SAJMS - South Asian Journal of Management Sciences

Improving Reverse Logistics of Used Lubricant Oil for Re-Refining

Recycled used lubricant oils offers the benefits of recovering base oils prevents environment from harmful uses and protects the environment from disposal of used lubricant oils. It also promises to save billions of dollars of new base oil used in formulating new lubricant oils. It is argued that failure to ensure return of used lubricant oil and poor reverse logistics is the result of market failure, where the customer is not charged the true cost of using this valuable resource, which should include factors such as cost to the environment. This provides a possible economic rationale for government to intervene in the market to encourage return of used oil for recycling closer to the optimum level. The research found that charging an amount on the purchase of new lubricant, which would be adjusted on return of used lubricant oil, would ensure optimum return of lubricant oil. The amount should be high enough to discourage inappropriate users from buying the used oil. Alternatively, incentives such as free service or free replacement of oil filter could also be used. Findings suggest that the incentives such as free oil filter with oil replenishment or offering free car wash seems to be the most practical as it will also avoid the problems in handling and adjusting cash charged for ensuring used oil return.

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