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REVERSE LOGISTICS IN VIETNAM: THE CASE OF ELECTRONICS INDUSTRY HansChristian Pfohl , Ha Van Thi Nguyen Abstract – Reverse logistics in Asia has not reached the same level as its operations in Europe. However, the effort of many countries in this region as well as the attraction of the profitable recycling has stimulated the development of reverse logistics system. This paper analyzed opportunities and challenges for reverse logistics in Vietnam in the case of electronics industry in systematically different perspectives: consumption and disposal of electronic products, related regulations, consumer awareness, and practical returns management. To this end, we implemented a crosssectional survey triangulated with semistructured interviews with households. In addition, we conducted case study with four companies to explore returns management in practice. The findings support us in proposing some solutions for implementing reverse logistics in Vietnam.Key words – Electronics Industry, Reverse Logistics (RL), Extended Producer Responsibility (EPR), Returns Management, Endoflife products (EoL)INTRODUCTIONReverse logistics (RL) has received increasing attention because of recaptured value from returned products, law enforcement, consumer awareness, and corporate responsibility towards environment 13. Reverse logistics can be defined in the economic or ecological aspects, or we can utilize both perspectives to explain about the concept of RL 37. Reverse logistics is the process of moving goods from their typical final destination for capturing value, or proper disposal 1,8. It refers to the role of logistics in recycling, waste disposal and management of hazardous materials, as well as in processing returned merchandise due to damage, quality problems, seasonal inventory, salvage, recalls, and reposition inventory 9,10. In recent years, considerable benefits gained in handling returned products have attracted more companies in Asia getting involved in reverse logistics. Reverse logistics is one of the tools that companies use to improve aftersales service through repair work, product disposal, delivery of spare parts, and complaint management to end users 11 . The value of the AsiaPacific returns market was estimated at 0.78 billion 12, evidently less than that in US and EU, but still increasing. Electronics industry is one of the sectors that have good reverse logistics system in Asia. Service parts distribution points commonly used in the reverse supply chain powers the electrical and electronic industries 13 and effective returns management improves customer’s loyalty to firms.Each country in Asian has made efforts to develop a reverse logistics network in line with the recycling trend. There is a great disparity in the extent of recycling efforts in countries in Asia. Countries such as Taiwan, Japan, and South Korea have dynamic reverse logistics in waste management and recycling industries as the result of extensive environmental regulations 14. In other emerging economies such as Philippines, Indonesia, and Vietnam, the basic conditions including takeback laws and recycling facilities necessary to deal with product recovery issues have just been set forth for few years.Vietnam, with a population of nearly 90 million, reached the GDP growth around 7% over the last ten years, which surpasses that of many countries in the region. Vietnam moved from the group of poor country to the one of average income with GDP per capital nearly 1,200. A thriving private consumer market, which makes up nearly twothirds of total GDP, means an increase in consumption of goods supported by rising incomes. Over 30% of the population living in cities, increasing disposable income and greater exposure to new lifestyle trends have resulted in growing retail demand, which topped almost USD 65 billion in 2009 and nearly tripled to that in 2004 15. The trend of urbanization and increasing consumption in Vietnam has denoted the large amount of discarded products and waste.
REVERSE LOGISTICS IN VIETNAM: THE CASE OF ELECTRONICS INDUSTRY Hans-Christian Pfohl 1, Ha Van Thi Nguyen2 Abstract – Reverse logistics in Asia has not reached the same level as its operations in Europe However, the effort of many countries in this region as well as the attraction of the profitable recycling has stimulated the development of reverse logistics system This paper analyzed opportunities and challenges for reverse logistics in Vietnam in the case of electronics industry in systematically different perspectives: consumption and disposal of electronic products, related regulations, consumer awareness, and practical returns management To this end, we implemented a cross-sectional survey triangulated with semi-structured interviews with households In addition, we conducted case study with four companies to explore returns management in practice The findings support us in proposing some solutions for implementing reverse logistics in Vietnam Key words – Electronics Industry, Reverse Logistics (RL), Extended Producer Responsibility (EPR), Returns Management, End-of-life products (EoL) INTRODUCTION Reverse logistics (RL) has received increasing attention because of recaptured value from returned products, law enforcement, consumer awareness, and corporate responsibility towards environment [1-3] Reverse logistics can be defined in the economic or ecological aspects, or we can utilize both perspectives to explain about the concept of RL [3-7] Reverse logistics is the process of moving goods from their typical final destination for capturing value, or proper disposal [1,8] It refers to the role of logistics in recycling, waste disposal and management of hazardous materials, as well as in processing returned merchandise due to damage, quality problems, seasonal inventory, salvage, recalls, and reposition inventory [9,10] In recent years, considerable benefits gained in handling returned products have attracted more companies in Asia getting involved in reverse logistics Reverse