Measures for auditing performance and integration in closed‐loop supply chains

Purpose – In a growing number of competitive sectors with closed‐loop supply chains, the reverse component has become an inherent part of the business, not to mention a core competence; hence the need to have performance measures that can be used to provide an accurate diagnosis of the state of the supply chain by addressing both its forward and its reverse components. It is also important to identify the level of existing integration between parties, as this has been associated with supply chain performance. This paper seeks to address this issue. Design/methodology/approach – Elements gathered from the literature reviewed are used to present a set of measures that can be applied for auditing purposes in: the forward supply chain; product returns and reverse logistics; flows of materials and information and integration between supply chain tiers. To illustrate the use of the proposed set of measures for auditing purposes a case study involving a major European mobile phone network operator was analysed using the operator's own brand of handsets characterised for having a closed‐loop supply chain. Findings – The proposed set of measures for auditing purposes provide an overall picture of the performance of a closed‐loop supply chain by revealing high levels of stock for the products analysed, consequence of the difficulty to generate accurate forecasts and the accumulation of high quantities of product prior to launch. Also the methodology presented in this paper identifies links between product returns (faulty and non‐faulty) to operations in the forward component of the supply chain (design, sourcing, manufacturing and forecasting) and also indicates how performance is affected because of integration. Research limitations/implications – The proposed set of measures for auditing purposes is relevant to closed‐loop supply chains which are related to products with short life cycles and during their lifetime can experience faulty and non‐faulty returns. The scope of the study presented may look limited; however, the application of the performance measures presented in this research can become a fundamental component of larger audit exercises. Further research should be carried out with supply chains on products with lifetime cycles that span long periods of time. Practical implications – For industry sectors with closed‐loop supply chains, the availability of a set of measures that address the forward and reverse components plus integration can provide a detailed picture of the performance of value streams over traditional approaches to measurement that focus on only one component of the supply chain. The set of measures has the potential to be used to achieve better customer service and reduction in costs involving shipping, warehousing, labour and call centres. Originality/value – The contribution of this research on closed‐loop supply chains is a methodology that defines performance measures for auditing purposes of the forward and reverse components of supply chains and assists in assessing the importance of integration between different tiers of supply chains.