Using Sustainable Balanced Scorecard and Graph Theoretic Approach to Make Decision in Reverse Logistic

. The aim of this study is to identify the decision should be made by the company to manage their reverse logistics activity. In this study, the company should decide whether the reverse logistic activity must be outsourced part of reverse logistics activity or all must be outsourced or nothing must be outsourced. The object of this study is PT. XYZ - a foreign-owned electronics company and there is four scenario for reverse logistic activity proposed by the company. This study uses a graph-theoretic approach as the method to consider interdependencies and maintaining the hierarchical relationship among attributes and sub-attributes which is important to determine the best scenario of reverse logistic. The attributes and sub-attributes were selected by combining four traditional balanced scorecard perspectives with two perspectives of sustainability, i.e. environmental and social. This research used primary data collected by distributing closed questionnaires to the management of the company. The data processing with a graph-theoretic approach generates the permanent function which is known as the outsourcing index for each scenario. The outsourcing index for first until the fourth scenario is 52.71, 70.97, 89.86, and 81.27 respectively.


Introduction
Reverse Logistic (RL) can be defined as the set of programs aimed to transport the product in the reverse direction in the supply chain, from the customer to the producer [1] or return the product from the customer to the producer.According to reference [2], there is a challenge in the process of returning the product, which required a high speed in the stages of product collection before the product becomes obsolete due to rapid technological developments and market demand.In addition, the difference quality, and quantity of the returned product may also affect the remanufacturing stage, which this step need varies with time for each product depending on the level of product quality, quantity and return time [3].Basically, the activity in RL can be grouped into collection, acquisition, inspection, and sorting the returning product into several categories, and, then disposing of the returning product for the process of repair, remanufacture, recycle, reuse, or final disposal.In this case, the manufacturer can perform all the activities of RL inside of the company or only part of the activities of RL perform on the inside of the company and outsourcing the other part of activities through the third party or we called outsourcing [4].
Talking about outsourcing, there are some advantages and also the disadvantages of outsourcing should be considered by the company.The first advantage of outsourcing is the company has the possibility to increase their competitive position through their focus on core activities [5].The second advantage of outsourcing is the company can make cost-saving when a certain resource, either equipment or human resources, do not require own by the company in the full time, or the company do not require to make some efforts to find the specific resources [6,7].The third advantage of outsourcing is the possibility of the company to access a skilled personnel, who may not be available in the internal organization and the company can totally exploit the investment, innovation and specialist capabilities from the supplier [8].The fourth advantage of outsourcing is the company can improve their performance from the economics of scale offered by the outsourcer company [9].The fifth advantage of outsourcing is related to flexibility.In this case, the contract and also the job of Outsourcers Company depend on the changing of the business environment [10].The disadvantages of outsourcing are related with the loss of managerial control over the outsourcers company, threat to the confidentiality and security, the problem of quality, the hidden cost and also the reallocation of existing team.To overcome the loss of control in the outsourcing process, it seems that management should have the power of negotiations, the skill of people and management process, and the skill for the contract of management.In terms of the problem of quality in outsourcing process, the company should have the particular way to ensure that the outsourcer company does not have a bad effect to the quality of good and services produced; otherwise, the company can lose the position in the marketplace.The hidden cost can happen because not all situation can be covered by the contract; in this case, any situation that not protected by the contract will be the source for the company to pay the additional charges.Besides that, in the outsourcing decision, the company should calculate the cost for selecting the best situation, such as the cost for selecting one provider than the others and the cost for choosing the in-house sourcing over outsourcing [6,11,12].
Deciding what part of the activity of RL should be in-house and what part of the activity of RL should be outsourcing is one of the solutions considered by PT.XYZ to improve the performance of their RL activity since this activity faced the problem of long processing time PT XYZ purpose four scenarios to shorten the processing time.The first scenario, all activity of RL are done by PT XYZ itself, from collecting, checking, sorting, shipping, remanufacturing, until recycling activities.In the second scenario, the collecting, sorting, and shipping activities are conducted by PT XYZ while remanufacturing and recycling activities are conducted by third parties (or outsourcing is only for remanufacturing and recycling).In the third scenario, collection, sorting, and recycling activities are conducted by PT.XYZ; while the shipping and remanufacturing are conducted by a third party (or outsourcing is only for shipping and remanufacturing); then, in last scenario or fourth scenario is conducted by the third party or the company outsources all the activity of RL.Only one of the four scenarios will be selected and it should be the best scenario for the company.
This study will use the aspect in the Sustainable Balanced Scorecard (SBSC) to generate a number of attributes and sub-attributes that are important for assessing the proposed outsourcing scenario as the research conducted by Ravi et al (2005), Shaik and Kader (2012), and Tjader et al. (2014) [13][14][15].SBSC is developed from Balance Scorecard (BSC).To assess the performance of the system, basically, the BSC method had considered several important aspects of the business, such as finance, business processes, operations, and quality management.However, as the RL activities are well known associated with sustainable development that has concentrations in the three bottoms three line of aspect (economic, environmental, and social aspect), therefore, some researcher add two aspects to BSC namely environmental and social aspect; so, the BSC method become a Sustainable BSC or SBSC.Not only from the SBSC method, will this study be complemented by the sub-attribute for assessing the proposed outsourcing scenario with the aspiration from the top management of PT.XYZ.Furthermore, after the attribute and sub-attributes are identified, the company can select the best-proposed scenario by using a variety of multi-criteria approach such as Graph Theoretical Approach (GTA).GTA can manage the hierarchical structure and at the same time also able to utilize interdependence between attributes that had been generated through SBCB.The final result obtained from GTA is "outsourcing index" as the value of a permanent function obtained for each scenario.The scenario with the greatest value of outsourcing index is the best outsourcing scenario.The other side of the result of this study will help to seek environmentally responsible solutions for end-of-life (EOL) of defective electronics items, and consequently lead to developing low carbon society.

