Journal of Purchasing & Supply Management 21 (2015) 155166

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Journal of Purchasing & Supply Management

journal homepage: www.elsevier.com/locate/pursup

Creating integral value for stakeholders in closed loop supply chains

Maren Schenkel a,n, Harold Krikke a, Marjolein C.J. Canils a, Erwin van der Laan b
a
Faculty of Management, Science and Technology, Open University, Valkenburgerweg , 177, 6419AT Heerlen, The Netherlands
b
Rotterdam School of Management, Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands

art ic l e i nf o a b s t r a c t

Article history: This paper contributes to the existing literature by researching integral value creation in closed loop
Received 10 July 2014 supply chains (CLSCs). We distinguish between multiple types of business value, strategic success
Received in revised form factors, and multiple groups of stakeholders that affect and are affected by CLSC activities. To gain
3 April 2015
empirical evidence, we collect and analyze in-depth data of four case studies in business to business
Accepted 7 April 2015
markets in high capital goods. Our ndings show that CLSC activities create opportunities and reduce
Available online 25 April 2015
risks for the focal company and their primary and secondary stakeholders. Strategic success factors such
Keywords: as product design, customer services, and CLSC business models modify CLSC processes and, hence,
Closed loop supply chains increase value. Intra-and inter organizational information sharing and stakeholder relationships
Value creation
strengthen value creation by inuencing the strategic success factors. We conclude with the formulation
Stakeholder theory
of propositions.
Business model
Strategic success factors & 2015 Elsevier Ltd. All rights reserved.
Information value
Reverse supply chain

1. Introduction CLSC research is needed that synthesizes these tangible and

Since the mid-nineties companies have been increasingly
triggered to deal with product returns due to, for example,
environmental take back and recovery regulations, (e.g. Atasu
and Van Wassenhove, 2010; Prahinski and Kocabasoglu, 2006),
or increased e-business (Autry et al., 2001; Choi et al., 2004). To
handle product returns, rms usually set up a reverse supply chain
(RSC). Immature RSCs often operate in isolation and are not as well
developed as their forward counterparts (Fleischmann et al., 1997;
Zsidisin and Siferd, 2001).
Today it is increasingly acknowledged that rms create value by
integrating the RSC with the original forward supply chain (FSC)
into a closed loop supply chain (CLSC) (e.g. Guide et al., 2003;
Talbot et al., 2007). For example, CLSC activities entail economic
and environmental benets by reducing virgin material consump-
tion with purchasing recovered parts and materials and extending
the product portfolio with pre-owned products (e.g. Wells and
Seitz, 2005; Zsidisin and Siferd, 2001). Value for customers may
result from an increased spare part availability and an extended
service period due to harvested and recovered parts (e.g. Krikke et
al., 2003; Kumar and Malegeant, 2006). Product returns also
provide valuable information on product design and the product
life cycle (Mafakheri and Nasiri, 2013; Talbot et al., 2007). More
n
Corresponding author. Tel.: 31 45 576 28 77.
E-mail addresses: Maren.Schenkel@ou.nl (M. Schenkel),
Harold.Krikke@ou.nl (H. Krikke), Marjolein.Caniels@ou.nl (M.C.J. Canils),
elaan@rsm.nl (E.v. der Laan).
intangible benets in CLSCs and investigates CLSC business value
beyond economic benets (Klassen, 2009).
Managing a CLSC involves designing, controlling and operating
a system to maximize value creation over the entire life cycle of a
product with dynamic recovery of value from different types of
return (Guide and Van Wassenhove, 2009: 10). It entails taking
back and recovering used products, parts or materials for reuse
in the original or a secondary FSC (Guide and Van Wassenhove,
2009; Thierry et al. 1995). Hence, CLSC management involves both
forward and reverse supply chain functions including green
purchasing, green manufacturing and material management,
green distribution and marketing as well as the logistics for
product returns (Olugu et al., 2010; Wells and Seitz, 2005; Zhu
et al., 2008).
Creating competitive advantage by closing the loop has been
extensively studied (e.g. Kapetanopoulou and Tagaras, 2011; Lehr
et al., 2013; Rogers et al., 2010) using theoretical angles such as the
resource based view (Daugherty et al., 2005; Jayaraman and Luo,
2007; Richey et al., 2004), game theoretical models (Heese et al.,
2005) and transaction cost economics (Martin et al., 2010).
However, the importance of risk reduction for CLSC value creation
has been overlooked. Supply chain risk can affect supply chain
performance and hence, competitive advantage (Wagner and
Bode, 2008). Moreover, to stay competitive, companies need to
address the demands of multiple stakeholders as well as the
externalities that corporate processes can create for different
stakeholders (Olugu et al., 2010; Sarkis et al. 2010a). CLSC activities
involve interaction and collaboration between the focal rm, their

