Market-Motivated Value Systems and Reverse Logistics : An Evaluation Model for Third Party Reverse Logistics Providers

1. INTRODUCTION

Rapidly globalizing markets, production and distribution systems operating within complex and fluid capital markets have triggered exceptional economic and competitive pressures in national economies. Consequent microeconomic reform, deregulation and the corporatization and privatization of national marketplaces have been no less significant and have further impacted on nation-wide, as well as international, global logistics systems so that change is now pervasive, urgent and transforming. For buyers of freight services, whether manufacturers, rural and primary producers or retail giants, the pressing need to control costs in supply chains has spawned numerous strategies within a broader supply chain management framework that seeks sophisticated levels of operational as well as corporate integration–and ideally, fully integrated corporate and intercorporate business processes. For sellers of freight services–traditional “transport” providers now best described as third party reverse logistics providers (3PRLs) and fourth party service providers (4PRLs). They provide the outsourcing service of reverse logistics to the companies, intervene between buyer or shipper and customer–the focus on value delivery in competitive markets and are underlying urgent attempts to expand control over freight activities and to capture an increased share of value over the entire movement chain. It is resulting in rapidly restructuring corporate and value delivery systems.

Therewith, over the last several years, changes in environmental laws and the new returns demands of market returns have raised the requirement for effective reverse logistics to a new level, reverse logistics issues are gaining justifiable popularity among society, governments and industry worldwide. They are mainly regulatory-driven in Europe, consumer-driven, market-driven and profit-driven in North America and in incipient stage in other parts of the world, including China, where both consumer awareness and globalization are likely to lead to greater economic, consumer and regulatory pressures in the coming future. Only very recently, some companies in consumer durables’ and automobile sectors in China have introduced exchange offers to tap customers who already own such products. Presently, these returned products are either resold directly or after repair and refurbishment by firm franchisee/ local remanufacturers in the seconds’ market. They are not remanufactured or upgraded by original equipment manufacturers (OEMs). In Chinese society is particularly price sensitive and to a little extent quality sensitive (quality for a given price) but not environment sensitive in its buying and promotion behavior in past years. Therefore, reverse logistics has not received the desired attention and is generally carried out by the unorganized sector for some recyclable materials such as paper and metal. Presently, with market economy bring to success gradually, only markets (driven by economy, environment, policy, health, etc.) are relevant in China as statutory regulations and consumer pressure are virtually non-existent. This provides a good opportunity to explore and examine market-motivated Reverse Logistics Network Design (RLND). Many products are returned to the retailers shortly after a consumer purchases the product, and as a result retailers have a large problem managing returns. As well, manufacturers must deal with returns from retailers, the channels of distribution, or end customers with warranty issues. For example in 2001 there were about 40 million desktops and mobile Personal Computers sold. About 9 million (23%) of these were sold through retail stores. The retailer experienced a return rate of about 10% or 900,000 Units. Each of these units is estimated to cost the retailer $40-$50 to process and ship back to the manufacturer or to dispose of the units. The manufacturers estimate that each return costs them about $500 each. This adds up to a whopping $486 million. Each return is taking the manufacturers from 4 to 12 weeks to fully process. Returns are a small percentage of sales for the retailer or manufacturer, however, in high volume environments like consumer goods, this small percentage adds up to a large reverse logistics problem.

Our present work is motivated by increasing sales potential of white goods, pharmacy and automobiles and the good response exchange offers by OEMs or retailers have generated so far, for example, China Government has come on the automobile recall system from March 2004, and Guangdong Province has set up the overdue pharmacy recall mechanism from 2005. This leads to the requirement of setting up a proper RL system. A well-managed RL program can result in important cost savings in procurement, disposal, inventory holding and transportation. This may be carried out by the OEMs or their consortia or by 3PRLs.