logistics is one of the tools that companies use to improve after-sales service through repair work, product disposal, delivery of spare parts, and complaint management to end users [11] The value of the Asia-Pacific returns market was estimated at $0.78 billion [12], evidently less than that in US and EU, but still increasing Electronics industry is one of the sectors that have good reverse logistics system in Asia Service parts distribution points commonly used in the reverse supply chain powers the electrical and electronic industries [13] and effective returns management improves customer’s loyalty to firms Each country in Asian has made efforts to develop a reverse logistics network in line with the recycling trend There is a great disparity in the extent of recycling efforts in countries in Asia Countries such as Taiwan, Japan, and South Korea have dynamic reverse logistics in waste management and recycling industries as the result of extensive environmental regulations [14] In other emerging economies such as Philippines, Indonesia, and Vietnam, the basic conditions including take-back laws and recycling facilities necessary to deal with product recovery issues have just been set forth for few years Vietnam, with a population of nearly 90 million, reached the GDP growth around 7% over the last ten years, which surpasses that of many countries in the region Vietnam moved from the group of poor country to the one of average income with GDP per capital nearly $1,200 A thriving private consumer market, which makes up nearly two-thirds of total GDP, means an increase in consumption of goods supported by rising incomes Over 30% of the population living in cities, increasing disposable income and greater exposure to new lifestyle trends have resulted in growing retail demand, which topped almost USD 65 billion in 2009 and nearly tripled to that in 2004 [15] The trend of urbanization and increasing consumption in Vietnam has denoted the large amount of discarded products and waste The concept of reverse logistics is still relatively new in both academic research and management attention in Vietnam because little value is attributed to customer service and environmental issues seem to be less important Returns management process is commonly not a major component of firms’ business, Prof Dr Dr h.c.Hans-Christian Pfohl, Technische Universität Darmstadt, Department of Management and Logistics, Darmstadt, Germany, pfohl@bwl.tu-darmstatd.de Ha Van Thi, Nguyen, nguyen@bwl.tu-darmstadt.de ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY especially in Vietnam where 97% of companies have small and medium sized business (SMEs) However, reverse logistics is steadily employed in practical business due to increasing competition to satisfy customer and transformed market opportunities, e.g the growth of retail market in Vietnam Most companies concentrate primarily on the management of returns from consumer in warranty period, but they are lacking in awareness of reverse logistics In Vietnam, reverse logistics is also reviewed by its roles in informal collecting and recycling system of End-of-life products (EoL), particularly with packaging waste, waste paper, and discarded electronics products Vietnam has recycled wastes informally for decades with the involvement of different partners such as households, informal collector, junkshops, scrap dealers, and recycling villages However, the system causes risks for environment, bad influences on public health and waste of recyclable materials Due to economic growth, and fast urbanization, the system is transforming to conventional or municipal system of waste management [16], especially in urban areas The conventional system handles practically only a minor fraction of the potential discarded products generated by industries, shops, institutions, and households [16,17] The existence of social groups associated with waste work, low public awareness, and the shortage of infrastructure and technology are challenges for developing a formal waste management model Consequently, there exists in Vietnam a mix of municipal system, private enterprise, and informal recycling, in which the application of RL is at the infant stage Reverse logistics is just at the beginning stage in most industry sectors in Vietnam, increasingly popular with electronics industry because of the increasing consumption of electronics products and the growing amount of discarded products such as television, personal computers and mobile phones To date, there are in Vietnam only a few studies on RL where public awareness, environmental legislations and infrastructure are still deficient The author in [18] conducted his research on recycling system of electronic appliances in Vietnam The study in [19] also mentioned building and testing model of collecting used battery Therefore, the paper aims at exploring the opportunities and challenges for RL in Vietnam in the case of electronics industry in systematically different perspectives: consumption and disposal of electronics products, related regulations, awareness and behaviors of consumers, and practices of returns management METHODOLOGY A cross-sectional survey collects data to make inferences about a population of interest at one point in time [20] We conducted the survey with 158 households by semi-structured interviews in Hanoi and two provinces in Northern of Vietnam during the field trip within one month Given the difficulties of getting households to agree to be interviewed, the sample was an opportunistic one, with the ones drawn from among people who already knew us and were willing to join Most of the households selected have an average of four persons and belong to middle or high income group in urban (55.7%) and rural (44.3%) area because only families that possess many electronic products could more easily reply to the related questions Because of the limited size of the sample population, the result might have limited representativeness for the general situation However, semi-structured interviews implemented with