http://dx.doi.org/10.1016/j.pursup.2015.04.003
1478-4092/& 2015 Elsevier Ltd. All rights reserved.
156 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
primary stakeholders (i.e. FSC and RSC actors) and secondary,
external stakeholders outside the value chain (e.g. NGOs, and local
societies) (Corbett and Klassen, 2006; Freeman, 1984). Previous
studies acknowledged that several strategic success factors may
play a role in improving CLSC performance, such as product
design, the business model and service concepts such as leasing
or service level agreements (e.g. Mont et al., 2006; Wells and Seitz,
2005). However, extant research has failed to analyze the role of
internal and external stakeholders in the implementation and
operation of the key success factors.
This study investigates the process of integral value creation by
CLSC activities. Integral value covers multiple types of business
value and opportunity creation and risk reduction for the focal
rm, primary and secondary stakeholders. Moreover, we study
how strategic success factors increase value creation and how
stakeholder relationships inuence the implementation and
operation of these success factors. Learning about the value
entailed in CLSCs, can specically help purchasing departments
to enhance the competitive advantages of their supply chains by
dual sourcing recovered and new materials and, hence, supporting
green purchasing initiatives.
We postulate that brand owners are the most suitable candi-
dates to be the focal rm in a CLSC. They are in the position to
make decisions on strategic success factors, such as product
design, customer services and business models (Krikke et al.,
2004; Wells and Seitz, 2005), and can affect different stakeholder
groups. Moreover, brand owners are often pressured and held
responsible for adopting environmental practices throughout their
supply chain (Caniato et al., 2012).
The paper is set up as follows. First, we present extant literature
related to value creation in CLSCs, stakeholder theory, as well as
strategic success factors for CLSC value creation. Second, we
conduct four in-depth case studies in CLSCs within a high capital
goods context. Thereby we attain in-depth insights into how focal
companies create value for themselves and other stakeholders.
Third, by cross-comparing organizational- and CLSC-specic fac-
tors we discuss how strategic success factors affect CLSC activities
and value creation and how stakeholder relationships affect these
factors. We conclude with synthesizing our ndings into proposi-
tions and present opportunities for further research.
2. Theoretical background
2.1. Closed loop supply chains
A RSC signicantly differs from a FSC with regard to its
operations, management and stakeholders (e.g. de la Fuente
et al., 2008; Fleischmann et al., 2000) (Fig. 1). For example, while
products in the FSC are produced according to market demand
forecasts, the RSC is more reactive to market returns of uncertain
quantity and quality (Tibben-Lembke and Rogers, 2002). In a well-
Fig. 1. Closed loop supply chain processes. Note. Adapted from e.g. Thierry et al. (1995) and Van Hillegersberg et al. (2001).
developed CLSC, FSC and RSC activities inuence and support each
other. For example, IT applications used in the FSC can keep track
of products in the installed base and increase the return rate in the
RSC (stlin et al., 2008; van Nunen and Zuidwijk, 2004). Also,
sourcing recovered materials and parts from the RSC can affect
supplier relationships in the FSC as suppliers may lose business
from new components, and instead recover returned ones (Thierry
et al., 1995). Hence, stakeholders from both supply chains need to
be involved in the value creation process.
2.2. Stakeholder theory and value creation
Exploring and expressing how rms differ in a competitive
sense, is researching a rm's form of value creation (Stabell and
Fjeldstad, 1998). Value chain theory suggests that rms create
value in a chain of strategically important activities that produce
products and transfer value between the rm and its customers
(Porter, 1985). Other value creating logics include value shops
(Simon, 1977), value networks (Stabell and Fjeldstad, 1998), or the
resource based view (Barney, 1991; Wernerfelt, 1984). These
theories mostly focus on value creation for the customer, as the
customer is considered as being the major source of competitive
advantages (Gummerus, 2013; Walter et al., 2001).
Stakeholder theory suggests that competitive advantage and
performance depend on managers' capacities to react to various
stakeholder demands and maintain a relationship with various
stakeholder groups other than customers or value chain partners
(Freeman et al., 2004; Mitchell et al., 1997). In this way, value is
created and shared among multiple stakeholders (Freeman, 1994;
Freeman et al., 2004). Stakeholders can be dened as any group
of individuals that can affect or is affected by the achievement of
an organization's objective (Freeman, 1984: 46). They can hold
companies accountable for social and environmental outcomes,
and thereby inuence a company's decisions (Parmigiani et al.,
2011).
CLSCs result in integrating more stakeholders, namely non-
supply chain actors such as local communities, NGOs, govern-
ments or future generations (Corbett and Klassen, 2006; Zhu et al.,
2008). Addressing more stakeholder groups with possibly con-
icting and ambiguous demands creates complexities that exacer-
bate efforts to create sustainable supply chains (Hall and
Vredenburg, 2005; Matos and Hall, 2007). Focal companies not
only need to identify major stakeholder groups, but also must
decide which groups to prioritize (Mitchell et al., 1997).
Studies have categorized stakeholder groups in different ways
(e.g. Abdulrahman et al., 2012; Choi et al., 2001). Focal companies
create value for and with so called primary stakeholders, while
secondary stakeholders are affected or inuenced by the value
created, but are not involved in transactions (Clarkson, 1995;
Freeman, 1984). Primary stakeholders include customers, suppli-
ers, service provider and leasing companies. Secondary stake-
holder groups are the natural environment, governmental and
 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
non-governmental organizations or the society at large. We see
the focal organization as a separate stakeholder group, which
encompasses employees, investors and shareholders (Clarkson,
1995; Matos and Hall, 2007).
Literature has stressed the importance of demands and pres-
sures from stakeholder groups in CLSC management (e.g. lvarez-
Gil et al., 2007; Seuring et al., 2008). Demands from primary
stakeholders can vary from fullling customer demand for spare
parts with recovered parts (Sprengler and Schrter, 2003), revenue
sharing among CLSC actors (Mafakheri and Nasiri, 2013) to sharing
responsibilities posed by environmental legislation (Jacobs and
Subramanian, 2012). Opportunity creation refers to generating
tangible and intangible benets (Jayaraman and Luo, 2007) for
the focal organization, primary or secondary stakeholders. How-
ever, value can also be created by reducing risks which is
associated with chance of danger, damage, loss, injury or any
other undesired consequences (Harland et al., 2003: 52). Supply
chain literature distinguishes several types of risk (Manuj and
Mentzer, 2008; Rao and Goldsby, 2009). In essence, rms create
(negative) externalities that affect their stakeholders (Freeman,
1994; Sarkis et al., 2010a). Secondary stakeholders increase pres-
sure on the rms to reduce negative impacts and increase
positive ones (Sarkis et al., 2010a: 14). For example, the improper
disposal of a product creates environmental or safety risks (Krikke
et al., 2004) and endangers public safety (Hojas Baenas et al.,2011;
Tsoulfas and Pappis, 2006). This may lead to increased environ-
mental regulations (Geyer and Jackson, 2004; Zoeteman et al.,
2009).
2.3. Types of value creation in CLSCs
By synthesizing CLSC and RSC literature we now distill cate-
gories of CLSC opportunity creation and risk reduction and frame
them as different types of value that can be created in CLSCs.
There are four types of values namely economic, environmental
and social, customer and information value (Koppius et al., 2011;
Krikke, 2011; Kumar and Malegeant, 2006, Mollenkopf et al.,
2011). Each value has different attributes that are concrete
realizations of opportunity creation and risk reduction.
Economic value refers to the protability of recovering product
returns (Brodin and Anderson, 2008; Dowlatshahi, 2010; kapa
and Klapalov, 2012). Sourcing costs can be reduced by substitut-
ing new materials, parts or products with recovered equivalents
(Jayaraman et al., 2012; Li and Olorunniwo, 2008). This also
generates savings in production, operation and logistic costs
(Ortegon et al., 2013; Ye et al., 2013), and improves process
efciency by reducing lead time (McConocha and Speh, 1991;
Ortegon et al., 2013). An additional value attribute is that focal
companies can deploy recovered products and parts to enlarge
their service business and aftermarket (Ravi et al., 2005), or enter
new market segments (e.g. Atasu et al., 2010).
Environmental and social value addresses growing stake-
holders' pressure by demonstrating a minimized corporate envir-
onmental and social impact and being compliant with legislation
(Koppius et al., 2011). Environmental value attributes include a
lower carbon footprint (Krikke, 2011) and pollution prevention
(Huppes and Ishikawa, 2009). Some studies discuss green image
and marketing through product recovery and consumer percep-
tions of recovered products as attributes of environmental value
(Hazen et al., 2012; Huang et al., 2012; Michaud and Llerena, 2011).
An emerging topic is that of social issues in CLSCs (Nikolaou et al.,
2013), for example by creating employment opportunities or
supporting local infrastructure development (Sarkis et al.,
2010b). Environmental and social risk reduction also involves the
use and disposal of toxic waste affecting human health (Khor and
Udin, 2013).
157
Customer value is generated by the increase of customer satisfac-
tion, repurchase intention and customer loyalty (Kocabasoglu et al.,
2007; Lee and Lam, 2012; Mollenkopf et al., 2007). This implies better
customer service by aftersales services such as maintenance (Amini et
al., 2005, Atasu et al., 2010) or take-back services (Mollenkopf et al.,
2011; Skinner et al., 2008). Customer value is also realized by
introducing green product features from re-used materials (Eltayeb
et al., 2011), a lower price for recovered products (Subramoniam et al.,
2010), reduced ownership costs (Amini et al., 2005), and an extended
spare parts availability (Kumar and Malegeant, 2006; Thierry et al.,
1995). Some studies also point to an improved corporate image
(Jayaraman et al., 2012) and brand protection (Michaud and Llerena,
2011; stlin et al., 2008).
Information value concerns information that becomes available
through CLSC management, including information about customer
purchasing and returning behavior, product use and-failure and
the installed base at large. Thereby, information systems own a
key role for collecting and sharing information across CLSC
stakeholders (Koppius et al., 2011). Few studies notice possibilities
for learning, such as the ability to collect life cycle information
to improve product recovery (Mafakheri and Nasiri, 2013;
Subramoniam et al., 2010), product design (Kocabasoglu et al.,
2007; Talbot et al., 2007), customer contact (Jayaraman and Luo,
2007), and supply chain processes (stlin et al., 2008). To this end,
information value can drive the value creation process of the other
three types of value.
In sum, we can generate a framework with four types of value
(economic, customer, environmental and social, information
value) and two dimensions of CLSC value creation:
(1) Value creation for the focal company, primary and second-
ary stakeholders, and (2) Opportunity creating activities versus
risk reducing activities.
2.4. Strategic success factors for value creation
Based on past studies, we distinguish three strategic success
factors for value creation in CLSCs.
2.4.1. Product design
Product design principles such as design for x, design for
disassembly, modular design and design for the environment
(Cerdan et al., 2009; Khor and Udin, 2013) benet product
recovery as they facilitate (cost effective) disassembly and recov-
ery at any required (sub-) component level (Niinimki and Hassi,
2011; Zuidwijk and Krikke, 2008). Modularity improves possibi-
lities for re-use and upgrades (Krikke et al., 2003; Rashid et al.,
2013). Design for upgradability aims at a product's ability to react
positively to essential technological shifts or changes during the
product life cycle (Rashid et al., 2013: 170).
2.4.2. Customer services
Customers return behavior creates uncertainty regarding
timing, quantity and quality of product returns which causes
inefciencies in the RSC (Thierry et al., 1995). Strong service
relationships with customers can increase the return rate of used
products through targeted service or trade-in offers to customers
and, hence, reduce uncertainty (stlin et al., 2008). Traditionally,
this includes service contracts or after-sales services (stlin et al.,
2008). In more recent (hereafter new) service models such as
leasing, the focal company owns and services a product, which
ensures the return of used products (Mont et al., 2006). For an
overview of CLSC customer and service relationships, see stlin
et al. (2008).
158 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166

