Rise of Reverse Logistics
NMIMS MBA 2nd Year Shashank Yagnick, 9004073881 Tushar Jain, 9768836017
Another set of reasons can be for hazardous material extraction and recycling or environmental friendly disposition. in-process inventory. are least bothered about these so-called "discarded" things. the larger issue common to all the above mentioned activities is that how the firms should efficiently and effectively move the products from where they are not required to where they can be processed. Some of the activities which can be performed as the goods find their ways back to the chain are as follows:Return to Retailer Resell Return to Supplier Resell Return to Manufacturer Salvage Recondition Refurbish Remanufactu re Reclaim Materials Recycle Landfill Thus the returned product can be sold and if not. finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. and controlling the efficient. value can still be captured from the returned parts by remanufacturing. let s see what all activities form the part of logistics. Many a times. reverse logistics was frowned upon as a "necesaary evil". which otherwise could have been foregone by dumping the goods in a landfill. The trends are clearly changing. for capturing value or for proper disposal. recalls or excess inventory. while leaving returns and exchanges to the intermediaries at store and warehouse level. Reverse Logistics include all the activities that are mentioned in the above definition.
Merchandise might find its way back to the manufacturer due to damage in transit. Logistics is defined by The Council of Logistics Management as The process of planning. Companies were more focussed towards pushing the goods to meet demand. refurbishing or repairing. reused or salvaged. But is it the same for the companies as well? Are they focusing only on the activity of producing new goods. with an exception that these activities now happen in reverse. certain materials can be reclaimed and the goods can be dispossed off. restock. Even if this isn t possible. But from logistics perspective. not any further.Introduction Ever wondered what happened to the faulty keyboard of your laptop which you got replaced just few days back? Or for that matter. implementing. and ensuring that these goods flow from their point of origin to their point of consumption. while ignoring those waste units that don t find an end customer? Well. inventory holding and disposal. Whereas logistics ensure that goods/information flow towards the point of consumption. Thus the returned waste part can actually help the company earn some additional revenue. A well managed Reverse Logistics can ensure important cost savings in transportation. what was the future of the pair of shoes which you had to return in exchange because the sole couldn't withstand the rough weather? Well most of us. cost effective flow of raw materials. and this brings us to our topic of discussion -the reverse logistics. Rise of Reverse Logistics Since few years back. the consumers. But before that. reverse logistics is concentrated towards the movement of goods from their final destination to their place of origin. procurement. can be reconditioned or refurbished.
Once this matter is resolved and the condition of the item is agreed upon. to determine whether it is even repairable before going through the trouble of shipping it back to the clearinghouse. In an Indian context. One of the major challenges that come up in implementing Reverse Logistics processes is the Retailer Manufacturer Conflict. at the store level. The manufacturer may suspect the retailer of abusing return privileges because of poor planning on his part. the value that the retailer should receive must be determined. It is a sunrise industry within logistics. but so are the execution risks.
Retailer Manufacturer Conflict One difficulty that arises in managing returns is the difference in objectives of the retailer and the manufacturer. the same sets of activities are carried out and the costs of activities are spread over very few products that have to be returned. reverse logistics has the potential to become a key route to cost optimization as the economy grows. The reverse supply chain is frequently much more labour-intensive than the forward supply chain. the cost of different activities involved is spread across the entire volume of products.
efficiency. and is still in an evolution phase. During forward logistics. during reverse logistics. some of which are discussed in the next columns. but it would make more sense. there could be differences on any one of the following points: · Condition of the item · Value of the item · Timeliness of response Retailer affirms that every product was sent back in pristine state. customer satisfaction and brand image. they have begun to appreciate the costs associated with reverse logistics. Reverse logistics processes must often be customized around each product coming back into the supply chain rather than having a standard process for all products. if any. The business opportunities are high. and the manufacturer may disagree on the claim and
Challenges of Reverse Logistics Managing the flow of goods through the forward-facing supply chain is difficult. companies have focused on creating standardization and routine so that people can do the same thing over and over again and attain maximum
. The process needs to be unique for each return based on the product. Whenever such incident occurs where the retailer wants to return an item to the manufacturer. and hence a need to streamline the system and reduce the expenses. the problem is that not all return situations are the same. to triage a returned good in the field. in operations activities. However. As a result. Historically.But as the margins for manufacturers and retailers start becoming razor thin. and improper handling by companies of these tocuhpoints can negatively impact profitability. The retailer may claim full credit. but keeping the reverse supply chain running smoothly presents a number of challenges. or its condition. However. and the damages. say. A number of touchpoints appear in a reverse logistic setup. must have occurred in transit or must be due to some manufacturing defects. or of returning product damaged by the retailer himself. more and more companies are devising sophisticated and efficient return approaches. Having all returned goods automatically sent back to a single clearinghouse might make sense operationally. the demand for it.
