REVERSE LOGISTICS

BY ABHIJIT MUKHERJEE (07/MBA/22) BANHI GUHA (07/MBA/47)

DEFINATION Purpose of conforming to customer P requirements. OI Process of planning, implementing & N controlling the cost-effective flow of raw material, in-process T inventory, finished goods & related information. O F Purpose of O recapturing value of proper disposal. RI GI

POINT OF CONSUMPTION POINT OF CONSUMPTION

FORWARD Forecasting relatively One to many distribution points straightforward Product quality uniform Product packaging uniform Destination/Routing clear Disposition options clear Pricing relatively uniform Importance of speed recognized Forward distribution cost easily Inventory visible management consistent Product life cycle manageable Negotiable between parties Marketing methods well known straightforward Visibility of process more transparent

FORWARD VS. REVERSE LOGISTICS

REVERSE Forecasting more difficult Many to one distribution points Product quality not uniform Product packaging often damaged Destination not clear Disposition not clear Pricing dependent on many factors Speed not considered a priority Reverse cost less directly visible Inventory management not Product life consistent cycle issue more Negotiation complicated complex Marketing complicated by several Visibility factors of process less transparent

C a r sp e b a tte ri s d i o sa l üC u sto m e r R e l ti n s M a n a g e m e n t. e . b u y b a ck g u a ra n te e IMPORTANCE OF REVERSE LOGISTICS . g . e . a fte r sa l s e a o ce se rvi . g .. H a za rd o u s w a ste m a n a g e m e n t.üA sse ts u ti i ti n ( ra th e r w e ca n sa y re -u ti i ti n ) l za o l za o üA sse ts re co ve ry ( to ca p tu re th e va l e . W a ste o i ro fi l i re cycl n g .. e . g .. w h i o th e rw i se ch u o l w i lb e l st) üPro fi m a xi i ti n : C o st re d u cti n th ro u g h re cycl n g i o m za o t üTo fu l l th e E n vi n m e n ta l o b l g a ti n s.

ACTIVITIES OF REVERSE LOGISTICS Collection Combined inspection/ selection/sorting Re-processing or Direct recovery Redistribution .

.ACTIVITIES OF REVERSE LOGISTICS Collection  Collection refers to bringing the products from the customer to a point of recovery.

products are sorted according to their quality state and recovery route.ACTIVITIES OF REVERSE LOGISTICS Collection Combined inspection/ selection/sorting  In the inspection/selection and sorting phase products are being sorted according to the planned recovery option and within each option. .

ACTIVITIES OF REVERSE LOGISTICS Collection Combined inspection/ selection/sorting Re-processing or Direct recovery  Re-processing  Repair  Refurbishing  Remanufacturing/Retrievals  Recycling  Incineration .

ACTIVITIES OF REVERSE LOGISTICS Collection Combined inspection/ selection/sorting Re-processing or Direct recovery  Direct Recovery Reuse Resale  .

.ACTIVITIES OF REVERSE LOGISTICS Collection Combined inspection/ selection/sorting Re-processing or Direct recovery Redistribution  Redistribution is the process of bringing the recovered goods to the new users.

DESIGN OF RSC NETWORK The Convergent Network The Divergent Network  .

REVERSE LOGISTICS APPLICATION AREA üPublication houses (40-50% by volume): To take back the unsold volumes for reuse üBeverage industries: To collect reuse the empty bottles. e.g.. Coca cola & Pepsi üHeavy industries: To collect and reuse the waste üConsumer goods industry: To fulfill the commitments of after sale service and buy back guarantee üPharmaceutical industries: To collect the expired formulations and drugs for environment friendly disposal üAutomobile industries: To fulfill the commitments of after sale service and buy back guarantee ü .

RETURN PERCENTAGES INDUSTRY Magazine Publishing Book Publishers Book Distributors Greeting Cards Catalog Retailers Electronic Distributors Computer Manufacturers CD-ROMs Printers Mail Order Computer Manufactures Mass Merchandisers Auto Industry (Parts) Consumer Electronics Household Chemicals PERCENTAGE 50% 20-30% 10-20% 20-30% 18-35% 10-12% 10-20% 18-25% 4-8% 2-5% 4-15% 4-6% 4-5% 2-3% Source: Rogers and Tibben-Lembke. Going Backwards: Reverse Logistics Trends and Practices. 19 .

publishers must supply large quantities of books üSuperstores sell less than 70% of books they order üShorter shelf life .PUBLISHING INDUSTRY üHighest rate of unsold copies (28% on average) üGrowth of large chain stores: More square footage requires more books üTo secure a prominent display in superstores.

COMPUTER / ELECTRONIC INDUSTRY üS h o rte r l fe cycl s i e üA p p roxi a te l 3 2 5 m i l o n P C ’ s b e ca m e m y li o b so l te i th e U S b e tw e e n 1 9 8 5 a n d e n 2005 üO p p o rtu n i e s to re u se a n d cre a te va l e o u t ti u o f a n e a rl o m n i re se n t a sse t y p üH o w to re co ve r a n d re u se m a te ri l as co n ta i e d w i i E -w a ste ? n th n üLead. televisions. cell phones. plastics and glass üE-waste includes computers.000 remanufacturers. employing 42. aluminum gold. audio equipment and batteries üRemanufacturing of toner cartridges: 12. sell nearly $1 billion annually . copper.000 workers.

annually .AUTOMOTIVE INDUSTRY üThree primary areas: Components in working order sold as is Other components. such as engines. and transmissions are refurbished before they can be sold Materials are reclaimed through crushing or shredding üAutomotive recyclers handle more than 37% of the nation’s ferrous scrap üRemanufactured auto parts market is estimated at $34 billion. starters. alternators.