open circumstances allowed for focused, conversational, and two-way communication, which made the households express their opinions of environment issues, disposal behavior of discarded products, and their satisfaction of firms’ returns policy Statistical analyses were conducted with structured questions by using SPSS ® version 17.0 Differences in propositions of demographics, data of electronics products used, related attitudes and behaviors of using, disposing, and returning were compared using frequency statistics and Chi-square test The significant level was set at p-value ≤ 0.05 In addition, a qualitative research method through case study was chosen for understanding of returns management in practice We used in-depth interview because it is flexible and allowed new questions addressed during the interviews based on the response of the interviewees The in-depth interviews contains closed-ended, multiple choice and scale type questions relating to different aspects of returns management We selected four cases in this study following their main products and services as well as their scale, referred to as A, B, C, and D because of commercial confidentiality reasons Two of them are foreign manufacturers, the other is local distributor with a retail chain of electronic products, and the rest one is a big local manufacturer During the visits, we discussed with senior managers of logistics and marketing functions and each interview lasted nearly 60 minutes The interviews focused on issues related to specific practices of reverse logistics including the awareness of the related laws, their understanding of reverse logistics, their return policy, ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY drivers, barriers for implementing of reverse logistics, and their practical operations of returns management For the analysis, we adopted cross-case comparison The analysis discussed in the next part will explore the opportunities and challenges for reverse logistics in Vietnam ANALYSIS AND FINDINGS Consumption and Disposal of Electronics Products Production of the Vietnam electronics industry reached $3.2 billion in 2008 with a stable growth rate of 21% percent year on year, in which 33% of total production was accounted for by consumer equipment, 34% by computer products and parts, 18% by components, and 8% by communication products [21] In 2008, export turnover were over $3.0 billion, 35% higher than a year earlier, dominated mainly by foreign giants, accounting for over 80% Meanwhile, Vietnam’s import for electronics and components is continuously increasing from nearly $1.5 billion in 2004 to $5.1 billion in 2010 because of rapidly growing consumption, opening the retail market, and along with tax reduction roadmap under the Trade Partnership Agreements with Japan, China and Asian countries The Vietnamese electronics industry has drawn large sums of foreign capital because of the low-cost labor and favorable government policies toward foreign investors for the recent years Many Japanese consumer electronics firms such as Sony, JVC, and Toshiba have formed joint ventures with Vietnamese state enterprise since the mid 1990s to enter the domestic market and are now assembling different kinds of products Korean firms such Samsung, LG arrived somewhat later, and followed by growing Chinese firms in the 2000s [22] From simply assembling imported components, Vietnamese firms can design products bearing Vietnamese trademarks and manufacture for export However, the number of domestic enterprises with capacity to compete has been tiny due to the shortage of long-term strategy and resource commitments Foreign companies, especially from Japan and Korea, countries in which specific domestic laws of extended producer responsibility (EPR) were established, dominate Vietnam electronic market presently Vietnam is a fast developing economy in Asia Due to the improvement of the standard of life over recent years, the demand for electronic products is on the increase According to the market survey by GfK Vietnam, a Vietnamese person spent $36.2 on electronic and IT products on average in 2007, over 27% compared to the number of $28.4 in 2006, especially in telecom fields with mobile phones and laptops [23] Additionally, more than half of Vietnam’s population is age 30 or younger and ready to spend on high tech products, which means that the demand for products of high value and advanced technology is continuously rising in the coming years Vietnam is ranked as among the world’s most promising retail markets because of growing personal income, consumer spending, and the increasing number of young people [15,21] Vietnams’ retail market has grown steadily at a 12% annual rate, which includes more than 400,000 traditional retail stores, 400 supermarkets, 60 commercial centers, and 2000 convenience stores [23,24] By 2010, the number of supermarket increased by 62% and the building boom is creating shopping centers that expand the current base by 150% [23] Vietnam’s annual retail market for consumer electronics and high tech is estimated to surge 26.1% to the equivalent of $2.3 billion, in which the largest growth is coming from sales of mobiles phone, color TV sets, DVD players and other video equipments, especially in urban areas [25] Demand for white goods, particularly washing machines, has been strong in recent years Sales of washing machines grew by over 11% a year between 2002 and 2007 Demand for consumer electronics has accelerated quickly, reflecting both rising incomes and easier access to such products The cross-sectional survey showed that the households in urban have the higher rate of having electronic products, in which mobile phone and TV are in the highest ranking, followed by computers, refrigerators, washing machine and air conditioner [26] (Table 1) TABLE Average Number of Electronics Products Possessed per Household Area Urban area Rural area Refrigerator 1.0455 7000 Washing machine 8977 1714 Television Computer 1.8182 1.1714 1.4545 5571 Mobile phone 2.9545 1.7429 ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY Air conditioner 1.1818 1000 Discarded electronics products are estimated to continuously increase in urban areas due to the more affluent lifestyles, larger quantity of commercial activities, and more intense industrialization [27] Additionally, due to the trend of remarkable price erosion of electronic products [25], it is often cheaper to buy new one than to repair it Hence, the rate of disposal has been on the rise The author in [18] predicts that, in 2012, about 5.69 million units or 176 thousand tons of home appliances will be disposed and 17 million units or 563 thousand tons in 2025, showing the rapid increase in discarded electronics products in Vietnam in the near future Most of the used electronics products are not safely disposed in Vietnam The informal collectors pay consumers a positive price for their discarded products They, in turn, sell their collections to traders who aggregate and sort different kinds of waste and then sell them to recyclers, who recover the metals The informal system including more than 1000 establishments with thousands of collectors is regarded as the savior for Vietnam recycling system [28] Although there have been significant improvements by the public urban environmental companies that are responsible for municipal waste collection and disposal, proper handling of hazardous waste remains severely limited Consumers are largely accustomed to informal recycling instead of municipal collecting system because of economic benefits, and without information about environmental issues caused by discarded products The roles of logistics in separating, collecting, handling and recycling discarded electronics products have not been fully implemented in Vietnam To date, Vietnam has a chain of 180 recycling villages allocated over the country with different methods of collecting and recycling [29] It is approximately 95.2% of e-waste recycled in recycling villages in Vietnam, which produced the huge volume of 700,000 tons of products and materials annually [30] Most of the recycling villages have small-sized business without the authorized license, and apply the outdated technology of recycling with low capacity and efficiency The rapid increase in discarded electronics products causes harmful effects on the environment and public health, unless a proper treatment system is introduced [18] A gradually increasing trend of collaboration among the recycling villages and government supports are good signals to develop a better treatment system in near future [19] Applying new technologies and reverse logistics with modern collecting model implemented in many developed countries is necessary but very costly because it requires more investments in enhancing public awareness, negotiating, and coordinating with the industry as well as in implementing the enforceable laws Some examples of establishing the formal collecting and recycling system without acknowledging the currently traditional system were failure to perform in practice [16] The challenge is to base on the actual circumstance of Vietnam to develop a suitable model that brings benefits for all partners participating in the current networks Therefore, there is a strong need to prepare a good framework of related laws, to understand local socio-cultural factors, and to have more knowledge of reverse logistics The next part mentions the issues related to regulations for developing of take-back laws in Vietnam Regulations of Implementing Take-back Responsibility Vietnam did not have any specific laws on management of discarded electronics products such as WEEE Directive in Europe or the Law for Recycling of Specified Kinds of Home Appliance (LRHA) in Japan However, there are nowadays more regulations directed to EPR principle for EoL products It is necessary to mention Article 67 in the Law on environmental protection (2005) that regulates the responsibility of the producer for discarded products including: (1) battery, accumulator; (2) electrical and electronic equipments for household and professional usage; (3) means of transport; (4) tire and wheel; and (5) other products following the President’s decision Additionally, the Decree No 80/2006/ND-CP with Article 21 also determines the classification and labeling hazardous mark for discarded products to define responsibility and method of separating at source and collecting With the imported products, the Decree also requires the importer to register the quantity and necessary technical information with the central environmental management authority to identify the solutions of collecting and treatment after consumer’s disposal However, these regulations have not been put in practice due to the shortage of a supporting mechanism and model to coordinate all partners in the system Lack of concrete instructions and relaxed enforcement of existing laws are stimulating the development of informal system in Vietnam Moreover, according to the Decree No 59/2007/ND-CP, solid waste muss be controlled, classified at source, and kept in bags or containers with different colors It was the first decree regulating the responsibility for waste classification The Decree also states that waste containers for solid waste should be arranged in the main streets, trading centers, zoos, and parks; the areas with high density of population, traffic nodes and other ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY public areas The Government also offers many incentives for all kinds of investment in solid waste management such as lower renting cost, tax advantages, and other conditions The Decree was regarded as a dynamic response of Vietnam government to develop market and networks for waste management This Decree has an important impact on promoting private sectors investing in collecting and recycling system, an essential condition for developing reverse logistics in Vietnam Law on protection of consumer rights (2010) prohibits disseminating and advertising the false information; fraudulent acts on the quality of