Literature Review
According to Kaplan and Norton's BSC (1992), there were four measurable perspectives in the BSC framework namely financial perspective, customer perspective, internal business process perspective and learning and growth perspective [16].Since its introduction, BSC has gained a high degree of recognition and the effectiveness of the BSC is affected by the size of the company and the intensity of integrating BSC into the business process.The greater the company integrates BSC into its core business strategy, the higher the opportunities to gain benefits from the use of BSC [17].In line with reference [17], the survey conducted by Yu, et al. [18] revealed that different organizations will use different forms of the BSC.In this case, the organization may make some variation in terms of the number of perspectives.Reference [18] also suggest that there are a number of organizations that use additional measures/perspectives such as safety, environmental, behavioral and ethical measures/targets.So, based on this condition, by adding the sustainable aspect as an additional perspective to the scorecard, the BSC evolved become Sustainable Balanced Scorecard (SBSC) as research conducted by Agrawal et al [19], Chung et al [20], and Jassem et al [21].In this case, each researcher can use different dimension to represent the sustainable aspect.As example Agrawal et al [19] use environmental and social dimension to represent the sustainable aspect; Chung et al [20] use sustainable development dimension to represent the sustainable aspect; and, Jassem et al [21] use environmental dimension to represent the sustainable aspect.This study uses environmental and social dimension to represent the sustainable aspect as research conducted by Agrawal et al [19] since the reverse logistic concentrate on the three bottoms three line of aspect (economic, environmental, and social aspect).Moreover, referring to Agrawal et al [23], the detail attribute, sub-attribute and also operational definition of each sub-attribute can be seen in Table 1.
Basically, the SBSC offers the potential tool to create efficient and effective strategies that link the social and environmental management systems with the strategic planning and management of the company [

23]
. Recently, the SBSC has been regarded as the important instrument for designing and achieving the ultimate goal of corporate sustainability management.SBSC can also be an appropriate framework for recording the essential information that associates with the company's sustainability performance by combining the non-financial and financial information [24].Moreover, Epstein and Wisner [25] recognize that a well-organized SBSC can support companies in the implementation of the effective sustainability strategy.The suitability of SBSC to prepare and design a company sustainability management strategy is primarily concerned with the ability to identify the relationship between the long-term social and environmental goals and short-term corporate finance [26].SBSC is also deliberated as an appropriate tool to disclose the company sustainability performance information [24].The level of competence of the employee of the company related to the function of RL Management Knowhow (LG2) Management capabilities in various areas of knowledge to assist the process of learning and innovation by the employee to achieve the effective and efficient RL systems Process Technology and Innovation Capability (LG3) The degree of physical automation, information and financial flow in the supply chain reverses.Use of technology to simplify the procedures and processes of RL for present and forthcoming requests Enterprise Alliances (LG4) Sharing risks and benefits, as well as the compatibility of corporate culture of Environmental (EP) Resources Consumption (EP1) Percentage of resource intake in terms of water, energy, and raw materials during the production process Disposal Capability (EP2) Ability to ensure safety and environmental protection through proper waste disposal Environmental Management System (EP3) The company has been certified in the field of environment such as ISO 14000, have had environmental policy, purpose that oriented to the environment, and inspection and control to achieve good environmental activity Pollution Production Control (EP4) The normal volume of emissions, solid waste, liquid waste, and hazardous materials produced per day during the RL process are clearly known

Perspective of Social (SO) Corporate Image (SO1)
Reputation and general image of the company Geographic Location (SO2) Good geographical location of the company to support business processes Employment Practices (SO3) Employee contracts, security and disciplinary practices, discrimination, equity labor sources, diversity, job opportunities, flexible working schedules, career development, and employment compensation Health and Safety (SO4) Rate of sickness absence, lost time injury rate, safety impacts of services and products, and, the number of incidents of non-compliance regarding health.

