Value creation through reverse logistics in used clothing networks

• Date: 14 August 2017
• DOI: https://doi.org/10.1108/IJLM-11-2016-0272
• Published date: 14 August 2017
• Pages: 864-906
• Author: Rudrajeet Pal
• Subject Matter: Management science & operations,Logistics

Value creation through

reverse logistics in used

clothing networks

Rudrajeet Pal

Department of Business Administration and Textile Management,

University of Borås, Borås, Sweden

Abstract

Purpose –The purpose of this paper is to identify the major reverse logistics design aspects in used clothing

value chains, and those enabling and challenging manifestation of value creation.

Design/methodology/approach –This research is based on an exploratory study of 12 established

organizations in Swedish used clothing networks. Data were gathered through semi-structured interviews,

secondary sources, and subsequent field visits.

Findings –Empirical insights on how various design aspects influence value creation in used clothing value

chains are provided. Crucial among these are strategic and consistent collection, presence of multi-channel

sales, and communication of post-retail concepts for manifesting value by bolstering consumer satisfaction,

environmental motivation, and corporate image. Inter-organizational collaboration in reverse logistics

processes and workplace training, further renders higher economic, environmental and information values.

Research limitations/implications –The paper proposes a holistic framework of design aspects in

reverse value chains, and extends existing knowledge on how these aspects manifest value creation. By doing

so, a nuanced view of the design aspects is offered by highlighting how they can differentially, either

enable, or challenge value creation. In this connection, seven supporting propositions are developed for

in-depth future research.

Practical implications –The paper includes implications for the devising strategic solutions for

higher value creation, by understanding of the key enablers and challenges, for many actors in the used

clothing networks.

Originality/value –The role of various design aspects in reverse value chains for manifesting multifaceted

stakeholder value creation is explicitly defined in the paper.

Keywords Sweden, Value creation, Value chain, Reverse logistics, Used clothing

Paper type Research paper

1. Introduction

In recent years, reverse logistics practices have gained growing prominence in many

industries ( Jayaraman and Luo, 2007; Kumar and Putnam, 2008; Govindan et al., 2015),

vis-à-vis the increase in environmental and sustainability concerns (Thierry et al., 1995;

Prahinski and Kocabasoglu, 2006). Such reverse logistics and recovery activities comprising

remanufacturing, refurbishing, or recycling aim at recovering higher value for all

stakeholders (Thierry et al., 1995; Rogers and Tibben-Lembke, 2001). Amidst this growing

strategic importance, reverse logistics practices are increasingly related to value creation

( Jack et al., 2010; Skinner et al., 2008; Fleischmann et al., 2004), and firms have strived

toward reverse logistics for generating competitive advantage ( Jayaraman and Luo, 2007).

The clothing industry, in particular, unites a variety of the world’s most resource

draining and environmentally stressing industries (Fletcher, 2008), thus has received

growing attention among both scholars and practitioners in terms of reuse, end-of-life,

recovery options, etc. (Tibben-Lembke and Rogers, 2002; Svensson, 2007) –thus motivating

The International Journal of

Logistics Management

Vol. 28 No. 3, 2017

pp. 864-906

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-11-2016-0272

Received 4 November 2015

Revised 2 August 2016

26 October 2016

22 November 2016

3 December 2016

Accepted 8 December 2016

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

This research is a part of Re:textile, an extended regional research initiative taken by Västra Götaland

Region (Region of West Sweden). The author has received funding for conducting this research work.

The author would also like to thank his graduate students, Emelie Johansson and Matilda Nyström, for

their support during the interview process.

864

IJLM

28,3

various reverse logistics activities, typically including acquisition, grading, reprocessing,

and redistribution (Abraham, 2011; O’Reilly and Kumar, 2016). This has resulted in

increasing post-retail initiatives undertaken by various actors, by focusing on reverse

logistics, through adoption of various strategies, such as product take-back schemes, resell/

reuse, etc. to capture higher value through resell (Hvass, 2014). However, in the used

clothing networks in western economies, majority of the actors are engaged voluntarily with

low levels of strategic collaboration thus making the system highly fragmented and

complex (Ekström and Salomonsson, 2014; Brooks, 2013). Such fragmented collection

system further introduces uncertainties in the quality, quantity, and timing of product

returns (Anderson and Brodin, 2005; Halldorsson et al., 2009).

Even though previous research has suggested the importance of reverse logistics for

delivering higher financial performance ( Jayaraman and Luo, 2007; Jack et al., 2010),

increased customer satisfaction (Skinner et al., 2008; Fleischmann et al., 2004), improved

brand image (Fleischmann et al., 2004; Jayaraman and Luo, 2007), or information flow

( Jayaraman et al., 2008; Huscroft et al., 2013); the general challenges in reverse value chains

posed by such complexities and uncertainties hinder the successful implementation and

functioning of reverse logistics thus limiting the value creation potential ( Jayaraman and

Luo, 2007) –as in the case of used clothing networks. Additionally, the existing literature on

manifestation of value creation in reverse value chains is still scattered and lacks a wider

stakeholder perspective (Schenkel et al., 2015; Bernon et al., 2011). Hence, despite the

importance of, and rationale behind efficient reverse logistics –the rewards and advantages

still remain to be exploited fully –in terms of value creation (Skinner et al., 2008;

Bernon et al., 2011). Given such rising importance of value creation through reverse logistics,

it is thus timely to explore the design aspects in reverse value chains that would support its

future development.

