p.57)

Reverse logistics activities can be performed to take back the product itself as well as its packaging. However, Rogers and Tibben-Lembke (2001) differentiated between reverse logistics activities for products and packaging. For products, the common reverse logistics activities are: refurbishing, remanufacturing, recycling, reclaiming materials,


reselling as it is, returning to supplier, salvaging and disposing in landfills. For packaging, the common reverse logistics are reuse, refurbish, reclaim materials, recycle, salvage and landfill. This means that remanufacturing is rarely performed for packaging (Christensen, 2002).

Reverse logistics has important environmental aspects as well as economic aspects. The environmental aspects focus on resource reduction, materials substitutions and waste reduction, whereby companies become more environmentally efficient and contribute to the solution of environmental problems (Carter and Ellram, 1998; Mclntyre et al., 1998; Stock, 1998). The economic aspects emphasise recapturing value from the returned products such as retrieving integrated circuits from electronic products, or recover valuable materials from the product through recycling process (Autry et al., 2001; Rogers and Tibben-Lembke, 1999; Wu and Dunn, 1995). Reverse logistics fulfil two main objectives. First, it diverts end-of-life products from landfills or incineration by collecting them for economic value recovery. Second, the secondary resources that result from the reprocessing of these end-of-life products replace primary resources in forward supply chains.

In Malaysia, there is a growing level of industrialisation and consumption, which has resulted in the increasing generation of solid waste (Hassan et al., 2006). The amount of solid waste generated in Malaysia increased from 16,200 tonnes per day in 2001 to 19,100 tonnes in 2005 or an average of 0.8 kg per capita per day (Ninth Malaysia Plan 2006–2010, 2007, p.455). Solid waste management is one of the most important issues for local authorities, where much money and effort are spent in the collection and disposal of solid waste (Hassan et al., 2006). Whereas end-of-life products are increasingly being considered as environmental liability and business opportunity in many parts of the world, especially developed countries (Geyer and Jackson, 2004), the traditional approach in Malaysia and many developing countries towards end-of-life products is to landfill or incinerate them with considerable cost and damage to the environment (Ferguson and Browne, 2001; Hassan et al., 2000; Rock, 2002). Despite concerted efforts to promote reuse, reduction and recycling (3Rs) of materials, the amount of solid waste recycled in Malaysia remained at less than 5.0% of the total waste disposed (Ninth Malaysia Plan 2006–2010, 2007).

Therefore, Malaysia needs to increase the level of environmental consideration to meet current economic needs without compromising environmental considerations (Richey et al., 2005). As such, it needs to achieve a balance between economic, environmental and social goals (Khanna et al., 2005). Sustainable development must “meet the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Economic Development, 1987, p.45).

3 Drivers for reverse logistics

Previous studies suggested that reverse logistics can be affected by various factors inside and outside an organisation. Internal factors include top management commitment and support, and the existence of an incentive system that rewards employees and managers for their involvement with reverse logistics activities (Routroy, 2009). External factors include pressures from government and regulatory bodies, customers, suppliers and competitors (Carter and Ellram, 1998; Lin, 2007; Peng and Lin, 2008; Zhu and


Sarkis, 2006; Zhu et al., 2007). Moreover, the literature suggests that the factors influencing reverse logistics activities differ from those of forward logistics (Carter and Ellram, 1998; Wu and Cheng, 2006). Extensive review of the available literature reveals four basic drivers for reverse logistics: regulations, customer pressures, social responsibility and expected business benefits. For instance, Rogers and Tibben-Lembke (1999) and Daher et al. (2006) argued that the main reasons that cause firms to make efforts to adopt reverse logistics are:

• environmental legislation, which forces companies to take back their products

• economic benefits of using returned products in the production process such as recapture of value and recovery of assets

• growing public environmental awareness.

In the context of Malaysia, there have been no previous studies found investigating the drivers for reverse logistics. However, related studies tend to emphasise the importance of the four drivers identified earlier. For instance, Raman and Peir (2006) conducted interviews with 10 SMEs in Malaysia and found that the main drivers for corporate social responsibility activities (waste recycling, paperless technology and use of biodegradable containers) are: professional code of conduct and ethics, customer pressures (for firms that are suppliers to MNCs), expected financial returns (especially from recycling), personal values of the owner and reputation. Perry and Singh (2002) conducted a survey among 91 MNCs in Malaysia and found that the most important influences on voluntary environmental actions are:

• pressures to conform to corporate head office environmental criteria (mentioned by 48.4% of respondents)

• increased environmental awareness by the workforce (37.4%)

• consumers (located in high-income communities) (23.5%)

• community, NGOs and media (9.9%).