2.4.3. Business models
The choice of recovery activity and CLSC design very often
depends on FSC design (de la Fuente et al., 2008; Oezkir and
Bashgil, 2012; Wells and Seitz, 2005) and requires coordination of
revenues and costs and responsibility sharing among CLSC actors
(e.g. Jacobs and Subramanian, 2012; Mafakheri and Nasiri, 2013).
For example, focal companies can outsource product recovery to
third party providers or suppliers instead of recovering in-house
(Mafakheri and Nasiri, 2013). In-house recovery activities can be
coordinated in separate recovery departments or as part of the
portfolio of the customer service department. Moreover, thinking
integrally of the entire process, instead of separate functions,
business cases and a silo approach, is imperative for a CLSC
business model that aims at value creation (Guide et al., 2003: 4).
3. Methodology
3.1. Research framework
Fig. 2 presents our research framework. We focus on the focal
company and an integrated FSC and RSC as conditions for CLSC
value creation. CLSC activities can create opportunities and reduce
risk for the focal company and their primary and secondary
stakeholders. Four types of value were identied with each type
of value including attributes of opportunity creation and risk
reduction. Strategic success factors inuence CLSC processes and,
hence, value creation. The aim of this study is to learn how CLSC
activities create different types of value for the focal companies
and their primary and secondary stakeholders, what role strategic
success factors (product design, customer services and business
models) play in the value creation process and how stakeholders
inuence these factors.
Given the little empirical evidence on these topics, we used
exploratory, theory building research with multiple case studies to
pave the way toward more insights in this eld (Eisenhardt, 1989).
We researched the CLSC and CLSC activities related to a product
group of a brand owner, who created value for and with their
stakeholders. We did not take a multi-actor view that specically
included the perspective of the brand owners' stakeholders.
3.2. Sampling
We used theoretical sampling and selected cases that were
suitable for illustrating value creation in different CLSC designs
and business contexts (Eisenhardt, 1989; Eisenhardt and Graebner,
2007). We listed possibly interesting cases, and evaluated their
relevance with two experts. We conducted our cases in the global
electronic industry because it is actively involved in product
recovery (Talbot et al., 2007). Electronic products are of signicant
original value and have a high residual value after their useful
lifetime, which makes recovery attractive to manufacturers (de
Brito et al., 2003). Due to their large environmental impact,
electronic and electrical equipment is subjected to various forms
of extended producer responsibility legislation, such as the WEEE
(waste of electronic and electrical equipment) directive (Frota Neto
et al., 2010; Thierry et al., 1995). We chose for the CLSCs of high
capital products in a business to business (B2B) and business to
government (B2G) environment. These products have long life
cycles, implying a high potential for recovery (Hauser and Lund,
2003). Brand owners often provide after sales services that
support reverse ows and recovery of products and close relation-
ship with stakeholders. Given these commonalities, we selected