This in particular calls for a holistic attention toward various aspects of reverse logistics

design, such as network structure, process r equirements, product return quality,

distribution routes, inventory management, information availability and collaboration,

pricing mechanisms and costs, etc. (Tibben-Lembke and Rogers, 2002; Jayaraman and

Luo, 2007; Fleischmann et al., 2004; Bernon et al., 2011; Daugherty et al., 2005) –by

leveraging upon which firms could create “new”value stream in reverse value chains for

improving competitiveness. To address this, the purpose of the paper is to identify the major

design aspects in reverse value chains required to manifest higher value creation, through

the interesting case of used clothing networks.

In this context, the concepts of “value”and “value creation”can be elusive as they can be

addressed at different levels of analysis (Lepak et al., 2007). Briefly revisiting the concept of

“value”at the firm level, it is generally defined as the economic implications of any process

performed to create a product/service that a customer would be willing to pay for

(Peteraf and Barney, 2003; Porter, 1985). On a similar note, “value”is also defined as use and

exchange values, wherein use value or value-in-use is defined as the customers’

perception of the usefulness of the product while exchange value refers to the monetary

price that the buyer is willing to pay for the offered product/service (Bowman and

Ambrosini, 2000; Lepak et al., 2007).

However, in light of the manifestation of “value”in reverse value chains, firms act as a

source of value created beyond their own economic interests, and in many ways target a

wider network of external stakeholders, such as society and environment (Lepak et al., 2007;

Mathur and Kenyon, 1997). Thus, the value created might yield return to stakeholders well

beyond such economic benefits, such as to environment and society (Davis and Kay, 2013).

On similar lines, Mathur and Kenyon (1997) have highlighted that the environment is

increasingly seen as an important stakeholder toward which the firm must also create

ecological value. More recently, Schenkel et al. (2015) have presented in their systematic

865

Reverse

logistics in

used clothing

networks

literature review five generic value types; these are economic, information, customer,

environmental, and image –thus covering both intangible and tangible perceived benefits

for multiple stakeholders in the value chain, such as the retailers and manufacturers, their

customers, suppliers or the environment and society at large.

Hence for the purpose of this paper, keeping in mind the multi-stakeholder perspective of

different value types in accordance to Schenkel et al. (2015), value is defined as the perceived

multiple benefits created through appropriate reverse logistics ( Jayaraman and Luo, 2007),

and generated both internally in a focal firm, but also externally, e.g. among other members/

actors of the reverse value chain. By adopting such a multi-stakeholder perspective toward

value, this study offers a new lens to address manifestation of value creation through

holistic reverse value chain design within the used clothing network, and in doing so also

deepens the general understanding of the conceptual framework for value creation through

reverse value chain design. Theoretically, the research draws upon the reverse logistics

literature to prescribe the design aspects necessary to enable such diverse value creation.

The remainder of this paper is structured as follows. First, a succinct description of the

used clothing network offering an empirical context for this research is provided, followed

by an overview of the five different value types as adopted in the paper. This is followed by

a detailed review of the reverse logistics literature aimed at developing a conceptual

framework of the design aspects in reverse value chain, along with proposal of more

concrete research questions. Thereafter, the methodology section explains the research

approach and selected cases. Subsequently, the findings and discussion sections present the

key design aspects enabling and challenging value creation in the used clothing network,

followed by identification and prescription of the evident patterns –within the reverse value

chain design framework –in the form of testable propositions. In the end, the conclusions

from the study are drawn and future research areas are developed.

2. Contextual setting: reverse value chain in used clothing networks in

western economies

A commercial chain for used clothes requires several steps for reclaiming value, such as

collection and sorting, refurbishing (e.g. repairing, washing) and is sometimes followed by

value-adding steps like redesigning/upcycling. As a matter of fact, many equivocal terms,

such as reuse, remanufacture, upcycle, etc. have semantically overloaded the extant

discussion but to draw a consensus, reuse value chains refer mostly to those where the

product output is mainly in the form of clothes “as they are”in their first life or with minor

modifications thus requiring low degrees of reconditioning (Abraham, 2011).

Remanufacturing of clothes is a new and emerging phenomenon which aims at remaking

of used clothes through various redesign possibilities in an industrially scalable way so that

they are at least equal to newly manufactured garments in terms of quality, in contrast to

craft-based upcycling mainly led by niche and small scale redesign brands (Dissanayake

and Sinha, 2015).

In the reuse value chain, through a series of interconnected complex reverse logistics

activities led by a number of different actors, such as retailers and resellers, charities,

commercial sorters/recyclers, used clothes regain new economic value for new purposes and

customers, as clothes, or sometimes converted into other products (e.g. home furnishings).

Mapping of the flow of used clothing reveals that majority of these actors are involved with

collection through diverse channels, thus resulting in a very fragmented and complex

structure (Carlsson et al., 2011; Ekström and Salomonsson, 2014). The charities are by far the

largest collector, as they collect material directly from consumers through multiple channels

or through donation partnerships with clothing retailers and brands. Reverse logistics

activities conducted by different charities vary, but generally include collection, sorting,

repairing, and sales of clothes to both consumers and to commercial recycling and sorting

866

IJLM

28,3