The following subsections illustrate each of the stipulated drivers for reverse logistics (regulations, customer pressures, social responsibility and expected business benefits) and their roles in motivating firms to adopt reverse logistics initiatives.

3.1 Regulations

Business organisations are expected to adopt green purchasing in response to environmental regulations set by various regulatory institutions such as government bodies inside the country, regulations in other (mainly export companies), in addition to regulations set by the parent companies. Such regulations take the form of formal rules, laws, sanctions and incentives (Scott, 1995). Firms try to avoid potential costs, uncertainty and legal liabilities inherent in existing and anticipated regulations (Clemens and Douglas, 2006). Moreover, regulatory institutions may provide inducements for organisations to behave in a certain way. Inducement mechanisms include providing incentives to organisations for conforming to the demands of the agency that offers the inducement (Grewal and Dharwadkar, 2002).


Currently, there are more strict legislations and regulations in many countries, especially in Europe, that require business organisations to take responsibility for their products from production up to the final disposal stage and promote recycling and take-back of end-of-life products (Ferguson and Browne, 2001; Tibben-Lembke, 2002). In particular, there exists the Waste of Electrical and Electronic Equipment (WEEE) Directive in Europe, which forces manufacturers to take responsibility for their products at the end of their life, and RoSH, which requires safe disposal or recycling of consumed products. Previous studies found that firms adopt reverse logistics initiatives in response to these regulations (Alvarez-Gil et al., 2007; Ravi et al., 2005; Murphy and Poist, 2003; Blumberg, 1999; Carter and Ellram, 1998).

In Malaysia, there are no government regulations that directly require business organisations to undertake reverse logistics activities (APO, 2007). However, the government offers various environmental incentives that encourage recycling and waste reduction including:

• Capital rebate up to 50% for the purchase of recycling machinery and exemption on the Import Duties and sales tax for such machines

• Provision of the Pioneer Status (including tax exemptions) and Investment Tax Allowance to any company that carries out activities such as proper storage, treatment and disposal of toxic and hazardous waste, waste recycling activities and conservation of energy (Ninth Malaysia Plan 2006–2010, 2007).

These regulations are expected to motivate organisations to adopt reverse logistics activities. Accordingly, this study hypothesised that:

H1: Regulations positively affect reverse logistics.

3.2 Customer pressures

Customers represent the major financial stakeholders that buy products and services of organisations. As such, customers can exert considerable pressures and may communicate goals of sustainability or environmental performance on these organisations. Previous studies found that customer pressure is one of the major drivers for reverse logistics. For instance, Alvarez-Gil et al. (2007) found that customers have significant influence on the final decision of implanting reverse logistics programmes. Similarly, Carter and Ellram (1998) emphasised the importance of pressures from consumers, and from intermediate customers such as retailers, in affecting reverse logistics activities. In the context of Malaysia, it can be noticed that most business organisations are suppliers to big companies in developed countries such as USA, Europe and Japan. Because reverse logistics is a common practice in these countries, business organisations in these countries, which are customers of organisations in Malaysia, are expected to exert pressure and encouragement on the Malaysian firms to adopt similar practices. Therefore, this study hypothesises that:

H2: Customer pressures positively affect reverse logistics.


3.3 Social responsibility

The interest for reverse logistics is expected to emanate not only from the external environment (regulations and customers) but also from the internal sense of responsibility of a firm towards the society in which it exists. For reverse logistics, such sensitivity is intensified by the ever-increasing environmental problems such as global warming and pollution. Such problems are expected to raise the awareness of business firms to behave in a more socially responsible manner and reflect an image of due diligence and commitment to sustainability and social responsibility. The ordinary supply chains are based on a linear production paradigm, which relies on constant input of virgin natural resources and unlimited environmental capacity for assimilation of wastes (Geyer and Jackson, 2004). Therefore, through reverse logistics, a firm can be more socially responsible by considering minimising its use of virgin materials and reducing the level of waste. Drumwright (1994), Murphy and Poist (2003) and Ravi et al. (2005) found that social responsibility has significant effect on green supply chain initiatives (green purchasing and reverse logistics). Besides, studies about Malaysia reveal that many companies in Malaysia, especially the MNCs, have social responsibility objectives that stimulate them to not harm the environment and produce more environmentally friendly products. Accordingly, this study hypothesises that:

H3: Social responsibility positively affects reverse logistics.