products and the origin of goods, information concealment about potentially unsafe of products for people and environmental surroundings Vendor is mandatory to take back the goods returned by consumers, to refund money or to exchange new products This law force manufactures and distributors to pay more attention to their returns management during warranty time Optimal handling of logistics in returns management includes collecting, transporting, handling and warehousing is necessary to reduce costs and increase customer satisfaction However, many companies maintain only the basic conditions for returns management and are reluctant to cope with returns Since 2008, Vietnam environment administration has studied to draft the concrete regulations and instructions for implementing take-back laws At the end of 2010, Vietnam environmental administration submitted a report suggesting a formal model of collecting and recycling for EoL products to the government [27] However, issuing regulations, instructing and supporting the implementation will take time and efforts because of law's complex, and the acceptability of the involved partners The next part addresses the awareness and behaviors of consumers related to disposing the used products and returning the unexpected ones It is also seen as central to solve problems related to developing reverse logistics system in Vietnam Awareness and Behaviors of Consumers During the field trip, we found a higher level of awareness of environmental problems and a considerable degree of concern about this issue from almost of households asked It is different from the fact that many reports stated that the public is largely ignorant and unconcerned about the issues relating the environment [19] Table summarizes some characteristics of the households and their behavior patterns TABLE Characteristics of the Households and Behavior Patterns Variables Income Area (p-value = 000; Phi = 0.662 Reasons for classification (p-value = 000; V = 0.356) Concern in period of use (p-value = 018, V = 0.253) Concern in returns policy (p-value = 003) 33.5% Average income (AI) 44.3% in rural (90.6% AI) Distribution of answers 66.5% High income (HI) 55.7% in urban (79% HI) More income: 66% More use and recycle: 34% Clean the environment: 0% No concern: 50.9% Little concern: 30.2% Concern: 9.4% Much concern: 9.4% No concern: 32.1% Concern: 67.9% More income: 35.2% More use and recycle: 41.9% Clean the environment: 22.9% No concern: 37.1% Little concern: 19% Concern: 16.2% Much concern: 27.6% No concern: 12.4% Concern: 87.6% Among 158 eligible households, 153 (96.8%) reported that they frequently classify the discarded electronics products because of economic benefits (45.6%), reuse and recycling (39.2%), and cleaner environment (15.2%) Behaviors and attitudes towards used products are associated with income level Result of Chi-square test between income level and reasons for classification proved this argument The high-income households tend toward buying electronics products imported (p-value = 0.032), using the electronic products with shorter usage time, especially with mobile phone and consumer electronics [26] Separating, storing and reselling the discarded products have still been traditional habit of the households for a long time because of economic conditions and saving custom, especially with the old generation who used to live in poverty The habit of classification and the changes of awareness can support positively the formal collecting system if the infrastructures are well invested and accessed easily by the end-users Nearly 70% of the households interviewed not have enough information about characteristics of the expired products as well as their negative impacts on environment They classify mainly because of the rest functions after usage with various objectives such as repairing for reuse (40%) and reselling to informal collectors or secondhand shop (37.8%), give to other people (16.8%), charity (2.1%), and disposal (3.3%) Most of the households interviewed are in favor of collecting mechanism that a used product is exchanged ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY with a new one at retail store (87.3%) or customers will receive small economic incentive when they take the used products to collection points (81%) The households interviewed states that they will be active participants in formal collecting program if they have enough information and are motivated to so [26] To date, the households show more interests in returns policy from manufacturers and sellers (81%) The high-income consumers often concern in returns policy more than the middle-income group Many household interviewed stated that members in their family deal with product exchange more frequently (39.2%), but returning of products with full refund rarely occurs They return products because of different reasons, but mainly because of bad product quality (72.2%) and not meet customer expectations (23.4%) Almost of the households interviewed complained about the difficulty of exchanging (76.6%) and returning products (86.1%) such as shortage of information, complicated procedures and staff attitudes [26] Everything seems to be more complicated when consumers want to return products and get money back A restrictive return policy from manufacturers and retailers partly limits the increasing opportunities of selling more goods for customers Most of the households said that they feel more comfortable and more willing to buy goods if they know about a less restrictive returns policy [26] In fact, a study conducted by MIT Sloan found that a lenient return policy does tend to increase the volume of items returned but the ratio of returns to sales actually drops Customers see a lenient return policy as a way to mitigate the risk of buying so they buy more and return more items but less than a percentage of total purchases [31] The changes in consumer’s awareness as well as their concerns in returns policy are challenges for manufacturers and distributors in dealing with consumer returns