With the global economy development, a remarkable phenomenon shows that the value delivery system exists to create value for customers and environments by supplying needed products and services. Value delivery systems and their abilities are at the heart of every firm and, more than anything else, determine whether the firm survives in the marketplace or disappear into bankruptcy or takeover. Value delivery systems may take many forms as illustrated by these two cases (Meredith and Shafer, 1999) as follows: (1) Facing increased competition and customers who are smarter, more demanding, and less brand-loyal, McDonald’s is reevaluating the way it makes some of the items on its menu. For example, it is considering a switch to a hamburger bun that does not require toasting. In trial tests, customers seemed to prefer the new bun’s taste and texture. Furthermore, not toasting buns should translate into substantial cost savings due to reduced preparation time and the elimination of commercial toasting equipment (Gibson, 1995). (2) It is not well known that the Kmart and Wal-Mart chains both date back to 1962. By 1987 Kmart was clearly dominating the discount chain race, with almost twice as many stores and sales of $25-$63 billion to Wal-Mart’s $15.96 billion. However, for the retail year that ended in January 1991, Wal-Mart had overtaken Kmart, with sales of $32.6 billion to Kmart’s sales of $29.7 billion. Interestingly, although Wal-Mart had taken the lead in sales in 1991, it still had fewer stores-1721 to Kmart’s 2330. By the 1997 retail year, Wal-Mart had clearly established itself as the dominant discount chain, with sales of $106.1 billion to Kmart’s $31.4 billion. For the period from 1987 to 1995 Kmart’s market share declined from 34.5 percent to 22.7%, while Wal-Mart’s increased from 20.1% to 41.6%. What accounts for this reversal in fortunes? Kmart’s response to the competition from Wal-Mart was to build on its marketing and merchandising strengths and invest heavily in national television campaigns using high-profile spokespeople such as Jaclyn Smith. Wal-Mart took an entirely different approach and invested millions of dollars in value delivery systems for the products it sells in an effort to lower costs. For example, Wal-Mart developed a company-wide computer system to link information from cash registers to firms in its supply chain, thus greatly facilitating inventory management. The integration of the system and the distribution system meant that customers would rarely encounter out-of-stock items. Further, the use of scanners at the checkout stations eliminated the need for price checks. By Kmart’s own admission, its employees were seriously lacking the skills needed to plan and control inventory effectively (Duff and Ortega, 1995).

These brief examples highlight the diversity and importance of value delivery systems. Great many societal changes inevitably involve in value delivery systems. There is great pressure among competing nations to increase national productivity. Businesses are on a national crusade to improve quality and speed of their offerings in both products and services. As we will see, increasing productivity of the firm and adding value to customers and environments are primary objectives of market-motivated reverse logistics value delivery systems.

Otherwise, technological change is an important consideration. Technologies such as e-mail, laptops, personal digital assistants, e-commerce, are profoundly affecting business and are fundamentally changing the nature of today’s work. Many banks are shifting their focus from building new branch locations to using the Web as a way to develop new customer relationships and transaction processes. Banks rely on technology to carry out more routine activities as well, such as transferring funds instantly across cities, states, and oceans. Other industries also rely increasingly on technology for efficient, effective and secure processes, e.g., global positioning systems to monitor logistics activities, electronic data interchange and collective supply-chain adoption of the same server of database and planning systems.

In this paper, the feasibility and desirability of reverse logistics in market-motivated contexts are examined based on the China current in this paper. The interactions among the major barriers, which hinder or prevent the application of reverse logistics in China industries were analyzed. The processes and model of market-motivated value delivery systems based on reverse logistics are discussed, and the process content and model are presented. Consider the advantage of 3PRLs and outsourced service providers, an integrated evaluation model was built to select the three reverse logistics service providers using by the integrating decision-making methods in this paper. To reflect the comprehensive information, the Analytic Hierarchy Process and entropy approaches are applied to calculate the objective weights. A new kind of correlation similarity degree was established by combining the Euclidean distance with the grey correlation degree (that denotes correlative factors relation presented by grey numbers). In the end, an example was demonstrated our conclusions.

2. DEFINITIONS EXPATIATION

Reverse logistics (RL) is the collective noun for logistic environments with reuse of products, work in process and materials. Possible cost reductions, more rigid environmental legislations, and increasing environmental concerns of consumers have led to increasing attention to reverse logistics in the recent years. Reverse Logistics provided by RevLog a European Reverse Logistics initiative: “… Reverse Logistics though refers to all activities to collect, disassemble and process used products, product parts, and/or materials in order to ensure a sustainable (environmentally friendly) recovery.” Reverse logistics activities include: Processing returned merchandise for reasons such as damage, seasonal, restock, salvage, recall, or excess inventory; Recycling packaging materials and reusing containers; Reconditioning, remanufacturing and refurbishing products; Obsolete equipment disposition; Hazardous material programs; Asset recovery.

