Improving Reverse Supply Chain Operational Performance: A Transshipment Application Study for Not-for-Profit Organizations

Article excerpt

INTRODUCTION AND MOTIVATION

Not-for-profit (NFP) organizations have historically been lagging in their application of mainstream business tools designed to enhance operational performance (Hofstede 1981; Wortman 1981; Bradley, Jansen and Silverman 2003). Certain NFP institutions such as Salvation Army, Goodwill, and Habitat for Humanity generate funds not only from cash donations but also through donations of food, clothing, automobiles, and other material goods. These institutions collect the inventory by means of collection centers (CC) and scheduled pickups. The inventory is then sorted and distributed for sale (or use) at a variety of stocking locations. Furthermore, as the life cycle of the donated inventory progresses, the inventory may be moved to other enhanced selling locations to generate the maximum potential proceeds from the sale items. As NFP organizations slowly begin to apply for-profit strategies (and tactics) within their supply chain systems, there are many opportunities for improving supply chain operational performance.

The transshipment model proposed in this paper is designed to assist NFP organizations in determining how to best maximize revenues from donated goods. The model examines the preventive lateral transshipment allocation policy to balance inventories at the NFP retail stores in a larger pooling group. This larger pooling group follows a periodic review inventory control system in a NFP reverse logistics environment and also assumes that the current operating procedure is to bulk ship aged inventory. The current research presents a unique application of the preventive lateral transshipment model, as well as applying information technologies (such as e-commerce) to reduce lead times and the frequency of lost sales at retail outlets. Additionally, information technologies also influence how purchasing and supply management activities are utilized (Ellram 1990; Kleindorfer and Partovi 1990; Ellram, Zsidisin, Siferd and Stanley 2002; Goldstein et al. 2002). Furthermore, the use of transportation and logistics strategies, such as transshipment, enables channel members to compete as a unified logistics organization rather than pushing inventory down the value chain (Tan 2002).

The paper is organized in the following manner. First, an extensive exploration of the literature regarding the growth and importance of NFP organizations is offered. This is followed by a discussion of reverse supply chain strategies and models and the resulting transshipment applications. The research model is presented followed by an example and simulation results. Finally, conclusions and extensions of the model are presented.

LITERATURE REVIEW

NFP

NFP organizations are gradually applying for-profit management strategies to enhance overall performance. In comparison with the for-profit sector, there is a limited quantity of research focused specifically toward the management of NFP organizations (Vazquez, Alvarez and Santos 2002). The leading non-profit organizations emulate certain management practices from the for-profit sector that have increased effectiveness, thus allowing them greater latitude in achieving their respective missions. One research study has posited that "a total of over $100 billion could be obtained in the non-profit sector from gains because of improved management practices" (Bradley, Jansen and Silverman 2003). Non-profit organizations have experienced a convergence of several factors, including an increased demand for services offered, a reduction in governmental financial support, and an increase in the number of participants raising funds (Balabanis, Stables and Phillips 1997). The coalescence of all of these factors simultaneously has heightened the urgency for NFPs to adopt and embrace current for-profit management practices at an ever-rapid pace.

A few NFP industries have begun to emulate for-profit supply chain strategies with healthcare systems being one of the first industries to apply information technologies to increase their efficiency and effectiveness. …