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16. Reverse Logistics

Dr.A.Rajagopal
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Reverse Logistics

 Logistics system, in general, moves products to

customers. However, at times there is a need for
flow in the reverse direction i.e from customers.
 This flow of products / material in the reverse
direction is known as reverse logistics.
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Reverse Logistics

 Reverse logistics could be categorized into the

following broad categories:
 Quality related returns
 Warranty claims

 Packaging materials return

 Salvage of outdated products

 Green marketing practices (including recycling,

remanufacturing, etc.)
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Quality Related Returns

 Customers return products that are found defective

and sometimes the manufacturer themselves recall
the products on identifying quality problems in the
product.
 In the beginning of year 2010 one major
international automobile manufacturers recalled as
many as 400,000 cars due to problems in its
antilock braking system software which is likely to
cost of the company $2 billion.
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Used Products Returns by Customers

 Customers are encouraged to return used products

and take a new one back home.
 A credit is provided towards the value of the used
product returned by the customer.
 This is a prevalent practice in the two wheeler
market and the small sized four wheeler passenger
car market as well.
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Warranty Claims

 Products which become defective or does not

perform to the satisfaction of the customer could
be returned by the customer under warranty claims
for repair / replacement.
 The cost towards this is to be borne by the
manufacturing company.
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Packaging Material Returns

 Packaging materials like pallets could be returned

for reuse in the distribution chain.
 So is the case for packaging materials like bottles
used in soft drinks distribution. The bottles could
be collected and reused after proper sterilization.
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Salvaging Outdated Products

 Products that are outdated also need to be

collected back and disposed off properly.
 Return of products in the print media is a
challenge. The return rate could be as high as 35
to 40% in case of print media such as magazines
and newspapers. The reverse logistics is a regular
activity in this business.
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Green Marketing Practices

 Companies also collect back materials used for

packaging etc., in order to keep the supply chain
more of the green in nature.
  Reverse logistics has become a critical and a
challenging activity that computer/ electronic
industry. Approximately 325 million PCs became
obsolete during the period 1985 to 2005 in US
alone. There is a lot of potential for recycling/
remanufacturing in this sector.
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Retail Industry – Returns Management

 Retail industry generally operates with a thin

profit margin.
 Goods return is very critical in this sector of
business since its impact on the profitability could
be significant.
 Further, returns affect the profitability of retailers
more than that of manufacturers.
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Reverse Logistics - Process

 The reverse logistics process comprises the of the

following steps
 Retrieve
 Transport

 Receive

 Inspect

 Sort

 Disposal management
 Reverse Logistics – Operational
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Challenges
 Retailer - Manufacturer conflict could make
reverse logistics inefficient.
 There is a need for a working partnership to derive
mutual benefit for both.
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Symptoms of Poor Reverse Logistics

 The following are some of the symptoms of poor or

inefficient reverse logistics:
 Returns arriving faster than processing or disposal of
the returned items.
 Excess amount of returns inventory held in the
warehouse
 Unidentified / unauthorized returns

 No control over costs due to product returns

 Customer losing confidence in the repair management

process
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Reverse Logistics Information system

 A major problem in the reverse logistics

management is the information system.
 There is dearth of information on returns.

 A good information system for tracking returns is

very essential.
 A database on returns could be established at the
stores level in order to monitor the returns process.
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Centralized Return Center (CRC)

 A centralized return center could bring in

advantages in the reverse logistics system. The
following are the major advantages of centralized
return centers.
 Consistency in the disposition of returns and
minimization of errors in return handling.
 Space saving for retailers as retailers could
allocate the space for more salable merchandise.
 Centralized Return Center (CRC)
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contd.,
 Specialization of returns management results in
cost reduction (CRC employees can handle returns
more efficiently than retail clerks).
 Transportation costs reduction could be achieved
since the trucks which have brought in products /
consignments from the manufacturer could be
used for transporting returns in the reverse trip.
 Centralized Return Center (CRC)
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contd.,
 Good returns management and quicker returns
disposal could be used as a selling tool – easy
disposition of returns could be appealing to the
retailers and maybe used as a deal maker for
obtaining or retaining customers.
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Remanufacturing / Refurbishment
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Thank You