Figure 1 shows the basic flow diagram of reverse logistics activities. The complexity of operations and the value recovered increase from bottom-left to top-right in the figure.

Figure 1. Flow Diagram of Reverse Logistics Activities Source: Krumwiede and Sheu (2002)

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RL comprises network design with aspects of product acquisition and remanufacturing (Fleischmann et al., 2001). Literature suggests that the pattern of quantity, quality and time of arrival of returns is of paramount importance in reverse logistics network design. The location of facilities relative to process inputs, customer markets or waste disposal locations has been considered both analytically and empirically (Appa and Giannikos, 1994; Froch, 1995; Pushchak and Rocha, 1998). Strictly speaking, competition, value delivering and marketing motives, direct economic motives and concerns with the environment are some of the important of them. Literature describes four important stages in RL. Collection is the first and an important stage, where product types are selected and products are located, collected, and, if required, transported to facilities for rework and remanufacturing. Used products originate from multiple sources and are brought to a product recovery facility, resulting in a converging process. Inspection/ Sorting is the next stage which may be carried out either at the point/ time of collection itself or afterwards (at collection points or at rework facilities). This may or may not be combined with pre-processing. Pre-processing may cover in the form of sorting, segregation, partial or complete disassembly or minor repair and refurbishing activities. It may be carried out either at collection centers or at rework facility depending upon various technological and economic factors.

Location and distribution (network design) is the most important and critical stage of reverse logistics that is assuming greater importance in business as well as in theory (Tibben-Lembke and Rogers, 2002). In many cases, recovery networks are not set up independently "from temporary" but are often combined with the existing logistics structures. In particular, this is true if products are recovered by the OEM. Location and configuration of facilities frequently affect and are affected by the external natural environment, mainly the estimated returns. Redesigning logistics networks to accommodate product returns and remanufacturing and reuse of such parts and components can often be quite profitable are remarked (Corbett and Kleidorfer, 2001).

3. EXISTING BARRIERS, THE RETURNS PROCESS, RESEARCH ISSUES AND GAPS

3.2 Returns processes

The Returns processes can be summarized in the Figure 2 as follows. In processing a returned unit, two groups need to be satisfied: the end customer who returned the unit and the company that now needs to handle the returned unit and try to recapture value from it.

Figure 2. Returns Processes be summarized

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An overview of the returns process is as follows:

Retailers: Retailers need to handle returns from their customers. These returns arrive in a variety of conditions, many with open boxes, some with defective units and many with no faults. A retailer needs to process these returns and maximize value from these returned items by getting them back on the store shelf, returning them to the manufacturer for credit, liquidating them through some other channel or scrapping them.

Manufacturers: Manufacturers need to handle returns from multiple sources such as end-user customers, retailers, value added resellers or distributors. The manufacturers typically require their customers to obtain an approved returned materials authorization (RMA) or return authorization (RA) before accepting any product returns. These returns arrive in various quantities. The returns may be new stock, damaged stock, open box or defective. The manufacturer's main concern is to satisfy the customer or distribution channel partner who is returning the goods by exchanging the unit, repairing the unit or issuing a credit. The returned units need to be processed and then returned to inventory, repackaged, returned to vendor, repaired or scrapped. The manufacturer needs to maximize value on these returned units by processing them quickly to yield the highest price through secondary market channels.