Fig. 2. Research framework.

Table 1
Sample criteria and CLSC characteristics.

Company size in number of employees Maturity based on estimated return rate

Case 1 o35,000 High (1012%)

Case 2 o30 000 High (1015%)
Case 2 o300 Low (02%)
Case 4 o3000 Low (01%)

Industry Re-use Re-furbish Remanu-facture Re-pair Har-vest Re-cycle Market for recovered products

Case 1 Medical Original & new

Case 2 Document management Original & new
Case 3 ICT Original
Case 4 Material-& baggage handling Original

Note. The return rate is estimated by corporate representatives and describes the share of returned products in comparison to new ones sold. The indicates the estimated
degree of activity and importance within the company. For an explanation of the recovery options listed in this table, see Thierry et al. (1995).
 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166 159

four case studies with European brand owners that differed on and functions. All interviews used a semi-structured interview
company size and maturity in recovery activities in order to protocol with theoretical underpinned questions, based on pre-
generate a sample that represents as many companies practicing vious studies in CLSC, reverse logistics and operations research (e.
CLSC activities as possible. The brand owners had to comply with g. Krikke, 2011; Mollenkopf et al., 2011; Thierry et al., 1995), which
EU environmental regulations. Table 1 summarizes information on is available from the authors upon request. All interviews were
CLSC activities at each brand owner. conducted, recorded and transcribed by a single researcher. To
ensure the researcher's understanding of corporate processes, the
3.3. Data collection interviews were summarized and sent out to respondents for
feedback.
First, we conducted interviews with nine independent CLSC
researchers at a workshop in 2012 to learn about concrete 3.4. Data analysis
realizations of value creation in terms of opportunity creation
and risk reduction, and to verify the four types of value distilled We employed within case analysis to draw preliminary conclu-
from literature. Case study data was collected in 2012 and 2013. sions about what is happening and suggest ideas towards new
To achieve triangulation and rich information (Gibbert and data collection and questions (Miles and Huberman, 1994). This
Ruigrok, 2010), we collected data via interviews, participative process led to ve additional interviews with managers in two
observation in workshops, site visits and document analysis companies. We employed cross-case comparison to generate
(Table 2). 27 interviews were held with managers in service, theory from our ndings.
reverse logistics, sustainability, sales, research and development The data was analyzed by the methods of coding, pattern
(R&D), and product management from different hierarchical levels matching and cross-case meta matrices (Miles and Huberman,
1994). The initial coding list was deduced from the literature
Table 2 and further developed in several coding rounds based on inter-
Data used in this study. rater discussions among the researching team. Codes were com-
Case study 1 2 3 4
pared to identify relationships between different constructs
using NVivo 10 software (Miles and Huberman, 1994). In the
Interviews 6 4 8 9 analysis of value creation in CLSCs, we distinguish between the
Site visits 2 1 2 3 types of value created in CLSCs and the strategic success factors to
Observation 3 1 2
create value. We analyzed value creation by applying our research
Secondary data framework, a matrix consisting of two dimensions (1) Value
Presentations 2 3
creation for the focal company, primary and secondary stake-
Internal documents 3
Master thesis 2 2 3 2 holders; and (2) Opportunity creation versus risk reduction. Value
Brochures 2 4 attributesrepresenting a concrete realization of valuerelated to
opportunity creation are seen as benets which positively impact

Fig. 3. Economic, customer, and environmental and social value creation.