3.4 Expected business benefits

Making profit and financial returns are the most important objectives of business organisations. In this sense, every decision is evaluated based on cost–benefit criteria. Environmental initiatives are expected to come along with this general rule, i.e., a firm needs to expect business benefits from green initiatives before it engages in these initiatives. Expected business benefits indicate that companies adopt reverse logistics activities, such as recycling and reusing of products and materials, in anticipation of the fact that these activities have the potential to improve profitability of these companies through cost minimisation and increased revenues (Stock et al., 2002). Even without instantaneous profit, reverse logistics may be helpful to generate potential intangible benefits such as improvement of corporate image (Alvarez-Gil et al., 2007; Toffel, 2004). Previous studies found that expected business benefits have significant effects on reverse logistics (Blumberg, 1999; Ravi et al., 2005).

Literature about Malaysia shows that expected benefits, such as cost savings, marketing opportunities and financial returns from sales of green products, represent important drivers for green initiatives. For instance, Anbumozhi and Kanda (2005, p.6) argued that “companies in Asia need to see business value to justify the cost associated with compliance to a formal environmental standard” Zulkifli and Amran (2006, p.103) argued that “companies in Malaysia follow corporate social responsibility practices if they can get something in return.” Therefore, this study hypothesises that:

H4: Expected business benefits positively affect reverse logistics.


3.5 Control variables

To ensure robustness and credibility of results, this study controls for a number of extraneous or contextual variables that may affect the results of the study. The control variables in this are type of industry, number of employees (firm size), firm ownership, number of suppliers and participation in green-interested associations. The selection of these variables is based on previous studies that found a significant effect of these variables on green initiatives. For instance, Banerjee (2001) and Banerjee et al. (2003) found that high-impact industries (e.g., chemical industries) have high green initiatives and different antecedents compared with low-impact industries (e.g., the textile industry). Moreover, Bowen (2002) argues that larger firms are more committed to voluntary green initiatives because they have more resources and they are more visible to the society.

3.6 Concluding remarks

It can be concluded from the previous discussion about drivers for reverse logistics that reverse logistics is expected to be affected positively by four drivers: regulations, customer pressures, social responsibility and expected business benefits. The available evidence also indicate that these drivers are of special importance in the Malaysian context as a result of existence of regulations regarding reverse logistics in Malaysia, customer pressures (especially for companies exporting their products to Europe, Japan and USA), sense of social responsibility and firms’ expectations that reverse logistics activities can result in important benefits for adopting firms. Therefore, this study will investigate the effect of these drivers on reverse logistics.

4 Research methodology

This study conducted a survey to obtain quantitative data utilised in statistical testing of the stated hypotheses. The survey was conducted using questionnaires via the mail. This methodology was employed in this study because of the advantage of covering a wide geographical area in less time and at a lower cost (Sekaran, 2003). The following subsections provide detailed descriptions of the methodology utilised in the survey.

4.1 Sample and data

The survey covered all EMS ISO 14001 certified manufacturing firms in Malaysia. The term ‘firm’ here refers to companies as well as individual units or sites within companies. ISO 14001 certified firms were selected because they are expected to have embarked in the adoption of green purchasing initiatives. This is supported by the studies of Sroufe (2003) and Zhu et al. (2008). A sampling frame is a list of all elements in a population (Sekaran, 2003). For this study, the sampling frame represents all ISO 14001 certified firms in Malaysia. The sampling frame was obtained from SIRIM organisation in addition to the Federation of Malaysian Manufacturers (FMM) directory 2007 of Malaysian manufacturers (FMM, 2007). These two sources provided a sampling frame of 569 certified manufacturing firms in Malaysia by 2007. Given the


small sampling frame of the study and the likelihood of low responses from the mail survey (Sekaran, 2003), all the 569 questionnaires are included in the study.

