TRTF

International Symposium Proceeding 2018

The Influence Of Reverse Logistic On Supply Chain

Performance (A Case Study Of Food And Beverage
Industry In East Java)
Niza Nurmalasari Nur Kamiliyah Firizqi Rino Ahmad Faizal Wiwin Widiasih
Student of Master of Student of Master of Student of Master of Department of Industrial
Management Department Management Department Management Department Engineering,Faculty of
Universiti of 17Agustus 1945 Universiti of 17Agustus Universiti of 17Agustus Engineeering
Surabaya Indonesia 1945 Surabaya Indonesia 1945 Surabaya Indonesia Universiti of 17Agustus 1945
niza.nurmala@ nurkamiliyahf93 rino.ahmadfaizal93 Surabaya Indonesia
gmail.com @gmail.com @gmail.com wiwin_w@untag-
sby.ac.id

ABSTRACT point-of-origin to the point-of-consumption in order to meet

Reverse logistics has become an important issue and gaining customers’ requirement (CLM,1999).
attention of organizations due to increase flow of the return
product. The purposed of this paper is to examine the Influence Moreover, which are many users will participate in this flow such
of Reverse Logistics on Supply Chain Performance mediated by as suppliers, manufacturers, retailers, and also customers. The
product life cycle, case study of food and beverage industry in behavior of firms with regard to the environment and corporate
East Java, Indonesia. The design of this research conducted is a responsibility plays an increasing role in determining consumer
cross sectional study using explanatory methods, and trying to choice (Hillenbrand, Money, & Ghobadian, 2013; Mohr & Webb,
explain the interrelationships between variables through 2005). Firms are finding that they must deal with a high level
hypothesis testing. The numbers of samples used were 30 uncertainty, which is not only technical in nature. It has been
respondents are practitioners and expertise as those who have the observed by companies that there is an increase in the flow of
authority to manage RL in food and beverage where located in returns of the product due to product recalls, warranty returns,
East Java, Indonesia. This data analysis technique is using SPSS service returns, end-of-use returns, end-of-life returns, and so on
22 and PLS (Partial Least Square). Based on the findings of this (Ravi, Shankar, & Tiwari, 2005). With continuing pressures to
study that reverse logistics has significant influence on Supply reduce operating costs while often incurring additional costs
Chain Performance mediated by of product life cycle. brought about the environmental restrictions, firms must be
concerned with the cost of returning materials associated with the
Keywords products that they deliver(Alshamrani, Mathur, & Ballou, 2007).
Reverse logistics; Product life cycle; Supply chain performance;
Indonesian Food and Beverage Industry.

INTRODUCTION
Supply chains are undergoing radical transformations due
to the mega competition taking place on a global scale(Ravi &
Ravi, 2006). Supply chain management is a relatively young
discipline that extends logistics by integrating the management of
operations with that of material and information flow (Handfield
and Nichols, 1999). Its initial focus was economic sustainability,
based on the premise that an integrated and efficient supply chain
potentially minimizes monetary risks and increases profit
(Fawcett, Magnan, & McCarter, 2008a, 2008b). To improve
efficiency, the supply chain must use modern techniques and
approaches, such as JIT purchasing, economic batch sizes,
strategy inventory, reverse logistics, and third party logistics
(Govindan, Palaniappan, Zhu, & Kannan, 2012).

Logistics has been defined as that part of the supply chain process
that plans, implements, and controls the efficient, effective flow
and storage of goods, services, and related information from