4. THE VALUE DELIVERY SYSTEM AND ITS PROCESSES BASED ON REVERSE LOGISTICS

4.1 Value Delivery System

Why are the value delivery systems considered to be the heart of every firm? Fundamentally, firms exist to create value, and value delivery systems based on reverse logistics serve as the vehicle to create that value. Regardless of whether the firm is for-profit or not-for-profit, primarily service or manufacturing, public or private, it exists to create value. Thus, nonprofit organizations like the Red Cross strive to create value for the recipients of their services. Generally, a value delivery system supplies a family of return products or services to manufacturers or recall centers (such as 3PRLs). A firm may have value delivery systems for different aims, and the value channels show bi-orientation. Traditional Supply Chain improvement strategies have tended to focus on forward logistics processes. New forces, and an understanding of the connection to revenue and customer satisfaction and environment, are moving reverse logistics higher in the supply chain agenda. Therefore, in practice, such value delivery systems are also called closed-loop systems and bi-orientation value delivery system. Considering return processes, the activities involve in supply chain show in following Figure 3.

Figure 3. Activities involve in supply chain

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A value delivery system based on reverse logistics consists of a set of distinct processes. In turn, each process takes inputs or outputs and transforms them through a series of activities into useful outputs, such as returned materials, or intermediate products or services within the value delivery systems. Throughout many people use the terms ‘process’ and ‘business process’ interchangeably to describe specific aspects of a value delivery system. Using the previous example, the university could be viewed as the firm, the school of management as a business unit within the firm, each program or students’ contribution as a different value delivery system serving its own target orientation, and each course within the program or student contribution to school as a process within the value delivery system.

Consider some other examples of value delivery systems: (1) An automobile assembly plant receives raw materials from its suppliers in the form of parts and components. These materials along with labor, equipment, information and energy are transformed within various assembly processes (e.g., frame assembly, body assembly, painting and seat assembly) into the output, automobiles, at the same time, companies and suppliers have a plan and make good decisions to get value out of returns, i.e., reverse orientation delivery. (2) A hospital is another organization with a service output. Here equipment, labor, and materia medica are applied to another input, the patient, through a serious of processes (admitting, testing, surgery, prescriptions, counseling, etc.) in order to transform him or her into a healthier or more comfortable person, and pharmacy or suppliers recycle materia medica from recovery.

4.3 Process Intent

Process intent (is commonly known in marketing circles as a value proposition)is a clear statement of what the value delivery system is intended to do, a strategic direction for the firm’s management and employees as well as position statement for target customers and environments on the role of the value delivery system. According to Hill (2000), clear process intent rarely occurs in practice, and unclear process intent causes confusion for customers, managers and employees. Many companies mistakenly assume that particular products or services compete in the same way in different markets, thus, failing to recognize how business is won, for example, the design for reverse logistics is often different ways between the products of mobile phones and materia medica.

In today’s competitive markets, customers and potential customers demand increased value from the firm’s offerings. Unmet needs and reverse logistics needs are gaps that arise among what customers require, ecosystem protects and what the firm delivers. If the firm expects loyalty from its customers and the interrelated environments, these needs must somehow be satisfied by its value delivery system. To improve the value delivery system, it is essential to first understand exactly who the target customers are, what they need, how much they are willing to pay to satisfy this need, what they are handling product return, and what the impact will be on sales and profits and ecosystem. A firm must understand the importance of each need and focus its limited resources on fulfilling the most important ones. There must be a means to translate needs as customers express them into company language. That is, the external process intent must be translated into the internal process intent. Internal process intent relies on performance characteristics, design specifications and performance measures, and performance targets to describe the unmet needs in terms the company can measure. Figure 4 shows some steps involved in preparing the process intent.

Figure 4. Preparation of process intent

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4.4 Process Model

A process model is a detailed statement of how work should be divided to satisfy the process intent. Figure 5 shows a logical set of steps in developing a process model. The first is to construct a process map that identifies major processes within the value delivery system. Second, critical processes are identified whose innovation or improvement would enable us to satisfy the process intent. Processes should be dissected and analyzed to uncover opportunities for improvement. We do this using a lean audit and process benchmarking. A lean audit looks internally at existing processes, while process benchmarking looks externally at existing processes or ones that need to be created. In addition to a statement of the process model, it is also important to establish within the process model a set of actionable, prioritized recommendations as to how to achieve the process intent in a profitable manner and stay there.