This study combines issues related to the environment (green issues) with business aspects (logistics). Therefore, the appropriate person from whom the required data can be obtained should ideally have knowledge about these two aspects. Certification organisations usually appoint an Environmental Management Representative (EMR) in each firm to act as a link between the certification organisation and the certified firm. The EMR can belong to any department in the certified firm but mainly comes from operations, quality control, and environmental health and safety departments. The EMR keeps all the documents regarding green issues in his firm and regularly updates this information to the certification organisation about progress in environmental performance in his firm. Because this person is expected to be highly informative about green issues in his firm in addition to his knowledge about the business issues, this person was considered to be the most appropriate respondent. Therefore, the questionnaires were addressed to the EMRs in each firm. The questionnaire was sent through a single wave of mailing to respondents in the selected firms.

The questionnaire was sent to the respondents in the first week of March 2008. A covering letter, endorsed by the School of Management, Universiti Sains Malaysia (USM), was attached with each copy of the questionnaire. The letter explained the nature and benefits of the study in addition to general instructions on how to complete the questionnaire. The protection of confidentiality of information was clearly stated in the letter. Moreover, respondents were offered a summary report of the research as encouragement for their participation in the survey. Each copy of the questionnaire was accompanied by a pre-addressed and stamped return envelope. After sending out the questionnaires, telephone calls were made to the respondents notifying them that the questionnaire had been sent to them and solicited their participation. Two weeks after sending out the questionnaires, a first reminder letter was sent to the respondents to encourage their response to the questionnaire. After one month, a second reminder letter was sent to the respondents. In some cases, a second mailing of the questionnaire was done for respondents who said they had not received the first copy of the questionnaire. The data collection stopped two months after its commencement.

4.2 Measures

Reverse logistics is defined in this study as the return or taking-back of a product or packaging, after use, from customers, or returns to suppliers, for the purpose of reuse, recycling, reclamation of materials from the product or packaging, or safe refill of products (Carter and Ellram, 1998; Stock, 1998). This definition illustrates that reverse logistics involves return activities from customers at products’ end of life in addition to return of purchased items to suppliers for the purposes of recycling, reuse, or reclamation of materials. Moreover, the definition illustrates that reverse logistics can be performed for the product and its packaging (Rogers and Tibben-Lembke, 2001). Therefore, the measure for reverse logistics needs to encompass items that reflect all these elements. Six items that reflect these elements are adapted from Carter and Ellram (1998), Rogers and Tibben-Lembke (2001) as shown in Appendix.

To investigate the relationship between the four drivers and reverse logistics, the study developed measures for each driver based on previous studies and self-construct.


The measurement items for drivers are provided in Appendix. Given that some measures of variables in the questionnaire were specifically designed for this study, the measures needed to be rigorously tested for both content validity and reliability before being used in further analysis. Content validity is the technique used to ensure that the measures adequately measure the concepts that are supposed to measure (Sekaran, 2003). Reliability evaluates accuracy of the measures through assessing the internal stability and consistency of items in each variable (Hair et al., 1998).

4.3 Validity and reliability of measures

Before sending out the questionnaire, the validity of the measures was first pre-tested among selected academicians in USM as well as 16 EMRs in selected certified manufacturing companies, who were working in Penang, Malaysia. The respondents generally commented that the questionnaire was well designed and the questions were quite easy to understand. The reliability of measures was also pre-tested by calculating Cronbach’s Alpha coefficients of the 16 company responses. All the values of the coefficients fell within the range of 0.60–0.80; therefore, they had an acceptable level of reliability (Nunnally, 1978). After pre-testing, modifications were made to the questionnaire to reduce possible ambiguity of some questions and improve the general appearance of the questionnaire before sending it to respondents in the sampled firms.

After collecting the survey data, factor analysis was performed for testing the validity of measures used in measuring the drivers for reverse logistics. Table 1 summarises the results of the analysis. The table indicates that the data matrix satisfies the conditions of factor analysis. The KMO measure of sampling adequacy is 0.8 (above the recommended level of 0.6) and Bartlett’s test of spherecity is significant (p < 0.01). Therefore, the items are appropriate for factor analysis. Table 1 reveals that the items for green purchasing drivers loaded on four factors with eigenvalues exceeding 1. These four factors explain 71.79% of variance in the data (above the recommended minimum level of 0.60). The extracted four factors correspond to the conceptualised four drivers: regulations, customer pressures, social obligation and expected business benefits. However, three items (RG6, CP6 and EBB2) were found not to load appropriately on the four factors. These items have loading values below the minimum level of 0.45 or have high cross-loadings (above 0.35). Therefore, these items were deleted from the measures of reverse logistics drivers.