Disposition of Products This presents an uphill task to find a suitable place/resource to handle. Cummins India Ltd One of the major manufacturers of engines in India. These issues can be difficult to sort out. Major hurdles are roads. Proper understanding of taxation
Future Group It started its reverse logistics in house two-years ago for its fashion and furniture businesses. Inefficiencies that lengthen the time for processing returns cause harm to both firms. there seems to be some major hurdles in the implementation of reverse logistics. It is critical for the customers and for the customers' customers to be able to track the status of products in the reverse logistics supply chain so that they can fulfil their own service obligations. Business Practices
Some of the other key challenges are: Meeting Customer s Expectations Meeting customer demands with effective and efficient use of resources including distribution capacity. IT infrastructure in smaller towns and villages. Obviously. Regardless of the approach that a company takes in addressing its reverse logistics challenge. The company has developed an expertise in this area and offers to extend it to other retailers. power and efficient telecommunication. The entire operation is labour intensive as well. has
. and that's why information technology is playing such a critical role in the growth of reverse logistics. After the refund has been decided. a key goal of these initiatives is to improve visibility into the goods in motion throughout the reverse supply chain. regulations and processes. they need to work together to reduce the number of returns coming back and speed up the processing of those that do come back. it plans to offer the service of reverse logistics to other retailers as well whose products the retail giant is selling. destroy or to donate the product. But since company owns its own warehouses and other facilities. it does not reach the retailer quickly enough to sort out matters. Complicated Rules and Regulations There are certain mandatory knowledge of waste management laws. both the parties need to realize that they have to develop a working partnership to derive mutual benefit. Costs hike up by 7-8% of material cost. neither can live without the other. alternatively.
laws is required which might vary from one state to another in India. The company claims that average spending on reverse logistics comes to about 10-15% for garment firms and 20% for furniture companies. Managing Expenses There is a substantially high investment to set up a Reverse Logistics centre. to outsource their reverse logistics operations to service providers to take advantage of economies of scale and specialized expertise in planning reverse logistics operations. many companies have elected to either implement new solutions to better manage their reverse logistics process or. That's where the data come in. Infrastructure Lack of basic infrastructural facility for new business set up. inventory and labour.may have his reasons for not giving full credit. As a result. Mitigating challenges Currently. Ultimately.
"Reverse logistics gaining ground in Indian Market".1998.recently started with a RECON (reconditioning) business. The engine is dismantled.customer.businessweek. revenue. 2010.reverselogisticstrends. so that it can be turned into an area of opportunity. an altogether new engine is created which is sold as a second hand Cummins product with a company warranty.N. Thus.
References 1) Rogers.pdf 2) Shradha. all the parts are taken out and inspected.com/magazine/co ntent/08_31/b4094046657076.org/reverse. The company through its existing dealer and service network procures the used engine/generator and brings it back to the manufacturing facility. as opposed to a necessary evil.com/2009/09/03210902/ Reverse-logistics-gaining-grou..htm 4) "Product Lifecycle".rlec. Accessed through http://www. 2008. "Reverse Logistics: From Trash to Cash". Bloomberg Business week. Accessed from http://www. the way forward is to turn this area of cost into a profit centre. and at a lower cost as compared to a new engine. the parts which would have otherwise found their way to a scrap dealer are now being used by the company to generate revenue. for various reasons .reverse logistics will play an increasingly important role in the future strategies of the companies.html 3) Editorial..livemint. Accessed through http://www. In total. "Going Backwards: Reverse Logistics Trends and Practices´.com/
. costs. Accessed through http://www. retailers and logistic service providers. Conclusion Reverse logistics should be looked forward to as separate domain rather than an area of supply chain. 2009. After remachining/reconditioning of the parts. Companies should try to create competencies in this field so as to better satisfy the customers and obtain market advantage. Product returns are a fact of life for manufacturers.D.