Research Methodology
This study uses a GTA as the method to consider interdependencies and maintaining the hierarchical relationship among attributes and sub-attributes which is important to determine the best scenario of reverse logistic.GTA is a matrix approach which is suitable for investigating the directional graphs, specifically when numbers of nodes are large and graphs become complex to visualize.There were two basic elements in GTA, namely node and arrow or directed edges.The node represents the proposed attribute which is used for assessing the best outsourcing scenario for RL activity; whereas the arrow or directed edge connecting two nodes represent their relative importance.In detail, the steps to apply GTA can be described as follows [27] a. Find the relative importance weights between valid attributes and sub-attributes by looking the responses from the management of management of the company.The scale from 0.5 until 1 or from two attributes are equally important until one attribute exceptionally more important over the other is used to measure relative importance weights between valid attributes and subattributes.b.Plot the digraph of the value of attributes and sub-attributes which results from the calculations in stage 4 and convert the graph into the matrix.c.Find the diagonal value for the matrix of certain alternative outsourcing scenario of RL activity d.After obtaining the diagonal value for the matrix of certain alternative outsourcing scenario, substitute the value on the derived matrix by using Matlab.e. Evaluate the permanent function by repeating step b to d for each alternative scenario of outsourcing.The value of this permanent function for each alternative scenario of outsourcing matrix is also called the outsourcing index.Choose the best scenario based on the highest outsourcing index value of all scenario of outsourcing 4 Result of Data Processing and Discussion

The of validation of attribute and subattribute
The value of the arithmetic mean of each attribute and sub-attribute indicated that all of the attribute and subattribute have the value of the arithmetic mean ≥ 4. It means all of the attribute and sub-attribute are valid and can be used in this study for assessing the four alternative outsourcing scenario of RL activity in PT.XYZ.

result of calculation the geometric mean of the relative importance of attributes and sub-attributes
The sample of the result of calculating the geometric mean which is depicted the relative importance of attributes and sub-attributes can be seen in Table 2.It can be seen in Table 2, the weight for the relationship from attribute financial to internal business process is 0.588, so the weight for the relationship from attribute internal business process to financial is 1-0,588 or 0.412 or less than 0.588.It means the relationship between attribute financial to internal business process is stronger than the relationship from attribute internal business process to financial.Based on this condition, the arrow is directed from attribute financial to internal business perspective.This condition applies to the relationship between each attribute and sub-attribute.So, based on the value of the relationship indicated in Table 2, the digraph of attribute and sub-attribute can be made next, the digraph is converted into matrix form.

The result of evaluate permanent function for each alternative scenario of outsourcing matrix or the outsourcing index
After applying the GTA on the valid attribute and subattributes, the result of evaluating the permanent function for each alternative scenario of outsourcing matrix or the outsourcing index for scenario  [23], there were differences in the best alternative of outsourcing scenario.Research conducted by Agrawal et al [23] indicated that the best alternative of outsourcing scenario is outsourced all the process in reverse logistic.It can happen because, recently, the PT.XYZ already have XYZ Center with the main task is to receipt the defective product from the customer and deliver it to PT. XYZ.In this case of implementation of scenario 3, the main task of XYZ center will change to collection, inspection, and sorting (or not only receipt and deliver the defective product); whereas remanufacturing, recycle and transportation will be done by the third party.However, both in the result of research (Agrawal et al) and this research) indicated the same condition; remanufacturing, recycle, and transportation should be done by the third party.As the object of the research by Agrawal et al [23], the PT.XYZ only has one manufacturing plant while it has distribution all over the country, which may result in higher logistics cost.Remanufacturing process and recycle are not recommended to be done by the company itself since there is uncertainty in the context of quality and also quantity.Besides that, remanufacturing may not be a good idea for the company because of lower recapturing value of the low-cost product.Moreover, the remanufacturing process, recycle, and also transportation for the activity of RL will achieve economies of scale when the volume is large.In this case, the economic will be achieved by the third party as they not only collect, but also remanufacture, and recycle the defective product from PT. XYZ and also from the other company.As the third party can take advantage of the economics of scale, they can also reduce the cost of transportation, remanufacture, and recycle which is charged to the PT.XYZ.Overall, this makes the cost of reverse logistics cheaper.

Conclusion
The result of data processing with the GTA method indicated that the best scenario is scenario three.In this scenario, remanufacturing, recycle and transportation are outsourced; whereas, collection, inspection, and sorting are performed by the company.Since the PT.XYZ already have XYZ center, this center can be used by the company for activity collection, inspection and sorting the defective product.The result of this study cannot be generalized since the attribute, sub-attribute, and the alternative scenario of outsourcing for RL activity only based on the perception of one company.To overcome this limitation, the more case company with the different size or different industry can be included as the sample and a larger group of experts may be utilized to find more suitable attribute and sub-attribute and also to find the relative importance of each attribute and subattribute. 22,

Table 1 .
Attributes and sub-attributes on SBSC

Table 2 .
The result of calculation of the geometric mean for the scenario-1