Table 1 Rotated factor loadings for the drivers

Factors Item no. 1 2 3 4

SR1 0.728 0.144 –0.048 –0.015 SR2 0.823 –0.019 0.014 0.047 SR3 0.815 –0.024 0.042 0.086 SR4 0.650 0.161 0.096 0.007 SR5 0.664 0.181 0.324 0.160 SR6 0.614 –0.006 0.324 0.086


Table 1 Rotated factor loadings for the drivers (continued)

Factors Item no. 1 2 3 4 SR7 0.781 0.092 –0.001 0.043 SR8 0.713 –0.092 0.000 0.220 SR9 0.796 –0.052 –0.026 0.230 CP1 –0.172 0.814 0.297 0.074 CP2 –0.071 0.769 0.179 –0.007 CP3 –0.024 0.833 0.110 0.077 CP4 0.256 0.654 0.092 0.297 CP5 0.034 0.803 0.325 0.103 CP6* 0.111 0.303 0.126 0.399 CP7 0.129 0.483 0.282 0.311 CP8 0.053 0.669 0.076 –0.194 CP9 0.172 0.462 0.236 0.098 EBB1 0.151 0.328 0.544 0.138 EBB2* 0.138 0.403 0.537 0.028 EBB3 –0.037 0.075 0.626 0.029 EBB4 –0.098 0.259 0.739 0.105 EBB5 –0.073 0.254 0.734 –0.071 EBB6 –0.059 0.342 0.688 0.179 EBB7 0.209 0.106 0.661 0.175 EBB8 0.195 0.001 0.730 0.158 EBB9 0.204 0.256 0.715 0.064 RG1 0.189 0.219 0.344 0.460 RG2 0.318 –0.043 0.178 0.514 RG3 0.173 0.068 0.084 0.620 RG4 –0.024 –0.016 0.020 0.838 RG5 0.002 –0.014 0.135 0.826 RG6* 0.067 0.452 0.221 0.397 RG7 0.154 0.176 –0.022 0.691 Cronbach’s alpha 0.900 0.875 0.882 0.802

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalisation. N = 132. *Dropped items.

Reliability analysis was conducted in this study to ensure that the measures of variables have internal consistency across time and across the various items that measure the same concept or variable (Sekaran, 2003). Reliability was measured in this study using Cronbach’s alpha coefficients. The values of Cronbach’s alpha for the drivers ranged between 0.80 and 0.90 (see Table 1). These values well exceed the minimum value of 0.70 (Nunally, 1987). Thus, it can be concluded that the measures had an acceptable level of reliability.


5 Results and analysis

Descriptive statistics of reverse logistics and the four drivers are shown in Table 2. Given that reverse logistics is measured on a 5-point Likert scale where 1 = non-existence, 5 = existence to a large extent, the table indicates that there is a low level of reverse logistics in the Malaysian firms (mean = 2.74, standard deviation = 0.87), the sampled firms have a high sense of social responsibility (mean = 4.29, standard deviation = 0.47) towards the society in which they operate. The table also reflects that the firms tend to agree that there are business benefits from reverse logistics (mean = 3.77, standard deviation = 0.49). The firms also tend to agree that there are customer pressures on their firms to adopt reverse logistics (mean = 3.76, standard deviation = 0.69). Similarly, the firms agree, on average, that there are regulatory impositions and inducements on their firms (mean = 3.71, standard deviation = 0.59). The table also shows that correlation coefficients among drivers range between 0.10 and 0.52. This indicates that all the coefficients are in the moderate level and none of them is considered high (0.75 or above) (Sekaran, 2003). Therefore, multicollinearity does not appear to be a problem in this study. The correlation matrix also reveals that all the correlations are in the hypothesised positive direction.

