The impact of integrating return components planning with purchasing decisions on purchasing performance

Abstract

PurposeThe purpose of this research is to apply a simulation experiment to investigate the impact of new components purchasing and used components recovery strategies on multiple performance measures. The research compares the effectiveness of these strategies, given different levels of uncertainty for the return flow from the contingency perspective.Design/methodology/approachThe experimental design is implemented using an ARENA simulation model. Simulation results are used to test the proposed research model. Multivariate analysis of variance is used for data analysis.FindingsThe results demonstrate that while a proactive purchasing strategy reduces total system cost, it also negatively affects service level. While there are some general conclusions, it is equally important to make decisions under specific business contexts.Practical implicationsThe primary implication is that a firm has to align its purchasing strategy and recovery strategy with its business strategy. Given the tradeoff on multiple performance dimensions, the business strategy guides the selection of the appropriate purchasing and recovery strategy.Originality/valueThis paper demonstrates that using multiple performance measures is necessary to accurately assess cost and service trade‐offs related to a proactive purchasing strategy. Considering a wide range of circumstances, this paper suggests that the contingency perspective is a valid approach for investigating closed‐loop supply chains.