The challenge of functional integration and the returns management process: an international perspective

As supply chain management has grown as a discipline, research and practitioner emphasis has increasingly focused on managing business processes across extended —global— supply chains with the objective of providing value for the entire supply chain (Lambert et al. 1998). One of these processes—returns management—focuses on the reverse supply chain, and effective management can be complicated by the boundary spanning nature of this process within a firm and across the entire supply chain (Rogers et al. 2002). Successful boundary spanning requires cross-functional integration, within and across firms. Effective functional integration is important because poorly managed returns can erode profitability for a firm. It can also negatively impact relationships with customers and end-users, as well as a firm’s reputation with its stakeholders (Linton et al. 2005; Rogers et al. 2002).The growing emphasis on returns management, the role of functional integration, and value creation are being challenged by the concept of sustainability, which encompasses environmental, social and economic performance considerations. Despite the recent increased interest in all three topics, there has been limited research attention to their combination, particularly within the context of international supply chains. Due to this lack of exploration, a qualitative research methodology was chosen for investigation. Such an approach is appropriate for generating depth of understanding when a phenomenon is poorly understood (Flint et al. 2002) and over which the researcher has limited or no control. Thus, in seeking to understand the role of returns management within a global firm, we adopted an in-depth case-study approach (Ellram 1996; Yin 2003) to examine a single firm’s global returns management process, as it stretches from Asia to Italy and the United States.Specifically, the purpose of this paper is to address the following research questions:(1) What role does functional integration play in managing the returns management process?; (2) What role does the returns management process play in managing an international supply chain across multiple operating regions?; and (3) What external factors affect a firm’s ability to integrate functions related to returns management?Our findings suggest four important characteristics of the firm’s returns management process which could be instructive for other global firms. First, the returns management process is increasingly impacted by global supply chain design, as evidenced primarily by offshore production in this situation. Second, functional integration with respect to returns management appears to have beneficial economic performance outcomes. Third, external factors (such as socio-political issues concerned with sustainability) may explain some of the differences between the U.S. and Italian subsidiaries regarding management of returns and the ability to functionally integrate the returns process. Fourth, whereas retail power and consumer demands are just beginning to be felt in Europe, the U.S. subsidiary provides a good example of finding opportunity in what could be considered a challenging marketplace. One question for the future, among others, relates to the extent that learning and best practices can be transferred across operating regions of global firms: specifically, even though cost structures and customer relationships will differ, can the underlying philosophy of integrated returns management be transferred from one subsidiary to another subsidiary for overall corporate benefit?