Reverse Logistics in the Age of Digital Transformation for Circular Economy and Halal Logistics Through the Leadership of Asia

Introduction

Digital transformation is coming faster in all sectors. The pandemic has not only had an impact on the industry but has also contributed to the acceleration of this transformation. Digitalization does not solve all problems. However, digitalization cannot be avoided because it is able to offer better data, better management, automation, optimization, efficiency, and digitization implementation. Allied Market Research (2020) mentioned the pandemic has put an immense strain on the global supply chains which in turn increases the demand for efficient and effective logistics infrastructure. For this reason, technology investment toward digital transformation is a must to make it easier for the industry to quickly adapt to market demands. In the logistics sector, digital transformation is needed to answer various challenges where the logistics industry needs to be more open and clean, reform its structure, develop new strategies, and apply modern technology.

From the environmental perspective, it is undeniable, the pandemic significantly also brings positive consequences to the effects of climate change. The pandemic not only brings stories of illness and death but also stories of clear water and blue sky. The weakening of the economy, in fact, was followed by the improvement of the quality of air and the environment. Long before the Covid-19 pandemic occurred, concerns over resource consumption and environmental problems have led to the creation of sustainable development initiatives. The presence of a pandemic has further strengthened the awareness of the importance of those initiatives to achieve economic growth today without having to exploit the resources of future generations. One way to make this happen is to increase the amount of product material from waste recovery using reverse logistics.

Lambert, Stock, and Ellram (1998) categorized reverse logistics as one of the 14 major logistics activities. Although companies can conduct this activity in-house, the majority of companies outsource logistics activities to third-party logistics (3PL) providers to allow them to focus on their core business activities. In 2017, Allied Market Research and Statista (2020) denoted the global reverse logistics market was valued at US$415.2 billion. By 2025, the reverse logistics market is projected to reach US$603.9 billion, registering a compound annual growth rate (CAGR) of 4.6% from 2018-2025. The size of the reverse logistics market worldwide from 2017 to 2025 is shown in Figure 1.

Figure 1.

Size of the Reverse Logistics Market Worldwide (2017-2025)

Source: Allied Market Research, Statista (2020), Processed

The leadership of Asia may influence the value of reverse logistics to the world as one form of a circular economy. Ellen MacArthur Foundation (2012, 2013) mentioned Asia which is a powerhouse of consumption and production, has the potential to showcase the circular economy at scale. Asia accounts for around 60% of the world’s population and has become global manufacturing hubs. In addition, 90% of the growth of the global middle class which is predicted to increase from 1.9 billion in 2009 to 4.9 billion in 2030 will come from the Asia-Pacific region which will contribute to an exponential increase in the material impact of the consumer goods industry. Through digital technologies, Stonehouse and Konina (2020) ensured that emerging market companies might become global competitors for established firms from developed countries.

Therefore, this chapter offers reverse logistics as an alternative answer for the logistics industry to face the challenges of the circular economy through the leadership of Asia by digital transformation. This is because Asia has a great opportunity to become a leader. A study by Tan and Hosie (2010) showed that reverse logistics in Asia-Pacific is a growing business. There are certainly ample opportunities for companies in the Asia Pacific to offer reverse logistics services to leverage economies of scale. Sawant and Sonpimple (2019) also reported that Asia-Pacific accounted for the highest share throughout the global reverse logistic market. However, the CAGR is still dominated by Latin America, Middle-East, and Africa (LAMEA). Referring to the global reverse logistics market based on region, LAMEA region exhibits the highest CAGR of 17.9% during 2018-2025 than Asia-Pacific, Europe, and North America.