Table 2 Mean, standard deviation and Pearson correlation coefficients for all variables

Variables Mean Std. dev. RL RG CP SR EBB Reverse Logistics (RL) 2.74 0.87 1 Regulations (RG) 3.71 0.59 0.199* 1 Customer Pressures (CP) 3.76 0.69 0.184* 0.196* 1 . Social Responsibility (SR) 4.29 0.46 0.114 0.306** 0.095 1 Expected Bus. Benefits (EBB) 3.77 0.49 0.264** 0.264** 0.524** 0.161 1

Drivers used a 5-point Likert scale with (1 = strongly disagree, 5 = strongly agree) *p < 0.05, **p < 0.01, N = 132.

To test the research hypotheses, a two-step hierarchical regression analysis was carried out. In Step 1, the analysis tested the effect of control variables (type of industry, number of employees, firm ownership, number of suppliers and participation in green associations) on the dependent variable (reverse logistics). In Step 2, the independent variables (regulations, customer pressures, social responsibility and expected business benefits) were introduced to test their marginal effect on the dependent variable. Table 3 presents the results of the two-step regression analysis. In the first step, firm ownership type (Malaysian, Japanese, etc.) and participation in green associations had significant effects on reverse logistics. The control variables together explain about 13% of the total variation in reverse logistics. The addition of drivers in Step 2 explains the additional 4% of reverse logistics variance. This means that control variables and the drivers cumulatively explain 17% of the variance in reverse logistics. The results showed that expected business benefits was the only variable that had a significant effect on reverse logistics (β = 0.23, ρ < 0.01), followed by customer pressures (β = 0.22, ρ < 0.05). However, regulations, customer pressures and social responsibility showed no significant relationship with reverse logistics. These results give support to hypothesis H4 (expected


business benefits positively affect reverse logistics). However, the other three hypotheses were not supported.

Table 3 Multiple regression result: the effects of control variables and drivers on reverse logistics

DV: Reverse logistics Variables Step 1 std. beta Step 2 std. beta Control variables Type of industry 0.128 0.155 Number of employees 0.144 0.149 Firm ownership 0.210* 0.152 Number of suppliers –0.071 –0.065 Participation in green associations 0.183* 0.133 Model variables Regulations 0.132 Customer pressures 0.058 Social responsibility –0.006 Expected business benefits 0.217* F value 3.383** 2.587* R2 0.127 0.172 Adjusted R2 0.090 0.106 R2 change 0.127 0.045 F change 3.383** 1.518

*p < 0.05; **p < 0.01.

6 Discussion

Despite the importance of reverse logistics to a firm and society, the results show that there is a low level of reverse logistics in the Malaysian firms. This can be due to the high costs and other constraints involved in reverse logistics (Geyer and Jackson, 2004). One possible explanation for the low level of reverse logistics is the high cost of adopting reverse logistics initiatives coupled with less visible economic benefits from these initiatives (Anbumozhi and Kanda, 2005; Min and Galle, 2001). Rogers and Tibben-Lembke (2001) pointed out that reverse logistics is often ambiguous in terms of product quality, process visibility, disposition and routing of product compared with forward logistics. This ambiguity, coupled with relatively costly reverse logistics processes, renders reverse logistics as less of an important issue to many organisations as evident by the few resources and little effort devoted by these organisations to handle reverse logistics activities.

Another explanation is the lack of capabilities to adopt green supply chain initiatives. Complexity of reverse logistics activities represents a challenge to many firms. Guide et al. (2003) argued that product returns are uncertain in quality, quantity and timing compared with new products. Abdullah mentioned that


“many Malaysian industries are still unable or perhaps unwilling to comply with the standards of discharges and emissions due to the lack of capabilities such as non-availability of cost-effective technologies.” (Abdullah, 1995, p.17)

The results of the study revealed that regulations had no significant effects on reverse logistics. This result contradicts previous studies that found significant relationships between regulations and reverse logistics activities (Alvarez-Gil et al., 2007; Blumberg, 1999; Carter and Ellram, 1998; Ravi et al., 2005). Bearing in mind that all of these studies were conducted in Western countries, the discrepancy in the results can be attributed to the availability of regulations that impose or encourage firms to take-back products or materials after use in Western countries (mainly Europe) and the lack of such regulations in Malaysia. Accordingly, Malaysian firms encounter less regulatory pressures to adopt reverse logistics. Hassan et al. (2006, p.275) made a note of this point by stating that:

Although, some countries, like the Netherlands and Germany, issue regulations that held producers responsible for the waste and pollution generated by their products throughout their entire life cycle, such regulations are lacking in Malaysia Therefore, Malaysian firms recognise life cycle regulations only when they export their products to Western countries, and in particular European countries.