Figure 5. Development of process model

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5. OUTSOURCE PRODUCT RETURNS

Currently most retailers and manufacturers struggle with handling and processing returns internally. Many manufacturers will conclude that handling product returns is not a strategic core competency and will look for an outsourced provider, as they have done with forward logistics. Most retailers and manufacturers struggle with returns for many reasons such as: It is a small part of their business processes; Their prime focus is on getting new products to customers; They have difficulty understanding and monitoring costs; There is poor or no systems for managing the returns processes; A lack of a systems results in slow processing of the returns and the returned inventory; An inability to track or monitor inventory levels of returned stock; Few good channels exist to get value from their returned and processed units; Returns can be a significant problem if not managed well.

Without good systems in place significant individual attention is often required to manage a single return to competition.

Outsource logistics providers or 3PRLs are ideally suited to help handle reverse logistics and generate significant savings since reverse logistics is an easy extension of the existing business services of 3PL operations: Many of your existing customers likely already need help; You are already masters at many of the required processes; You are experts at managing outsourced projects; You are experts at tracking and managing inventory; You are already doing minor inspection work; You are already doing minor reconditioning or repackaging; You are likely to generate significant savings in shipping; Your ability to rapidly process transactions solves their key problem of slow processing.

To be successful you need to satisfy the goals of your customer and the goals your company as the following Table 1:

Outsourcing reverse logistics should be handled like other outsourcing decisions. The customers will be looking for: Cost savings - monthly costs, one time savings; Easy management; Regular status updates; One stop shopping - one provider who can handle as many of their requirements as possible; A partnership-the nature of returns will require a close working relationship.

Specific to reverse logistics handling clients will be looking for: Quality service for their customers -you may be an extension of your client's customer service group and will need to respond to their end customer's needs and requests; Rapid cycle time -through create, receive, ship or credit, inspect, recondition, recover; Accuracy - correct handling of units through each step of the required processes; Inventory management and minimization - of both finished goods and good in process; No misplaced or unhandled units; Visibility -status of a unit or RMA at any given time; Timely data updates - i.e. to process customer credits based on receipts; Reports; Detailed billing.

In the U.S. and Europe, consumer goods firms generally outsource logistics needs to 3PLs. Although 3PLs control a small share of the overall logistics market in China, they are growing in importance for multinational companies and organizations looking to set up or expand operations in China. 3PLs are essentially supply chain managers who subcontract some of their logistics requirements to container lines, trucking firms and airfreight companies. Many own assets such as distribution centers, warehouses and trucking fleets, and a growing number of providers are expanding to offer across-the-board services. For consumer goods companies looking to move their product into or around China, outsourcing to a 3PL can mean lower supply chain costs.

According to Morgan Stanley & Co. Incorporated reported in 2004, while 3PLs currently handle just 16% of final products in China, more foreign and local 3PLs will enter the market over the next five years (Storage Institute, 2005). The emerging 3PL industry in China may be categorized into four types: (1) Large SOEs (such as Sinotrans, COSCO and China Post) with extensive transport and warehousing assets, broad national networks, and strong relationships with central and provincial governments. These firms already enjoy a monopoly in several areas of trucking, shipping and postal services. (2) Medium-sized domestic logistics providers (generally privately owned), which focus on one or two key industries. (3) Logistics divisions of manufacturers and processors, primarily providing services to internal customers, but sometimes offering 3PL services to outside companies. The Shanghai Fruit Distribution Center is an example of a subsidiary company that has sought to internalize logistics needs. However, as an SOE, the division is struggling to update its facilities and compete with private counterparts. (4) Foreign logistics providers, including multinational firms, new wholly foreign owned entities (WFOEs) and smaller firms working in niche markets.

China’s leading 3PLs are large foreign companies licensed to operate as WFOEs. Also growing in importance are foreign companies that are currently restricted to operating as joint-venture partners or through free-trade zones (FTZs). In 2001, the government of Shanghai’s Pudong New Area lifted all restrictions on warehousing and logistics companies setting up operations in the Wai Gao Qiao Bonded Zone, equalizing their position with trading companies in the zone. Foreign companies are now allowed to operate these warehouses themselves to store a wide variety of raw materials, parts and other finished goods for onward sale and shipment into China. In Wai Gao Qiao, foreign operators generally maintain high-standard warehouses at their manufacturing facilities, which can double as regional distribution centers. A growing number of providers are “one-stop-shops” that offer wide-ranging import distribution services that extend beyond logistics. By 2006, all of these firms will be permitted to operate as WFOEs, and will be free to offer a wide array of services, provided they obtain the necessary licenses.