160 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
business and society at large. Whereas value attributes related to
risk reduction are risks and negative externalities which impact
the business and society at large. We compared the framework
resulting from our data analysis of the four types of value with
predicted ones. Cross-case meta matrices helped with nding
strategic success factors for value creation based on case study
differences. We processed information in an iterative manner,
constantly comparing data and moving back and forth between
data and emerging theory (Eisenhardt and Graebner, 2007). We
presented our nal ndings to corporate representatives in a
workshop in February, 2014. Feedback and observations from this
workshop were processed in the outcome of this study.
4. Value creation in CLSCs
Throughout data analysis, we identied attributes of economic,
customer, environmental and social value creation (Section 4.1).
Information value is seen as a driver of the other three types of
value (paragraph 4.2).
4.1. Economic, environmental and social, and customer value
creation
By undertaking CLSC activities the four focal companies created
opportunities and reduced risks for themselves, primary and
secondary stakeholders. Fig. 3 displays the results. Behind each
value attribute, the different cases are indicated in brackets with
numerals for cases 1 till 4. The types of value creation are indicated
with Roman numerals, i.e. economic value (I), customer value (II)
and environmental and social value (III).
4.1.1. Focal companyopportunity creation
The focal companies extended their business by selling pre-
owned products to the original or secondary market. Trade-in
deals and cheaper, recovered product variants extended their
markets and created customer retention. Recovered products were
also used to compete on price level for placing products in mature
markets. A potential second life cycle generated a higher product
residual value and, hence, market value. It also generated addi-
tional income from second service level agreements as a product
manager (case 1) explained:
Another element is by reuse, you offer it to other customers,
you increase your installed base and there you have an increase
of the service recognition you have with people, this is also an
element that brings additional money.
The service business was increased by an extended spare parts
availability. This enabled the focal companies to service (old)
products in the installed base with recovered parts from similar
models and offer unique parts, which were not registered as
service parts. An asset recovery manager (case 2) gave an example
(translated):
[Imagine that] There is a customer and this customer has a
machine with a bump in the cover [. .], the cover is not a service
part. So, our regular systems do not support that and you
cannot order such a cover. Normally a cover does not get
broken. [. .] We have several machines standing here [and]
remove one [a cover and] nicely wrap it. [. .] So this is actually
added value that our service organization supplies.
Service activities, e.g. upgrades or modication of existing
products on- or off-customer site, created service income and
increased the return rate of old spare parts. Service costs could
also be lowered by substituting end-of-supply items with
recovered and harvested parts. By repairing the customers' parts,
inventory and working capital costs for spare part pools could also
be lowered.
The focal companies reduced sourcing costs and embedded
costs for e.g., transportation or energy, by substituting new
materials with recovered ones. Product recovery recovered more
embedded resources than recovery of parts which in turn out-
performed recycling. However, the income from material recovery
barely broke even with reverse logistics and re-processing costs
(internal studies cases 3 and 4).
4.1.2. Primary stakeholdersopportunity creation
Customers were given more choice by a product portfolio that
included pre-owned equipment with reduced prices. While pro-
duct recovery was an ongoing activity in cases 1 and 2, it was
driven by individual customer requests in cases 3 and 4. The
service portfolio was extended by leasing contracts (cases 1 and 2)
or the offer to rent or purchase pre-owned equipment for rapid
capacity increases (cases 3 and 4). A customer service manager
gives an example (case 3) (translated):
[Imagine] We have a customer who says [. .] I have [a machine
with] 12 sections running and they are already four years old.
However, I am creating a lot of volume now and I need, let's say,
another 6 sections [. .], I do not need new ones. [. .] So [the
customer asks] can't we deliver pre-owned ones? And this
happens on a regular basis [. .].
Due to the high residual market value, leasing companies could
offer contracts with reduced leasing costs. They provided services
to the focal companies (cases 1 and 2) or directly to the customer
(case 3). Moreover, the focal companies transferred savings made
by recovering used parts to their customers who could purchase
parts at a stable price. This reduced the customers' total cost of
ownership, yet required compatibility between various releases or
even products.
All four companies advocated a corporate green image. How-
ever, few customers especially asked for take back and shares of
recovered materials. Apparently, pre-owned equipment is sold
primarily for its price-quality ratio. Fluctuating commodity prices
and resource scarcity played a minor issue. Case 4 did not generate
any savings themselves, yet motivated their suppliers to recover
materials to hedge against high commodity prices, thereby pre-
venting higher parts prices for themselves. The supply chain
manager explained (translated):
This is also our message to the suppliers []: If you source
your copper from mines [. .] and in ve years [the resource] it is
close to depletion, or prices increase and your competitor made
sure that he gets all returned from the market, then he has
organized his own supply and [. .] your business will cease.
4.1.3. Secondary stakeholdersopportunity creation
Recovery activities supported local employment opportunities.
Case 3 built local repair centers in different regions, while case
4 employed local organizations to remove old, non-repairable
systems. These organizations generated income from recycling
materials.
4.1.4. Focal companyrisk reduction
All focal companies complied with environmental regulations
(e.g. RoHs, REACH, WEEE). Cases 1 and 2 pro-actively controlled
their auditing and compliance process and thereby reduced costs
for compliance. They also considered their product recovery
activities as a way to achieve legitimacy within their industry,
which has a long-standing tradition in CLSCs.
 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
Several managers stressed that CLSCs enabled their company to
protect their aftersales- and pre-owned market from cannibaliza-
tion by third party inuence, e.g. brokers. One sustainability
director (case 1) explained:
They [Brokers] are not going to sell the whole part, they make
way more money by taking out the parts, so this is what they
do, they are going to take out the parts, they repair [] and
then they sell them and what happens, that competes with []
[our] parts.
Paradoxically brokers also served as suppliers of pre-owned
parts in emergency situations, i.e. lack of supply. Cases 3 and 4 also
dealt with the customers who did not return, broken parts or let
competitors service their machines.Harvesting and recovering pre-
owned parts assured fullment of warranty obligations also in the
case of constrained supply or future resource scarcity.
4.1.5. Primary stakeholdersrisk reduction
Recovery activities and regulations required data collection on
the products' life cycle. This data was used by the companies and
their customers to report on their environmental performance.
Good collaboration with suppliers is needed as they have to report
the bills of materials of their components and parts. High capital
electronic goods contain many components, and compliance
turned out to be a huge effort for the focal companies.
Customers included governmental organizations that require
certain environmental certications which especially emerged in
the United States (e.g. EPEAT certication) (case 3). These certica-
tions could be obtained easily as recovered products complied
with the required minimal content of recycled materials.
By using remote diagnostics and minimizing repair lead times,
manufacturers limited the downtime of broken machines, which
in case of capital goods led to signicant cost savings for the
customer. However, this did not apply to all recovery option.
Uncertainty of timing and quality of returned machines caused
longer lead times for refurbishing than new built in case 1.
