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Reverse Logistics

Reverse logistics involves the flow of goods from the point of consumption back to the point of origin. It includes activities like handling returns, recycling, and hazardous waste disposal. Several industries have significant reverse logistics needs due to high return rates. For example, the publishing industry has an average return rate of 28% of books. Reverse logistics presents both challenges and opportunities for strategic advantage. Effectively managing returns can help reduce costs and recapture value. As environmental regulations increase, the importance of reverse logistics will continue to grow.

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Parth V. Purohit
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362 views21 pages

Reverse Logistics

Reverse logistics involves the flow of goods from the point of consumption back to the point of origin. It includes activities like handling returns, recycling, and hazardous waste disposal. Several industries have significant reverse logistics needs due to high return rates. For example, the publishing industry has an average return rate of 28% of books. Reverse logistics presents both challenges and opportunities for strategic advantage. Effectively managing returns can help reduce costs and recapture value. As environmental regulations increase, the importance of reverse logistics will continue to grow.

Uploaded by

Parth V. Purohit
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Prepared By, Parth V. Purohit 18 Ahmedabad Mgnt.

Association

Definitions
Logistics (Forward)
Process of planning, implementing and controlling the efficient, cost-effective flow of
raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements

- Council of Logistics, 1988

Reverse Logistics
Process of planning, implementing and controlling the efficient, cost-effective flow of

raw materials, in-process inventory, finished goods and related information from the
point of consumption to the point of origin for the purpose of recapturing value or proper disposal - Rogers and Tibben-Lembke -

Reverse Logistics Activities


Handling of returned merchandise Damage Seasonal inventory Resell via outlet Salvage of outdated products Stockbalancing returns
Recycling and reuse Material reuse Remanufacturing / refurbishing Hazardous materials disposition

The Reverse Logistics Process

Return Percentages

Publishing Industry
Highest rate of unsold copies (28% on average) Growth of large chain stores: More square footage requires more books To secure a prominent display in superstores, publishers must supply large quantities of books

Superstores sell less than 70% of books


they order Shorter shelf life

Computer / Electronic Industry


Shorter life cycles Approximately 325 million PCs became obsolete in the US between 1985 and 2010 Opportunities to reuse and create value out of a nearly omnipresent asset

How to recover and reuse materials contained within


E-waste?
Lead, copper, aluminum gold, plastics and glass E-waste includes computers, televisions, cell phones,

audio equipment and batteries

Remanufacturing of toner cartridges: 12,000 remanufacturers, employing 42,000 workers, sell nearly $1 billion annually

Automotive Industry
Three primary areas: Components in working order sold. Other components, such as engines, alternators, starters, and transmissions are refurbished before they can be sold Materials are reclaimed through crushing or shredding Automotive recyclers handle more than 37% of the nations ferrous scrap Remanufactured auto parts market is estimated at $34 billion, annually

Retail Industry
Profit margins are so slim that good return management is critical
Returns reduce the profitability of retailers marginally more than manufacturers Returns reduce the profitability of retailers. The average amount that returns reduce profitability among manufacturers is 3.80%

Forward vs. Reverse Logistics

STRATEGIC USE OF REVERSE LOGISTICS


Reverse Logistics as a Strategic Weapon
Many firms have not yet decided to emphasize reverse logistics as a strategic variable. The handling of reverse logistics challenges is an strategic capability. Reverse logistics is strategically used to:

Reduce the risk of buying products that may not be hot selling items. Increase the switching changing suppliers. costs of

STRATEGIC USE OF REVERSE LOGISTICS


Competitive Reasons o Liberal return policies over the last few years due of competitive pressures.
o Taking back unwanted products or products customers believe do not meet needs. Good Corporate Citizenship o o Use reverse logistics capabilities for altruistic reasons, such as humanity. These activities enhance the value of the brand and are a marketing incentive to purchase their products.

Cont.
Clean Channel

o Clean out customer inventories, so that they can purchase more new goods.
o Fresher inventories can demand better prices, which in turn, protects margin.

Recapture Value and Recover Assets

Large portion of bottom-line profits is derived from asset recovery programs. Profit derived from materials that were previously discarded.

Legal Disposal Issues o

As landfill fees increase, and options for disposal of hazardous material decrease, legally disposing of non-salvageable materials becomes more difficult.

REVERSE LOGISTICS CHALLENGES


Retailer Manufacturer Conflict o Inefficiencies that lengthen the time for processing returns: Condition of the item Value of the item Timeliness of response o They have to develop a working partnership to derive mutual benefit. Problem Return Symptoms o Lack of information about the process.

If you arent measuring it, you arent managing it.

REVERSE LOGISTICS CHALLENGES


Cause and Effect

Poor data collection leads to uncertainty about return causes.


Improving the return process decreases costs.

Being able to see defective products and to track return issues.

Reactive Response
o o

Government regulation or pressure from environmental agencies . It has not been possible to justify a large investment in improving reverse logistics systems and capabilities.

BARRIERS TO GOOD REVERSE LOGISTICS


Numerous barriers to good reverse logistics exist Management inattention and the lack of importance of reverse logistics. Corporate strategy for handling returns and non-salable items. Legal issues do not appear to be a major problem.
Companies can not continue to overlook the necessity of good reverse logistics management.

Product Take-Back
A number of societal changes regarding the environment are having a profound impact on reverse logistics. Firms are forced to take their products back when they are banned; this benefits the firms in two ways. They reuse the products and recapture their value. The firm is exposed as an environmentally friendly company.

Companies have begun to examine new ways to regain value from products once they have reached the end of their useful lives. Companies have begun to realize the potential marketing benefits of a take-back program.

Product Take-Back
Many companies such as Compaq, Hewlett-Packard, and Xerox have adopted the Extended Product Responsibility (EPR) program. EPR focuses on the total life of the product, looking for ways to prevent pollution and reduce resource and energy usage through the products life cycle.

CONCLUSIONS
More firms should give considerable attention on reverse logistics

Efficient handling and disposition of returned product can make a


competitive difference. Excellent reverse logistics practices add to the companys bottom line.

Aspects to reduce the cost of reverse logistics:

Improved Gate keeping technology Partial returns credit Earlier disposition decisions Faster processing / shorter cycle times Better data management

CONCLUSIONS

Within reverse logistics, maintaining the environment and making profits are complementary.

Fewer disposed products can benefit companies and the environment. Alternate uses of resources by extending products normal life cycles. Cost effective and ecologically friendly solutions.

Reverse logistics is not simply a matter of driving the truck the opposite way.

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