The current challenge for most companies is just getting a return fully processed, never mind effectively, inexpensively or in a timely manner. The management of reverse logistics is a painful process for manufacturers and retailers. It also represents a small part of their business and they are often not willing to commit the people, systems or resources to this area to manage it well. Few standards exist to define how to process and manage returns, but these processes are related to forward logistics processes. As a result, it is an easy extension of the existing 3PLs business, creating a lot of value for your customers. This translates into profits. Since there is room for improvement at your customers operations, the emphasis will be on organized delivery of good reverse logistics services, not on price.

While many 3PL's and outsource service providers claim to provide reverse logistics services, few are doing more than very basic receiving of a small volume of returned goods. There are several companies that have specialized in handling returned goods. Many of these companies appear to be very successful and growing.

6. EVALUATION MODELS

Since the complexity of reverse logistics, the evaluation for 3PRLs is difficult to be presented by the sole indicator, (i.e., if we want find the perfect synthesis evaluative system, the analysis based on the multi-angle and perspectives need to be considered). Therefore, the determinant indicator weights and the evaluation techniques become important considerations. They will decide if the overall evaluation models are excellent or bad.

Usually, the approaches for measuring the evaluating weights are involved in Analytic Hierarchy Process (AHP), Delphi, Entropy Value and Fuzzy Clustering Analysis, where the preceding two techniques are based on the experts’ knowledge, experience and value judgment. For example, the quantitative analysis recur to AHP, however, the subjective shortage is inevitably; the Entropy technique estimate is based on the external characters of historical data, the presupposition needs sample data existing and is short of the compare to the landscape orientation, so there are limitation in application; the Fuzzy Analysis is based on comparability of the historical data to classify for the evaluating indicators. It is easy to see, integrating these methods may reduce abovementioned shortages by each.

Among the evaluating techniques, Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and Grey Relational Analysis (GRA) are all using by constructing the ideal solutions and the negative ideal solution for the indicators evaluative problem, and take two benchmarks as the estimation base of the evaluating objectives (i.e., the adjacent ideal solutions and the removed negative ideal solutions). The traditional TOPSIS is based on the Euclidean distance by way of measures just to reflect the data curve location, but it couldn’t illustrate the data state change; the Grey Relational Analysis was used in the analogical degrees among curves to measure the correlation degree, which reflect the adjacent and removed degree of the curve geometrical comparability between the ideal solutions and the negative ideal solutions. Applying TOPSIS or Grey Relational Analysis respectively, that do nothing but calculates the solution optimization or not, then the results will be inadequate complete and impersonality, in this way, constructing the new nearness degree to reflect the location and the data curve comparability by combining with the Euclidean distance and the grey correlation degree.

In addition, the different indicators often have the various dimensions, so it is difficult to compare with those directly, the standardization processing for the initial decision-making matrix is necessary. Most of works were used to the linear transformation in [0,1], which just consider award no penalty. Using the different standardization processing may result in the different evaluating results, however, based on the “awarding optimization penalizing bad” principle, combining with the linear operator to standardize the indicators data is utility. To reflect the manufacturer practical demand impersonally and indicate 3PRLs by any possibility faithfully, the integrating decisions making technique will be applied, and determining the evaluating weights using by AHP and the entropy value technique, the ideal solutions nearness degrees are calculated using by TOPSIS and the Grey Relational Analysis, thereby, the a perfect indicators evaluating model may be set up. Herein, we consider add two parameters α, β into the model by way of the elasticity factors, where α denotes the decision maker cognize the proportions between subjective and impersonal factors, β reflect the decision maker considers nearness degrees for order preference based location and shape to add flexible monitoring and feasibility for decision making. To increasing the accuracy and practicability of the model, we need employ the linear transformation operator based on [-1,1] to the standardization processing for the indicators data.