Fig. 4. Information value in CLSCs. Note. The four case studies are indicated in brackets behind each information type. Economic (I) customer (II) and environmental and
social (III) are indicated in Roman numbers.
161
4.1.6. Secondary stakeholdersrisk reduction
Material recycling and recovery helped to lower the virgin
material consumption and CO2 emission. One product manager
(case 2) explained that if the company had to choose between new
and recovered, they chose for recovered (translated):
[] and some of the [remanufactured] products are still
available as [a] new [version], then they come from last year.
[] So you can x [the returned machine] or you buy a new one.
If this is the same price, than we rather x [the returned
machine].
The respondents also discussed social value creation. So-called
critical materials might violate human rights. Unsafe and hazar-
dous materials harm human health. By returning and recovering
used products, manufacturers ensured that hazardous materials
do not enter the environment and less critical materials are
needed. All cases reduced waste- and environmental costs by
recycling and re-use activities.
Comparing our overall ndings to prior research, we found new
value attributes such as an increased market value, better product
placement and customer support by supplying unique parts. We
did not nd attributes such as labor- and logistic costs reduction or
brand protection as proposed by the literature.
4.2. Information value
We found two types of information: Information about the
installed basenamely size of installed base, age, technical status,
and location of productsand information about the product and
product life cyclenamely spare part consumption, life cycle
performance, maintenance, service and recovery process. Informa-
tion only created value when they were shared and collaboratively
used across departments and suppliers to modify products and
supply chain processes. Hence, modied product design and
supply chain processes mediated information value creation. This
should eventually enhance customer, environmental and social as
162 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
well as economic value creation. Hence, information value can be
seen as a driver of the other three types of values. However, it is
mediated by product and FSC and RSC process modication
(Fig. 4). For example, based on information about the installed
base, the service and sales departments informed the product
recovery department about the future part consumption, trade-ins
and end-of life products. Using this information, the recovery
department could better plan harvesting processes, trade-in offer-
ings and market launches of recovered products. Managers from
all case studies agreed that information about the spare part
consumption, maintenance, return causes and defects and repair
process could help suppliers and the R&D department with
product modications.
Several managers proposed a simplication of information
management through improved database management (cases
1 and 4). One customer service manager (case 4) explained their
information system, its data collection and how it will benet
CLSC processes and product design (translated):
And if you want to close the knowledge circle, then you need
this kind of [IT] solutions. [. .] So we can then centrally see from
our ofce here, what the spare parts inventories are, what is
used and we will link it to the special equipment. So we can
see, hey, this kind of equipment uses a lot [of spare parts], this
equipment uses less. [. .] And of course, those parts that break
very often are returned saying, here you did not develop these
parts good enough: that is to be improved.
Being asked about learning from physical product returns,
several managers explained that products are only returned after
several years which is considered too long in high-clock speed
industries.
5. The inuence of strategic success factors on CLSC value
creation
In the cross-case analysis, we investigated the strategic success
factors business model, product design and customer services
(see Table 3). Each factor can have both positive and nega-
tive implications for FSC and RSC processes, thereby possibly
creating value. They also required the involvement of different
stakeholders.
5.1. Business models for CLSC activities
We found four different types of business models: An integral
business model and business case driven business model; a
business model related to the CLSC design, with recovery at the
focal company and recovery at the supplier or third party. The
business models were not mutually exclusive as they can be
combined and vary per part or product recovery.
5.1.1. Integral and business case driven business models
Cases 1 and 2 have dedicated business units for product
recovery and a permanent inventory of to be recovered parts
and products. They strived for an integral business model that
implies both integral thinking and integral prot creation across
departments with the aim to optimize the overall long-term
prot of the company. A recovery manager (case 2) illustrates
(translated):
[Imagine] A service technician [] He replaces a broken part
[] In the case that I have set up [recovery activities], and I say
[to the service technician], ok, if you send it [the broken part]
back to me then you receive 50 Euros. So the company earns 50
Euros, integrally. I make 50 Euro losses which I had to pay. [. .] I
make another 25 Euros reparation costs, so I have a [working]
product for 75 Euros. I sell this product for 100 Euros to the
service organization which receives the same product as if it
would be new. I would then have 25 Euro prot margin for
myself. But integrally I have earned, 50 and 25, 75 Euros for the
company.
Integral prot was created because the recovery department
acted both as an internal buyer for broken parts and as a supplier
for repaired parts. In this way, FSC and RSC processes were
integrated and both the service and recovery departments gained
nancial income. In case 1, prot was only created at the destina-
tion of recovered parts and products, i.e. the service or sales unit.
This way, the recovery department could suffer losses benetting
other departments. The business units located around the world
were stimulated to return old products and trade-ins to the central
recovery department which could match demand and supply on
global level. The return rate of products was steered by the trade-
in value offered to customers or (internally) to the national
business units. If the demand for recovered products exceeded
supply, the trade-in value was increased.
In cases 3 and 4 recovery was rather an occasional activity and
did not yet belong to core business activities. Each individual
business case had to be viable and generate short-term value.
Contrary to case 1 and 2 recovery-, inventory-, and transportation
costs and investments were minimal.
5.1.2. Business model with recovery at the focal company, supplier or
third party
In cases 1 and 2 equipment was recovered locally, mostly at
focal companies' locations, to minimalize costs for reverse logistics
and guarantee qualied processes. Due to increasing logistics
costs, reduced control over broken spare parts and long lead
times, case 3 recently shifted from recovery by the supplier to
recovery at a focal company location. Recovery at the focal
company enabled feedback processes between the recovery, ser-
vice and R&D department. However, it also required (initial)
investments. Case 1, 2 and 3 had a global supplier base, which
made shipping pre-owned parts and materials to the supplier for
repair economically not viable.
Case 4, however, had a responsive, local to local supply chain,
creating the possibility that recovery was done by suppliers who
offered warranties for recovered parts. Risks for the focal company
were reduced hereby. In both situations, the interests of the
suppliers and focal companies had to be met, for example regard-
ing a reduced part business for the supplier in case of own repair
(cases 13). Focal companies often employed third party service
providers for the de-installation of products (cases 1 and 4) and
reverse logistics (cases 3 and 4).
5.2. Customer services: new service models and traditional
ownership
New service models, such as leasing, strengthened value
creation by decreasing uncertainty related to the return quantity
and quality as well as trade-in and recovery costs. Moreover, focal
companies were able to collect data on the product life cycle (cases
1 and 2). Customers appreciated the exibility, stable cost of
ownership, and a well-maintained product. However, several
customers preferred traditional ownership models to maintain
control over the product and service operations. The customer
service manager from case study 4 added (translated):
They[our customers] have given budgets they can spend and they
also simply want to spend them [for buying new machines].
 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166 163

