8.1 Introduction

Conventional supply chain perspectives consider a set of processes, driven by customer demand, that convey goods from suppliers through manufacturers and distributors to the final customers. However, this is not where the story ends. Physical goods do not simply vanish once they have reached the customer. Nor does the value incorporated in them. Therefore, many goods move beyond the conventional supply chain horizon, thereby triggering additional business transactions: used products are sold on secondary markets; outdated products are upgraded to meet latest standards again; failed components are repaired to serve as spare parts; unsold stock is salvaged; reusable packaging is returned and refilled; used products are recycled into raw materials again.

The set of processes that accommodate these goods flows, which can often be interpreted as running 'upstream' in a conventional supply chain scheme, is known as 'reverse logistics'. Examples are manifold. Two categories, however, form the basis of the growing importance of reverse logistics throughout the past decade, namely return agreements for excess products and extended producer responsibilities.

The first category refers to a customer's right to return a purchased product and be refunded. Due to their increased channel power, retailers have been able to negotiate the right to return excess stock to manufacturers. Supply chain management analyses have shown that this type of return contracts can, in fact, be beneficial for both the manufacturer and the retailer. Thereby, the manufacturer's benefit hinges on larger expected sales...