The analysis of following case studies in electronics industry clarifies the awareness of reverse logistics as well as the current returns management in practice in Vietnam Returns Management in Practice The short profile of four companies in the case studies is presented in Table 3, with the brief view of business directions, business situation, and operation scale in Vietnam TABLE Company profile Company name3 Company A Company B Company C Company D Description Company A is one of the worldwide leaders in developing and manufacturing electronic products In Vietnam, this company has a long-standing presence beginning from its first factory in 1996 Its operation has rapidly expanded with six companies, 7000 employees with revenue of approximately 900 million USD Following sustainable development orientation, company A promotes activities to formulate the key strategy “Eco ideas” for product and stimulate recycling of end-of-used products Company B is among the world’s top electronics, information, and telecommunications firms The company focuses its strategy on sustainability and customer orientation In Vietnam, company B has 1500 employees, manufactures home appliances and consumer electronics sold through its own stores and intermediaries with the sales of 169 million USD It supports the implementation of extended producer responsibility in Vietnam and hopes that technically and economically feasible conditions will become available in the near future Company C is a one of the biggest local manufacturers in Vietnam that has started its business since 1984 This company manufactures and distributes their products with 7000 employees and the revenue of nearly 265 million USD Company C leads its business performance following customer orientation The company controls the life cycle analysis for all its electric and electronic products under the environment management system of ISO 140001 Company C has the powerful capabilities in repairing and refurbishing the returned products by effective operations of technical and warranty service centers in many provinces in Vietnam Company D is one of the biggest retailers of electronic consumers, home appliances, IT and communication equipments for the leading brands in the world The company distributes through its own supermarkets in main cities and operates its online shop The company operates with 2000 employees and has the revenue of approximately 80 million USD Company D has much concern in satisfying the customer’s demand in return issues with different kinds of return policy Although returns are not the focal point of contemporary supply chain management for all four firms, each reviews it with different levels following their strategy and resources All four companies studied have identified types of returns their company might face and mostly handles For example, company B recognizes Pseudonyms are used because of commercial confidentiality reasons ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY that its returns occur mainly because of quality problems and damaged delivery Meanwhile, company D has returns directly from consumer with different reasons such as not meeting customer expectation, technical problems, and warranty returns Company A and C have similar identification for returns with different categories Actually, there is small volume of product returns to all four companies through reverse chain Company A and D has returns rate nearly 3% of total sales, company B and C estimate the rate with less than 2% [26] Table describes the reasons and practices of returns management in four companies Almost companies have increasing concern in structuring written guidelines to reduce the number of return requests However, returns avoidance, gate-keeping, and disposition options have not played an important role in returns management process at all four firms Company A, B, and C standardize their returns policy by basic returns guidelines including time, return authorization information, and exchange rules of products Company D offers a returns policy in after-sales service through different channels including online, therefore, customers can request technical assistance with returns 24 hours a day and days a week Company A tends to have less restrictive return policy that it offers the convenient conditions and a concrete returns policy for consumers and agents Company B and C have more restrictive return policy, in which they focus solely on exchange policy and repair works provided with goods during the warranty time Technical assistants from these companies are required to check the status of returns goods to permit customer to exchange new ones Company D offers more liberalized return policy for customers by exchanging policy within days and trial-use policy within days with full refund TABLE Reasons and Practices of Return Management Reasons and Practices Customer satisfaction Competitiveness Cost reduction Avoidance and Gate-keeping Liberal return policy Company A √ √ X √ X Company B √ √ X √ X Notes: √ -yes X -no Company C √ √ X √ X Company D √ √ X √ √ All four companies believe that customer satisfaction and competitiveness can be improved through their after-sales service with support from effective returns management Company A and B sell their products to end-consumers through retail chains, own some service centers itself in main cities, and outsource to more than 100 service providers for repair and technical service Company C has promoted the operation of its own technical and warranty service centers in many provinces Vietnam with different activities Company C has a special program “Saturday Free” offering free of charge services of maintenance, installing, repairing, and even repurchasing the used products at its main customer center Company C has rationalized its collection with small incentive money to users for returning of used products However, it operated ineffectively because of availability and fierce competition with informal collecting system Company D has its own technical assistant group