A Hierarchical Model for Profit-Driven Reverse Logistics Network Design

This paper examines the feasibility and desirability of reverse logistics in profit-motivated contexts. It attempts to determine implications for various stakeholders in India for selected categories of products from “low volumes and growing markets” to “high volumes and declining markets.”We develop a hierarchical model that captures real life scenarios and provides near optimal solutions related to various aspects of Reverse Logistics Network Design. These include disposition decisions; opening and locations/capacities of facilities at various points of time; and flows across them during a given time horizon under various strategic, operational and customer service related constraints.The research methodology consists of review of literature and practices; informal interviews with various stakeholders; an integrated model development that combines both descriptive modeling and optimization; and strategic and operational insights. Our findings indicate that reverse logistics activities are profitable for all categories of products considered beyond a certain minimum quantity of returns.