Impact of reverse logistics on supply chain performance

Purpose - The purpose of this paper is to analyse the impact of reverse logistics on order and inventory variance amplification in a single-echelon supply chain (SC) and to propose a new order policy for dampening such amplification. Design/methodology/approach - A general review of the literature on sustainable operations and on the impact of reverse logistics on SC performance provides the foundation for the study. The authors use difference equation math approach for modelling and analysing a closed SC. A proper design of experiment and data collected from the European Union statistics validate the obtained numerical results. Findings - The variability of reverse flow in a closed loop SC increases the serviceable inventory variance. However, a proper design of the reverse flow considerably improves the global performance. To this purpose, the authors propose a new order policy, namely R-APIOBPCS, which explicitly considers the reverse flow of products. Research limitations/implications - The paper presents a math model describing a closed loop supply chain (CLSC). No empirical analysis is provided. Future researches should evaluate the impact of the proposed R-APIOBPCS on more realistic closed loop SC models. Practical implications - The paper's findings may motivate logistics and SC managers to implement CLSC when supported by innovative, suitable tools for the proper management of the information and material flow in the chain. Managers should be well acquainted that, by doing so, they not only satisfy national and international legislations but also achieve improvements in logistics performance. Originality/value - The authors propose a novel replenishment rule that accurately coordinates the upstream and downstream flows in a SC. The proposed order policy can be reasonably considered one of the advocated managerial tools for the proper management of reverse logistics: it allows reducing inventory and limiting the variability of the orders placed to suppliers in SC with reverse logistics.