in each supermarket responsible for dealing with customers’ complaint related to returns Company D outsources partly logistics operations including activities for reverse logistics such as collecting returned goods from customers or repair services in different provinces where company does not have distribution center For reverse logistics in EoL returns management, it is important to note that their involvement is not mostly due to the legislative obligation as in other countries because the concrete take-back regulation has not been brought into practice in Vietnam Three of four companies have known somewhat about the take-back legislative framework (Law of Environment 2005) However, not all four companies are well aware about the liabilities they will obey if take-back law is deployed in Vietnam, especially with retailer All four firms interviewed declared that under the fierce competition of cost, it is not easy to maintain the competitive advantage if the manufacturers and importers are forced to set up their own collecting system of discarded products from end users, especially with local companies They are unable to set up themselves their own collecting system because of economic scale and their limited resources While foreign companies have more awareness of EoL returns management because they have implemented their extended producer responsibility in many countries and joined different collective takeback systems, the local companies understand partly the significance of reverse logistics Setting up an effective product recovery system in Vietnam takes so much cost and concern because of lacking support and ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY coordination mechanism Moreover, infrastructures, logistics system, and recycling facilities have been in the process of building and developing Therefore, all four companies studied thought that cost reduction is not the reason for them to implement EoL returns management Therefore, for the possible scenario in Vietnam, legislation should also be used as an impetus for establishing reverse logistics to recover the discarded products from the waste extreme and its useful life [32] Among four companies, company A seems to deal with EoL management in an economic way to achieve the long-term benefits Company A has started collecting their discarded products by its trial program with “New for Old” returns through marketing campaign The company invested much more resources in reverse logistics by minimizing waste during the procurement, production, and distribution processes and promoting recycling activities Since 2008, 100% waste in production has been recycled in manufacturing plants of company A The company has adopted eco-design strategy and conducted life cycle analysis for all its products to promote energy conservation, reduce waste generated by its operations and increase recycling of EoL products Company B regards EoL management as part of its business strategy in adherence with activities of marketing, eco-design and recycling In Vietnam, the investment of company B for reverse logistics has just limited with the amount, which is along with forward logistics such as waste avoidance in production and distribution, warehouse, means of transport or information technology Company B concerns in reasons why customers return product to find out its solutions of avoidance All four companies judged the high costs as the most important barriers to implement reverse logistics effectively (Table 5) The costs relate mainly to problems in collecting, transportation, warehouse, handling, reprocessing, and customer service Insufficient infrastructure and unprofessional logistics system in Vietnam are also mentioned to be the reasons for increasing costs They complained about the shortage of recycling facilities and technology as the second obstacles for executing an efficient reprocessing in reverse supply chain Although, there are some recycling facilities allocated in different provinces, but most of them are not licensed to operate officially and have outdated recycling technology Most of companies intend to outsource reprocessing to other parities, but they are not sure about the quality of material recycling as their input requirements Company C and D criticized that investment in product recovery costs much money Limitation of financial resources and their lacking in experience and collaboration in reverse supply chain are huge barriers with the local companies in implementing reverse logistics TABLE Barriers to reverse logistics Notes: √ -yes X -no Barriers High costs Recycling facilities and technology Financial resources Lack of concrete regulations Supporting mechanism Awareness and experience Company A √ √ X √ X √ Company B √ √ X √ X √ Company C √ √ √ √ X X Company D √ √ √ √ X X For EoL returns complied with the laws in the near future, all four companies interviewed commented that the government should give out the concrete regulations with detail instructions of the participants’ responsibilities, deposit and refund system, collecting models and operating mechanism Most of them are afraid of the ambiguity of the regulations as the obstacles for ineffective implementation of reverse supply chain It will not create the equality among the companies in the industry, which lead to losing their competitive advantages The companies are anxious about low public awareness, the existence of informal collecting and recycling system, and coordination among partners in reverse supply chain Information dissemination of specific regulations to companies is necessary to enhance their awareness of legislation Supporting mechanism from the authority is also an important instrument to help the companies to deal with returns management of discarded products CONCLUSIONS AND RECOMMENDATIONS Based on the analysis from different aspects, it can be said that reverse logistics in Vietnam has been at the infant stage Almost companies deal with returns management in fundamental level to meet customer demand ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY partly and to increase competitiveness However, environmental issues have obtained more attention from both the government and consumers in Vietnam The regulatory approaches primarily depending on the principle of EPR may come into practice in a few years Applying reverse logistics for EoL returns management has become an optimal solution to reduce cost and to take competitive advantage for many companies in other countries In order to implement reverse logistics sucessfully, we propose some solutions from three perspectives of government, producers and consumers First, it is necessary to have closed coordination among all related partners to remove the obstacles occurring in the system For management of discarded electronic products, the application of EPR is certainly appropriate However, the government should pay attention to analyzing the impacts of cost on setting up different take-back scheme, perceiving the socio-cultural differences and especially understanding the role of different partners in the system A suitable model of take-back scheme with optimal handling of logistics supports producers to reduce costs and makes consumer easily access to collection points The government should not be only policy maker with top-down enforcements Instead of that, they should play the main role as coordinator and supporter by giving definite instructions on mechanism of responsibilities and benefits among manufacturers, distributors, collectors, recyclers, and end-users The government should collaborate with firms and call for their investments to remove the barriers of system inadequacy [33] including insufficient infrastructure, undeveloped logistics system, and outdated recycling facilities It is very essential to renovate local recycling facilities to have capability of recovering the discarded product with suitable quality as input requirements for production We recommend that gathering informal collectors into collecting groups or private companies, and collaborating recycling villages should be the focal point to restructure the informal system in Vietnam Second, consumers are regarded as the most important link in reverse logistics system because they are the persons who decide whether products are returned and disposed appropriately In Vietnam, consumers are increasingly interested in returns policy and after-sales service to make purchasing decision However, their awareness has been still low and inactive in requiring their rights in purchasing goods In practice, consumers dissatisfied with returns management process because of time limitation, complicated procedures, and staff attitudes The law on protection of consumer rights as well as increasing consumer awareness is putting pressure on firms’ returns management In any case, higher public awareness and participation in product recovery may increase the amount of product returns to the manufacturers through reverse chain, thus achieve economies of scale to reduce operating cost [32] Therefore, the government and firms should conduct education program to enhance consumer’s awareness of the waste reduction and recycling, and disseminate the related information To call for consumer’s attention and improve steadily their awareness, small economic incentive is necessary in the first period of implementing take-back laws and scheme in Vietnam Third, according to case study analysis, both foreign and local companies have adapted partly their existing supply chain to reverse logistics They are rather good at giving guidelines for return authorizations and remain restrictive returns policy mainly with product exchange Companies seem to be much more customer friendly with liberalized returns policy [31], and therefore promotes sales In practice, conducting effective returns management with support of reverse logistics facilitates the companies in reducing customer returns rate and optimizing their reverse chain Foreign companies have more sound awareness of sustainable development, related legislations, and experiences with EoL returns management It is the opportunity for Vietnam in implementing ERP principle, and take-back scheme because 90% of market share in electronics industry belong to foreign companies They should become the leading actors complying with the laws and supporting the take-back system, especially with recycling and remanufacturing technology The local companies, especially with SMEs, can enhance their awareness and experience of reverse logistics in coordination with foreign companies in producer responsibility organizations (PROs) The paper analyzed some opportunities and challenges for developing reverse logistics in Vietnam in different perspectives Although the sample size of the study was small because of limitation of time and funds, the statistics are rather fit to suggest the results are relevant The research focused only on the electronics industry might limit generalization, but it can be perceived that electronics industry has more incentives to invest in reverse logistics than others In order to develop a formal reverse logistics system in Vietnam, it is necessary to explore the contextual differences, to find out the suitable methods and important variables in determining the extent to which a model can be transferred and implemented In future, with a broader empirical research, we intend to transform those suggestions into a real model and address the issues raised by this paper ©International Logistics and Supply Chain Congress’ 2011 October 27-29, 2011, Izmir, TURKEY REFERENCES [1] Lambert D M., 2006, Supply Chain Management - Processes, Partnerships and Performance, Supply Chain Management Institute, Florida [2] Chan F T S., and Chan H K., 2008, “A survey on reverse logistics system of mobile phone industry in Hong Kong,” Management Decision, 46, pp 702-708 [3] Fleischmann M., Krikke H., Dekker R., and Flapper S D P., 2000, “A characterisation of logistics networks for product recovery,” International 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