Table 3
Strategic success factors in CLSCs.

Strategic success factor Inuence on CLSC activities Stakeholder involved

Business model: Integral business model (1,2)  Integral & long-term prot Focal company (Recovery, sales and
 Integrate FSC and RSC processes service department); Customer
 Continuous trade-in possibilities
 Matching supply and demand for recovered
products on a global level
 Matching recovery activities with forward
service period
 High return rate and continuous inventory of
returned products
 Market demand steers the return rate
 Pre-investment
 Increased spare part business

Business model: Business case driven (3,4)  Short-term value from recovery Focal company (Recovery and service
 Reduced inventory costs and investment department); Customer
 Lower return rate
 Less transport of returned parts

Business model: Recovery by focal company (1,2,3)  Reduced logistic costs and lead time Focal company (Recovery and service
 Control department, R&D department)
 Feedback information between the recovery-
and R&D department
 Initial investment costs
 Higher margin on recovered products
and parts
 Reduced business for the supplier

Business model: Recovery by supplier (3,4)  Intensied business with supplier Supplier; Focal company (Recovery
 Supplier warranty on recovered parts and supply chain)
 Reduced risk & investment
 Increased reverse logistic costs

Customer services: New ownership models, e.g. leasing (1,2,3)  Increased sales & service business Customer; Leasing companies; Focal
 Increased return rate company (Recovery and service
 Lower trade-in costs department)
 Improved maintenance status, reduced
recovery costs
 Collect data on the product life cycle
 Long-term investment
 Obligation for taking back

Customer services: Traditional ownership (1,2,3,4)  Service as an additional contract Customer; Focal company (Recovery
 Full sales income and service department)
 Customer contact via, e.g., service level
agreements, upgrades and modications,
consultancy on repair
 High trade-in value risks economic feasibility
of recovery
 Low return rate lowers economies of scale

Product design: Modularity (1,2,3,4), design for disassembly (1,2,3)  Improved service activities Focal company (Recovery
standardization on product (1,2,3) and part level (1,2,3,4), serviceability or  Modularity offers more recovery options department, R&D department)
upgradability, inter- release compatibility (1,2,3) and inter-product  Upgradability to future technologies Supplier
compatibility (3), design for the environment (1,3); customized software  Value depreciation on module level as
(2,3,4); customized product design (3,4), robust design (2) modules can be exchanged
 Ease of disassembly and testing reduces costs
and increases economic feasibility of recovery
 Ease of removing hazardous materials

Backwards compatibility

Note. The four cases are indicated in brackets.

