Lecture 9 Reverse Logistics

BM0472 International Trade Management

LessonObjectives
Appreciatetheimportanceofreverseflows
Discusstherecovery optionsinreverselogistics
UnderstandReverseLogisticsSystemsvs.ClosedLoops
UnderstandestablishingReturnsPolicies
Discussthemajor forcesforreverselogisticsprograms

ImportanceofReverseFlows
Traditionally,reverseflowswerenotviewedasaddingvaluefor
customersorrevenueforthemanufacturerorproducer
Interestandexpectationsinsupplychainsustainabilityhas
increased.Sustainabilityapproaches:

Reuse
Remanufacturing
Reconditioning
Recycling

Anincreaseinvolumeofreverseflowspossiblybroughtaboutby:

Internetsales
Retailerscustomerservicepolicies
Consumerrecyclingprogrammes
Highobsolescencerateintechnologicalproducts

HP_Reuse_&_Recycle.mp4

Reverse Logistics Systems

Reverseflowsaregoodsandmaterialsmoving
upstreaminthesupplychain.
Reverseflowsweretraditionallyignored,but
regulationandeconomicshaveincreasedattention
onthem.

A generic reverse logistics system with

recovery options
Forward Logistics

Source
Recycle

Parts
Manufacture

Remanufacture

Market

Reuse

Redistribution
Disposal

Parts
Manufacture

Test

Reverse Logistics

Collection

Recoveryoptionsinreverselogistics
Reuse
referstoaprocessinwhichtherecoveredproductisused
againforapurposesimilartotheoneforwhichitwas
originallydesigned.

Recoveryoptionsinreverselogistics
Remanufacturing
involvesaprocessofreducingaproductintoits
constituentparts.Itrequiresmoreextensivework,often
completedisassemblyoftheproduct.

Recoveryoptionsinreverselogistics

Remanufacturing

Recoveryoptionsinreverselogistics
Recycling
istheprocessofcollectinganddisassemblingused
products,componentsandmaterials,and
separatingthemintocategoriesoflikematerials,
suchasplastic,glassetc.,andthenprocessing
themintorecycledmaterials.

Recoveryoptionsinreverselogistics
Recycling

Recoveryoptionsinreverselogistics
Recycling

Eightcategoriesofreverseflows
1. Productsthathavefailed;areunwanted,damaged,or
defective;butcanberepairedorremanufacturedandresold.
2. Productsthatareold,obsolete,orneartheendoftheirshelf
lifebutstillhavesomevalueforsalvageorresale.
3. Productsthatareunsoldfromretailers,usuallyreferredtoas
overstocksthathaveresalevalue.
4. Productsbeingrecalledduetoasafetyorqualitydefectthat
mayberepairedorsalvaged.

Eightcategoriesofreverseflowscontinued
5. Productsneedingpullandreplacerepairbeforebeingput
backinservice.
6. Productsthatcanberecycledsuchaspallets,containers,
computerinkjetcartridges,etc.
7. Productsorpartsthatcanberemanufacturedandresold.
8. Scrapmetalthatcanberecoveredandusedasarawmaterial
forfurthermanufacturing.

Reverse Logistics Systems vs. Closed Loops

Reverselogistics
Theprocessofmovingortransportinggoodsfromtheirfinal
destinationforthepurposeofcapturingvalueorforproper
disposal.
Involvestheprocessesforsendingneworusedproductsback
upstreamforrepair,reuse,refurbishing,resale,recycling,or
scrap/salvage.

Closedloopsupplychains
Designedandmanagedtoexplicitlyconsiderbothforwardand
reverseflowsactivitiesinasupplychain.
Explicitlydesignedandmanagedforbothflows

Closed Loop Supply Chain for Cartridges

HP_Closes_the_Loop_Worldwide.mp4

Closed Loop Supply Chain for Tire Retreading

Establishing Returns Policies

Gatekeeping
Processofscreeningallreturnedgoodsatthepointofentry
intothereverselogisticssystem
Objectiveistobalancethevalueofsatisfyingcustomerswith
thecostandcomplexityoftakingbackreturnedmerchandise
Somemerchandisecanbereturnedtotheretailfloorfor
resale,otherreturnsarenotresalablebecauseofdefectsor
damagedpackaging.Thesehastobereturnedtothe
manufacturerorsoldatadiscounttoathirdparty,henceincur
costs
Companyreturnpoliciesstatethegatekeepingprocessclearly
tocustomerse.g.within7days,innewcondition,with
originalreceipt,withpackaging&accessories

Establishing Returns Policies

Avoidance
Companiescantrytoavoidorminimizereturnrequests
throughvariousmeans
e.g.customerreturnhistorychecktodisallowcustomers
whorepeatedlyreturn;adoptareturnforstorecredit
onlypolicy;customertotalktoacustomersupport
representativefirst upsellingorcrosssell

Disposition
Mayberestockedandresoldifstillinnewcondition.
Maybesoldtootherpartiesoutsidetheoriginalsupply
chain secondarymarkets(outletstores,onlineauctions)
Mustconsiderlegalandenvironmentalrequirements

Major forces for reverse logistics programs

CustomerService
Avarietyofreasonsforcustomerreturnsincluding
defectiveorunwanteditems,warrantyproblems,recalls,
andmissshipments.

EnvironmentalIssues
Increasingenvironmentalchallenges
Corporationsplayanactiverole ethicsandsocial
responsibility
Publicrelations
Regulatorypolicy

Major forces for reverse logistics programs

EconomicValue
Potentialforviewingreverseflowsasavaluestreamas
opposedtoawastestream
Makingreverseflowsprofitableisachallengeaswellasan
opportunity.
Costbenefittradeoffs
Commonmistakemadeistheassumptionthathe
processesarethesameasforwardflowsandthereforethe
costsarethesame.