Customer pressures were not found to have significant effects on reverse logistics. This result contradicts the conceptual work of Carter and Ellram (1998) that predicted customers as one of the major drivers of reverse logistics. However, the results coincide with the empirical study of Zhu et al. (2008) in the Chinese manufacturing industry, which found no significant relationships between customer pressures and reverse logistics. As indicated earlier, reverse logistics entails considerable costs and capabilities and it is performed at low levels in Malaysia. Thus, customers are not expected to exert pressures on other firms to adopt reverse logistics because they themselves rarely adopt the initiative.

In this study, social responsibility was found to have no significant effect on reverse logistics. In the previous research, some studies found significant relationships between social responsibility and reverse logistics (Forman and Jorgensen, 2004; Murphy and Poist, 2003). Given the results of descriptive analysis, which indicate that there is a high level of social responsibility among Malaysian firms, it seems that this high-level social responsibility is not reflected in a corresponding high level of reverse logistics in the context of Malaysia. As indicated earlier, reverse logistics activities require considerable costs and capabilities, which mean that firms may think about factors, other than social responsibility, when considering adopting these practices. An expected business benefit is the only driver that showed a significant effect on reverse logistics. This result is consistent with previous research (Blumberg, 1999; Ravi et al., 2005; Seitz and Wells, 2006; Zhu et al., 2008) that found significant effects of expected business benefits on reverse logistics. This result indicates that the sample firms focus on evaluating economic returns from reverse logistics initiatives (conducting cost–benefit analysis) before they consider adopting such initiatives. Nevertheless, the high significant effect of expected business benefits on reverse logistics, compared with that of other factors, gives an indication that the sampled firms gave considerable attention to economic considerations, rather than social issues, when choosing to adopt reverse logistics.

It can be concluded from the above-mentioned explanation that there is a general tendency of Malaysian firms to place a high consideration on business benefits from


reverse logistics activities as the main criteria for deciding whether to adopt these activities. Therefore, the high sense of social responsibility exhibited by these firms does not constitute the true motivator for them to adopt reverse logistics. Rather, it is their expectation that reverse logistics in the direct improvement in the economic position of their firms. Other studies found similar results. There is a common belief among many researchers that the maximisation of benefits is the principal driver of the reverse logistics process. For instance, Rogers and Tibben-Lembke (2001) found that the low level of importance given to reverse logistics, relative to other issues, is the greatest barrier to its implementation. Respondents were not able to justify a large investment in improving reverse logistics systems and capabilities.

7 Conclusion

Today, reverse logistics is viewed as an area that offers great potential to reduce costs, increase revenues and generate additional profitability for firms that manage the process well (Stock, 1998). However, little is known about what really motivates firms to adopt reverse logistics initiatives. This study tried to shed some light on this issue by portraying the effect of four drivers: regulations, customer pressures, social responsibility and expected business benefits, on reverse logistics.

The results of the study indicate that expected business benefits are the main driver for the adoption of reverse logistics. This result implies that it is important for managers to identify exactly the benefits of each reverse logistics activity, and make proactive efforts to make these activities profitable. The result also implies that managers of Malaysian firms need to consider conveying the benefits and ‘success stories’ about reverse logistics to other firms to spread the concepts and activities of reverse logistics among a large number of firms. However, this entails a clarification of the link between reverse logistics and business objectives. Reverse logistics has to be sold as a business opportunity and needs to be presented to business organisations as a route to commercial success rather than just a moral imperative.

The main contribution of the study is its proof of the effect of expected business benefits on reverse logistics initiatives. In particular, the study proved that, although manufacturing firms in Malaysia have a high sense of social responsibility, these firms are motivated by the desire to gain business benefits rather than by external pressures and their sense of social responsibility. This indicates that organisations are influenced by short-term rather than long-term imperatives (Faulkner et al., 2005) and there is a distinction between positive attitudes and actual practice (Tilley, 1999). This indicates that managers may accept the broad societal importance of environmental issues without translating this into any specific initiatives to make changes in the way organisations operate. It can be concluded from these results that proper manipulation and utilisation of the drivers can bring significant effects on reverse logistics. For instance, by clarifying business benefits of reverse logistics activities, business firms may be motivated to adopt more of these activities. Therefore, emphasis should be placed on business benefits from green initiatives for effective dissemination of these initiatives.