Another obstacle was that when leasing products, the focal
companies had to pre-invest in new products, and (partly) earn
the investment back throughout the leasing period. They also had
the obligation to accept products returns from leasing.
In traditional ownership models, trade-in and discount pro-
grams reduced re-acquisition costs and created market demand
for new machines (cases 14). Customer contact was maintained
via service level agreements and value-adding services.
5.3. Product design
Environmental design standards were partly adopted in all case
studies. They were not only regarded as green but also as good
quality standards and value proposition to the customer (case 3).
Focal companies often collaborated with suppliers to implement
these design standards. The intensity of collaboration varied
depending on whether the focal company designed and (partly)
164 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
manufactured products and parts themselves (cases 1 and 2) or
mostly designed and assembled the products (cases 3 and 4).
All focal companies strived for increased standardization and
modularity to improve compatibility between products and
releases, design for disassembly, and future upgradability. These
design standards simplied service activities, increased the re-use
rate for parts, enabled more recovery options, and future product
upgrades. The R&D manager from case 3 explained their design
(translated):
Key is actually that you determine the interfaces, the [different]
spaces in our machines which are reserved for a special
function.] [] and you can work on the machine as long as
you stay in the spaces and interfaces. [. .] So this way you
actually have an open architecture with xed interfaces in
which you can add all new functions in the future and renew
obsolete functions.
Customization inuenced product recovery in two ways. Cus-
tomized hardware often hindered recovery on product level, due
to a lack of inter-product compatibility. Hence, depending on the
degree of standardization, recovery was feasible only on part or
material level. Software customization often occurred at the end of
the production phase and could still be adapted later in the
product life cycle.
6. Discussion and propositions
In this study, we argue that focal companies create economic,
customer, and environmental and social value by CLSC activities in
two ways. First, CLSC activities create opportunities for extending
current service business and markets, streamlining business pro-
cesses or reducing production costs by for example cheaper
sourcing. Second, CLSC activities lead to risk reduction, for
instance by complying with environmental regulations, avoiding
constrained supply of materials or reducing the supply chain's
environmental impact. Several value attributes can be related to
more than one type of value. For example, a high spare part
availability can extend the company's service business (economic
value) but also improve customer services (customer value)
(Fig. 3). Hence, win-win situations between the three types of
value occur. While economic and customer value attributes can
stand alone, environmental and social value attributes are almost
exclusively created in win-win situations with (one of) the other
two values. We can also see that environmental and social value
attributes mostly relate to risk reduction value attributes. Hence,
Proposition 1a. CLSC activities create opportunities for stand-
alone economic and customer value and reduce risk for environ-
mental and social value creation.
Proposition 1b. Environmental and social values created by CLSC
activities are almost exclusively the byproduct of economic or
customer value.
Future research could measure the relative importance of each
value and value attribute of opportunity creation and risk reduc-
tions as identied in Fig. 3. The nding that win-win situations
emerge when several values are created simultaneously is
addressed in concepts such as eco-efciency (e.g. Ayres et al.,
1997; Huppes and Ishikawa, 2009) or the triple bottom line
approach (e.g. Klassen, 2009; Lai et al., 2013). The minor relevance
of environmental and social value is also discussed in the litera-
ture. Some authors suggest that green supply chain management
and CLSC activities may rather increase costs and investments
than that they generate economic benets by, e.g., extending
markets (e.g. Kapetanopoulou and Tagaras, 2011; Walker et al.,
2008). Additionally, recovering used products may not be
necessarily environmental friendlier than new production
(Gutowski et al., 2011).
The attributes listed as opportunity creating and risk reducing
can be linked to the different stakeholder groups. It can be seen
that opportunity-creation attributes mostly relate to the focal
company and primary stakeholders, while risk reduction attributes
also include secondary stakeholders. We propose:
Proposition 2. CLSC activities primarily create opportunities for
the focal company and primary stakeholders, while reducing risk
for all three groups of stakeholders.
Focal companies obviously see primary stakeholders such as
customers and suppliers as major sources of value creation.
Whether CLSCs activities create, for example, social benets,
remains an emerging and contradictory topic in the literature
(e.g. Lai et al., 2013; Nikolaou et al., 2013; Sarkis et al., 2010b).
Future research studies should investigate how focal companies
can create value for secondary stakeholders such as societies or
non-governmental organizations.
The focal companies in this study obtained data on the installed
base, the product and product life cycle (Fig. 4). Using this data
they improved product- and FSC and RSC process design including
aspects of customer services. Hence, information value enhances
the other three value types. Obtaining information requires the
involvement of different stakeholder groups, in particular primary
stakeholders. The focal company and other primary stakeholders
have to process and share received information for actual product-
and process improvements, hence:
Proposition 3. Intra- and inter-organizational data collection and
information sharing lead to improved forward and reverse supply
chain processes and improved product design which strengthen
CLSC value creation.
This study has showed that information value is created in a
feedback process between different stakeholder groups. Future
research could further explore the inter-and intra-organizational
information processing in CLSCs using methodologies such as
system dynamics to research vicious and virtuous feedback loops.
More attention could also be paid to the benets of IT investments
and use among stakeholders of both supply chains types or
emerging IT topics such as big data or systems talking to systems.
It is also important to investigate which kind of information is
needed by which supply chain stakeholder in order to improve
product or process design (e.g. Datta and Christopher, 2011).
The cross-case analysis investigated several strategic success
factors that strengthen value creation in CLSCs (Table 3). Although
primarily led by the focal companies, each factor affects the
opportunity-creating or risk-reducing activities of multiple stake-
holders. For example, when implementing new product design,
focal companies need to collaborate and share information with
their suppliers. New customer service concepts, such as leasing,
are only implemented when the customer appreciates these new
forms of ownership.
Proposition 4. Relationships between the focal company and their
primary stakeholders as well as intra- and inter-organizational infor-
mation sharing, inuences the impact of the strategic success factors
in CLSCs.
Future research could focus on stakeholders' relationships and
their inuence on the implementation of strategic success factors
from different angles, such as incentive alignment, the manage-
ment of conicting stakeholder interests, and stakeholder colla-
boration. Longitudinal studies could capture the short- and long-
term dynamics of pertaining strategic success factors.
 M. Schenkel et al. / Journal of Purchasing & Supply Management 21 (2015) 155166
7. Conclusion
Our study has demonstrated integral value creation in CLSCs. We
have distinguished between opportunity creation and risk reduction
and multiple types of value for multiple groups of stakeholders.
Strategic success factors such as product design, customer services
and CLSC business models and intra- and inter-organizational infor-
mation processing strengthen value creation by modifying CLSC
processes and product design. These factors are inuenced by stake-
holder relationships.
Our study has a number of limitations. We especially focused
on the perspective of the focal companies which create value for
different groups of stakeholders. Hence, we did not interview
corporate stakeholders which can lead to a subjective perspective
of value creation. Future studies could include primary and
secondary stakeholders into data collection. For example, focus
groups can be used to compare stakeholders' perspectives. The
companies in this study were sampled according to the company
size and maturity of CLSC activities. These sample characteristics
inuence the strategic success factors. Comparative studies, which
give answer to which strategic success factors create more value
than others may be conducted in the future. More research is also
needed for instance in B2C and/or less capital-intensive goods.
Companies may use the results of this study as a benchmark for
assessing their CLSC value creation and evaluate the impact of
their product design, customer services and business model
characteristics on their CLSC value creation. More importantly,
they may consider investments in data collection, information
sharing and relationships with different stakeholder groups.
Economic value is one of the primary values gained from CLSC
activities which is, among others, created by reducing material
consumption and sourcing costs. Purchasing managers are key to
closing the loop as they re-integrate used materials into the FSC. In
order to leverage environmental and customer value as a bypro-
duct of economic value, purchasing managers should be in close
contact with, for example, sales-, environmental- or service
departments.
Acknowledgment
This project was funded by the Netherlands Laboratory for
Lifelong Learning (NeLLL), theDutch Institute for Advanced Logis-
tics (DINALOG) as part of the project Value Creation by Closing the
Loop (grant number: 2010 2 028R) and European Union, EFRO and
OP-Zuid program as part of the Logistics Accelerator project
registered 31 W 013/PROJ-00848.
A draft version of this work has been presented at the IPSERA
annual conference (April, 2014, Pretoria, South Africa). The authors
would like to thank those who attended this presentation, and
those who read earlier versions of this paper, for their helpful
comments. The authors wish to thank Hannes Sibbel for his role in
editing this paper and visualizing research results.
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