The following evaluating model integrates with weight determined, indicator evaluated, standardized processing, elasticity factor etc., in this way, it is an integrated evaluating framework. Therefore, we can analyze all kinds of influencing factors for decision making in the round, and integrate the subjective experiences and the impersonal data, synthetically utilize the nearness degrees that reflected the similarity between distances and flexibility, and bring into play “awarding optimization and penalizing bad” advantages, such that the decision making calculating processes have substantial results in application and theory, and the results much more accuracy; otherwise, utilizing the elasticity factors will increase the agility for the model, and make for holding the evaluative keynote as a whole based on the manufacturer demands.

7. CASE STUDY

To further illustrate the practicability and feasibility of the model, a case for the Great Wall 3PRLs Co. is considered in this section. From the manufacturers’ viewpoints, the evaluating analysis of 3PRLs can be considered those aspects involving in managing level, information monitoring, vehicle types, network overlay, craft brother experience and expense etc. Using by Matlab7.0 and the abovementioned evaluating model, the order preference for the 3PRLs will be obtained.

The relative significant matrix A based the initial data follows:

Based on AHP, the weights of the evaluating indicators have the following form: P_i =(0.1584, 0.1893, 0.1980, 0.0483, 0.1503, 0.2558), and the maximum eigenvalue λ = 6.4203.

The initial data of all indicators based on selected service providers are shown in Table 3. Using by the normalized technique and the entropy value technique, the evaluating indicators weights follows: Q_i = (0.2216, 0.1460, 0.0448, 0.1688, 0.0047, 0.4141).

Suppose that the decision-maker identify proportions account for the subjective factors and impersonality factors relative to the indicator weights, i.e., α₁ = 0.4, α₁ = 0.6, respectively. From (6), the final indicator weight is

and the consistency test shows that CI = 0.0841, and CR = 0.0667 < 0.1.

Applying the linear transform operator on [–1,1] to the initial data, the normalized matrix U follows:

From (10), constructing the weighted normalized matrix V is as follows:

From (11), (12), we can deduce the ideal solution and the negative ideal solution $V_i^{+}$ and the negative ideal solution $V_i^{-}$

Computing the Euclidean distances $S_i^{+}$ and $S_i^{-}$ from the selected solution to the ideal solution and the negative ideal solution, respectively,

Thus, we can represent the grey relative degrees $R_i^{+}$ and $R_i^{-}$ from the selected solution to the ideal solutions and the negative ideal solutions, respectively

Suppose that the order preference based on the decision-maker selected the location and shape, respectively, i.e., β₁ = 0.7 , β₁ = 0.3 , then the final decision-making vector for the relative nearness degree C_i follows

According to the nearness degrees we can size that A≻D≻E≻C≻B≻F, and this shows the A is the optimum choice of the manufacturer under the known conditions, next one is D. From the numerical value results based on added the two elasticity factors α and β in the model, in this way, we can improve participant of the decision-makers, and decision-making is more accordance with the physical background and increase the flexibility for the model. Table 4 reveals that the results under the different α and β.

In a general way, the different α and β selected have an immediate effect on the decision-making of the manufacturer. Therefore, the decision-makers can be based on their preference to choose the parameters of α and β, and the problem can be regarded as the group decision-making problem based on the participators.

8. CONCLUSIONS

The feasibility and desirability of reverse logistics in market-motivated contexts are examined based on the China current in this paper. The interactions among the major barriers, which hinder or prevent the application of reverse logistics in China were analyzed. A key task of top management is to diagnose those barriers of reverse logistics that could be crucial to the survival of the organization in the future. Simultaneity, a value delivery system exists to create value for customers and environments by supplying needed products and services. Value delivery systems are at the heart of every firm and, more than anything else, determine whether the firm survives in the marketplace or disappear into bankruptcy or takeover. The processes and model of market-motivated reverse logistics value delivery system are discussed in this paper, and the processes content and model are presented. At the same time, based on the advantage of the third party reverse logistics providers (3PRLs) and outsourced service providers, an integrated evaluation model was built to select the three reverse logistics service providers using by the integrating decision-making methods in this paper. To reflect the comprehensive information, the Analytic Hierarchy Process and entropy approaches are applied to calculate the objective weights. A new kind of relative similarity degree was established by combining the Euclidean distance with the grey correlation degree. In the end, an example was demonstrated our conclusions.