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1.1 Reverse Logistics in Food Industry
Many firms were focused particularly on the supply chain
activities to meet the customers’ demand that is forward supply
chains and logistics. Product returns are increasingly issue in According to (Vlachos, 2014) the major challenge for reverse
manufacturer and vendor which has received much attention. The logistics in food industry relies on the perishable nature of food
concept of reverse logistics has received growing attention in the and agricultural product which have short shelf life and require
last decades, due to competition and marketing motives, direct fast and efficient logistics operations. Even the smallest deviation
economic motives and concerns with the environment(Kaynak, in an organoleptic characteristic may create a food safety incident
Koçoğlu, & Akgün, 2014). However, today supply chains are and subsequently pose a possible threat to consumer’s health, is a
steadily implement reverse logistics strategies. clear indication that deviations from the promised food quality
may harm public confidence and generate distrust even among
According to the Ministry of Industry, the contribution of the food loyal customers. Poor reverse logistics can have devastating legal
and beverage industry to the non-oil and gas industry GDP (Gross and economic repercussions. The performance of reverse logistics
Domestic Product) reached 34.95 percent in the third quarter of is affected by many factors, which we found useful to review
2017. This performance result made the sector as the largest them under five research streams: food specific features, cost,
contributor to industrial GDP compared to other sub sectors. In competitive advantage, regulation and legislation, and
addition, these achievements have increased four percent information management.
compared to the same period in 2016. Meanwhile, its contribution
to national GDP was 6.21 percent in the third quarter / 2017 or up 1.2 Product life cycle (PLC) in reverse food
3.85 percent over the same period the previous year. Furthermore,
from the development of investment realization, the food and
beverage industry sector for domestic investment (PMDN) in the supply chains
third quarter of 2017 reached 27.92 trillion rupiah, an increase of
16.3 percent compared to the same period in 2016. Meanwhile, (Madaan & Wadhwa, 2007) proposed PLC analysis as a
for foreign investment amount to USD1.46 billion. tool to design analysis logistics operations and extract value from
returned products.
Furthermore, according to a study from the Economist Sustained that food quality management affects the
Intelligence Unit, Indonesia is the world’s second largest food supply chain performance (Van Der Vorst, Tromp, & Van Der
waster, binning almost 300 Kg of food per person each year. The Zee, 2009). Food quality elements are affected by many logistics
study, titled Fixing Food: Towards a More Sustainable Food functions such as packaging, loading techniques and handling,
System found that only Saudi Arabia is worse than Indonesia in temperature-controlled transportation and warehouse. Referring
food waste, throwing away 427 kg of food per individual on an to the food industry, supply chain performance is dependent on
annual basis. Worldwide, one third of all food produced annually how effectively uncertainty is managed at three levels of the
is lost or wasted costing us around one trillion dollars. This supply chain (Kumar & Nigmatullin, 2011):
problem is particularly sensitive in countries such as Indonesia, • The retailer, which is influenced by demographic
where millions of people still suffer from malnutrition. Precisely, changes, competitive forces and inflation
7.6 % of the 260 million populations suffer from malnutrition. In • The distributor and manufacturer, which are affected by
this aspect, Indonesia is only better than Ethiopia (32 %) and India bullwhip affect
(15.2 %). Food wastes can be attributed to a number of factors • Customer demand, which can have unpredictable
such as excess buying, premature harvesting, inadequate labeling patterns.
and storage instructions, poor storage facilities and transportation,
production errors, trial runs, packaging defects, and wrong
weights and sizes (FAO, 2011; Vlachos, 2014)
Based on the above phenomenon with the increasing number of
food industries and through food waste is a serious and costly
issue to the Indonesian government. The significant of reverse
logistics in the food industry is evident in the requirement to
provide quality and safe food to consumers without posing any
threat on human health, wellbeing and the environment(Vlachos,
2014). The research contribution of this study is to review the
relevant literature and propose framework of indicators to test the
research objective of this study. The contribution to practice of
this study is that it offers specific managerial implications based
on previous study and suggestions to manage reverse food
logistics that helps reduce waste throughout the food supply chain
and increase value from returned products especially in East Java
Food Industry.
Figure 1: PLC position of reverse logistics (Source : Madaan &
Wadhwa, 2007)
LITERATURE REVIEW
The typical PLC is comprised of four phases (Figure 1);
a product introduction phase that is characterized by investment
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TRTF International Symposium Proceeding 2018