Acknowledgement

The authors are grateful to anonymous reviewers of IJLSM for their constructive comments.

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Appendix: Questionnaire items

Items for reverse logistics

No. Items: currently my firm… RL1 Collects back used products from customers for recycling, reclamation of materials,

or reuse RL2 Collects back used packaging from customers for reuse or recycling RL3 Requires suppliers to collect back their packaging materials RL4 Returns back its products to suppliers for recycling, retaining of materials,

or remanufacturing RL5 Returns back its packaging to suppliers for reuse or recycling RL6 Returns back the products from customers for safe refill

Items for regulations

No. Items RG1 Through adopting green supply chain initiatives, my firm tries to reduce or avoid the

threat of current or future government environmental legislations RG2 My firm’s parent company sets strict environmental standards for my firm to comply

with RG3 There are frequent government inspections or audits on my firm to ensure that the firm is

in compliance with environmental laws and regulations RG4 Financial incentives offered by the Malaysian government, such as grants and tax

reductions, are significant motivators for my firm to adopt green supply chain initiatives


Appendix (continued)

Items for regulations

No. Items

RG5 Financial incentives offered by international organisations, such as United Nations, are significant motivators for my firm to adopt green supply chain initiatives

RG6 Environmental regulations in other countries, such as Europe, Japan and USA, induced my firm to adopt green supply chain initiatives

RG7 There are a large number of environmental regulations or restrictions imposed by the government on my firm’s industry

Items for customer pressures

No. Items CP1 My firm’s major customers frequently require my firm to adopt green supply chain initiatives CP2 My firm’s major customers would withhold the supply contract if my firm did not meet their

environmental performance requirements CP3 My firm’s major customers have a clear policy statement regarding its commitment to the

environment CP4 My firm receives requirements from consumer associations to be more environmentally

conscious firm CP5 My firm’s major customers frequently encourage my firm to adopt green supply chain

practices CP6 My firm’s major customers frequently provide financial incentives to my firm to adopt green

supply chain initiatives CP7 My firm expects to receive special recognition or award from its major customers for the

adoption of green supply chain initiatives CP8 My firm’s major customers always reject my firm’s products if they contain hazardous

elements or materials such as lead, mercury, and cadmium CP9 My firm’s major customers always reject my firm’s products if they do not contain recyclable

or reusable contents

Items for social responsibility

No. Items SR1 My firm believes that it is its responsibility to minimise negative effects on the natural

environment in all its operations SR2 My firm always declares that it is an environmental conscious firm in its reporting SR3 It is important for my firm to consider the societal well being in all of its operations SR4 Environmental problems like pollution constitute continuous concern for my firm SR5 My firm believes that green supply chain initiatives are the right thing to do to promote

societal welfare SR6 My firm believes that it can prevent environmental problems such as global warming by

adopting green supply chain initiatives SR7 Health and safety of the society is a major concern in my firm SR8 My firm’s behaviour is affected by how the society wishes it would behave SR9 My firm pays considerable attention to the reaction of the society to its action


Appendix (continued)

Items for expected business benefits

No. Items EBB1 Successful firms in my firm’s industry adopt green supply chain initiatives EBB2 Big firms in my firm’s industry adopt green supply chain initiatives EBB3 Green supply chain initiatives are currently adopted by large number of organisations

in Malaysia EBB4 Large number of firms adopted green supply chain initiatives EBB5 Green supply chain initiatives are generally considered in my firm’s industry as having

considerable marketing benefits EBB6 Green supply chain initiatives are generally considered in my firm’s industry as having

considerable operational benefits EBB7 Green supply chain initiatives are generally considered in my firm’s industry as

important thing to improve organisational image EBB8 There is a general belief in my firm’s industry that green supply chain initiatives have

benefits that outweigh their costs EBB9 There is a general belief in my firm’s industry that green supply chain initiatives are the

most right thing to do to achieve business objectives

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