in product research and development, a growth phase Table 1: Percentage of participation: forward logistics vs reverse
characterized by increasing production capacity and logistics logistics
channels, a maturity phase where process and cost efficiencies are Raw
typically implemented, and a decline phase where the focus is on Product Material Manufacture Distribution Retailing Other Total
product disinvestment (Madaan & Wadhwa, 2007). Non-
dairy
1.3 Supply Chain Performance Metrics Product 0.00% 6.67% 0.00% 0.00% 0.00% 6.67%
Dairy
Improving supply chain performance has become a Product 0.00% 3.33% 0.00% 3.33% 0.00% 6.67%
challenge for companies aiming to sustain their competitive Noodle 0.00% 0.00% 3.33% 0.00% 0.00% 3.33%
advantage (Cai, Liu, Xiao, & Liu, 2009; Estampe, Lamouri, Paris,
& Brahim-Djelloul, 2013). The SCOR (Supply chain operations Bakery 6.67% 3.33% 3.33% 0.00% 10.00% 23.33%
reference) model emphasizes the operational process and includes Biscuit 0.00% 13.33% 0.00% 0.00% 0.00% 13.33%
customer interactions, physical transactions, and market
interactions. SCOR model has been increasingly adopted by the Snack 10.00% 10.00% 0.00% 0.00% 0.00% 20.00%
company to improve their supply chain (Huang, Sheoran, &
Frozen
Keskar, 2005). Food 3.33% 0.00% 6.67% 0.00% 0.00% 10.00%
(Vlachos, 2014) has been examined the reverse logistics
performance by using Key Performance Indicators in the food Coffee 3.33% 0.00% 0.00% 0.00% 0.00% 3.33%
industry, there are:
Other 0.00% 6.67% 0.00% 6.67% 0.00% 13.33%
• Speed
• Flexibility Total
100.00
• Quality/Reliability 23.33% 43.33% 13.33% 10.00% 10.00% %
• Sustainability: Economic Performance
• Sustainability: Environmental Performance
• Sustainability: Social Performance RESULTS AND DISCUSSION
We run SPSS 22 as samples test and run 2 tailed to paired
differences between forward and reverse logistics with 6
Research Method performance measures. There were no significant differences in
The research method is basically a scientific way to get all dimensions of performance. This finding also support the
data with specific purposes and uses (Sugiyono, 2017:2).
argument that reverse logistics operations do not receive the
Associative analysis aims to determine the influence or also the required attention from managers who tend to focus on forward
relationship between two or more variables, where this study is to chains (Vaidyanathan and Yadong (2007) in Vlachos, 2014).
know the influence of the reverse logistics on the supply chain
performance mediated by of product life cycle. The type of
research conducted is a cross sectional study using explanatory
methods, and trying to explain the interrelationships between
variables through hypothesis testing. The approach of this study
used is quantitative, which includes the development of empirical
models and measurements based on theoretical studies, data
collection using questionnaires and Likert scale, then testing of
the hypotheses built. Likert scale is used to measure attitudes,
opinions and perceptions of a person or group of people about
social phenomena (Sugiyono, 2013:132). Table 2: Paired samples test between forward and reverse
This study use non-probability techniques, where the
sampling uses in this study is purposive sampling. Positive logistics
sampling technique is a sampling technique using certain
considerations (Sugiyono, 2016:85). Samples taken are
companies that implement reverse logistic system and the Paired Samples Test
respondents are practitioners and expertise as those who have the Paired Differences
authority to manage RL (i.e. expertise of logistics, warehouses,
transportation / distribution, production, planning and production
Sig. (2-
and inventory control, procurement and marketing) in food Paired Differences Std. t
Mean tailed)
manufacturer companies located in East Java. Deviation
Table 1 present sample distribution of by the industry and
supply chains and the questionnaire were distributed to 30
respondents. Moreover, Questions that address a sensitive subject Speed -.05633 .73196 -.422 .676
(e.g., financial performance) may increase the potential for Flexibility .03400 .66472 .280 .781
response bias. Therefore, this study avoided collecting sensitive
Reliability and
data and information (Vlachos, 2014).
Quality -.03133 .47870 -.359 .723

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Sustainability:
Economic .02300 .57335 .220 .828
Sustainability: -
Environmental -.11600 .63523 1.000 .325
Sustainability:
Social .21967 .74289 1.620 .116

To identify amongst variable we run PLS. The significant effects

are those variables with a p-value ≤ 0.05 and had statistically
significant effect on the result.

Table 3: Path Coefficients with PLS

Path Coefficients

Sampl
Standard T Figure 2: Path diagram analysis PLS
Original Deviatio Statistic
Sample
e
Mean
n s
P
Values
Discussion and conclusions
(O) (STDEV (|O/ST The study examines the influence of reverse logistics on supply
(M)
) DEV|) chain performance mediated by product life cycle in food
RL * PLC - industry, in East Java, Indonesia. Moreover, in their
> SC implementation of reverse logistics systems were improving their
1.201 0.260 0.567 2.118 0.045
Performan supply chain performance for the companies to be effective and
ce
efficient. The role of supply chain performance metrics or KPIs it
PLC -> SC can help the company to measures the performance of their supply
Performan 1.480 0.208 0.638 2.320 0.000
ce
chain system in achieving reverse logistics objectives related to
cost containment and improved profitability. These findings are
RL -> PLC 1.421 0.743 0.583 2.437 0.026 supported by the work Vlachos (2014).
RL -> SC Furthermore, it was recommended that the company
Performan 2.812 0.200 0.799 3.519 0.018 implement the reverse logistics system and integrate all the
ce functional area that affect or can be affected by the returned
product especially in food industry in relies on the perishable
which have short shelf life and require fast and efficient logistics
RL has a significant effect on the product life cycle and operations in order more efficiently. Future researchers should
product life cycle on SC performance (table 2). In line with evaluate between forward and reverse logistics with different
Vlachos (2014) that all food products go through the same stages modeling by considering the barriers affecting performance
of product life cycle which include: measurement in food and beverage industry in Indonesia.
• Introduction stage: characterized by low sales and low
return rates
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