80% ü .RETAIL INDUSTRY üProfit margins are so slim that good return management is critical üReturns reduce the profitability of retailers marginally more than manufacturers üReturns reduce the profitability of retailers by 4.3% üThe average amount that returns reduce profitability among manufacturers is 3.

2% 35% 34.8% 19.0% 19.BARRIERS TO REVERSE LOGISTICS BARRIER Importance of reverse logistics relative to other issues Company policies Lack of systems Competitive issues Management inattention Financial resources Personal resources Legal issues PERCENTA GE 39.7% 26.0% 14. Going Backwards: Reverse Logistics Trends and .1% Source: Rogers and Tibben-Lembke.3% 33.

it is not clear whether the items are: defective.REVERSE LOGISTICS ELEMENT Preventive Measures: To increase Quality – minimize returns by defective products Return agreements with retailers / distributors Customer Service – providing toll-free numbers that customers can call before returning products Compacting Disposition Cycle Time Important to know beforehand what to do with returned goods When material often comes back in to a distribution center. can be reused. or need to be sent to a landfill The challenge of running a distribution system in forward is difficult – employees have difficulty making decisions when the decision rules are not clearly stated and exceptions are often made . or refurbished.

and returns inventory turnover Useful tools such as radio frequency (RF) are helpful.REVERSE LOGISTICS ELEMENT Reverse Logistics Information Systems The system should create a database at store level so that the retailer can begin tracking returned product and follow it all the way back through the supply chain Information system should also include detailed information programs about important reverse logistics measurements. New innovations such as two-dimensional bar code and radio frequency identification license plates (RFID) may soon be in use extensively Asset Recovery This is a good cash generating opportunity for companies who can sell these goods that would be otherwise end up in landfills . such as returns rates. recovery rates.

People in the sales department may tend to fight returns and delay them as much as possible. negotiations usually are informal and approached without formal pricing guidelines. Furthermore. In many cases. it makes more sense for the firm to outsource their reverse logistics functions than keep those in-house. accounts receivables are impacted by returns Outsourcing Reverse logistic is usually not a core competence of the firm.REVERSE LOGISTICS ELEMENT Negotiation Negotiation is a key element for all parties of the reverse logistics process. however. Because of the inherent lack of expertise on product returns. Firms often do not maximize the residual value of returned product Financial Management Probably the most difficult part of reverse logistic and also one of the most important Returns are sometimes charged against sales. .

RL TIPS FOR BETTER REPLACEMENT MANAGEMENT 1.Keep your alternative organized 5.Satisfy your customer as quickly as possible 2.Keep your customer informed 3.Keep a close eye on cost 6.Predict future requirements .Promise to deliver 4.

CASE STUDIES .

00. the experience curve of more than 125-year-old dabbawalla service.000 lunch boxes everyday in the busy metropolis of Mumbai.30 pm. the empty boxes are collected and taken back to the homes. The lunch boxes are delivered exactly at 12. these 'delivery boys' travel by local trains and use bicycles or walk to reach every nook and corner of Mumbai.MUMBAI DABBAWALLAS Started in 1880. They have 5. . catering services or hotels before 5 pm. Supplies 2. Later.000 people on their payroll to ensure the prompt delivery of lunchboxes within Mumbai.

3 for the carrier who delivers in Nariman Point. 10 is the number for the Churchgate station where the tiffin is offloaded and D for Dahisar station where it was collected. MC for his office in Mafatlal Centre and 4 for the floor his office is located on.  In another code below it.  Each box is differentiated and sorted along the route on the basis of markings on the lid.MUMBAI DABBAWALLAS  On an average. . every Tiffin box changes hands four times and travels 60-70 kilometers in its journey to reach its eventual destination. which give an indication of the source as well as the destination address.  For instance. Bhalekar's lunch would carry the coding 3MC4.

rely on the dabbawala to deliver a home cooked mid-day meal. hygiene. since neither of these serve home food. the dabbawallas' core offering remains unchallenged. caste and dietary restrictions or simply because they prefer whole-some food from their kitchen. However.  .MUMBAI DABBAWALLAS Current competition: The dabbawallas do face competition from fast food joints as well as office canteens. for reasons of economy. They generally tend to be middle-class citizens who.

depending on location and collection time.  Service charges vary from Rs 150 to Rs 300 per Tiffin per month.com to access the service. Money is collected in the first week of every month and remitted to the mukadam on the first Sunday. Today customers can also log onto the website www. .MUMBAI DABBAWALLAS  New customers are generally acquired through referrals. Some are solicited by dabbawalas on railway platforms. It is assumed that one dabbawala can handle not more than 30-35 customers given that each Tiffin weighs around 2 kgs. He then divides the money equally among members of that group. And this is the benchmark that every group tries to achieve.webrishi. Addresses are passed on to the dabbawala operating in the specific area. who then visits the customer to finalize arrangements.

00.MUMBAI DABBAWALLAS Typically. loans and marriage halls at concessional rates.000 to Rs 6. The amount is utilized for the community's upliftment. From his earnings of between Rs 5. . every dabbawala contributes Rs 15 per month to the association.000 per month which is divided equally even if one dabbawala has 40 customers while another has 30.000. Groups compete with each other. a twenty member group has 675 customers and earns Rs 1. but members within a group do not.

No dabbawala is allowed to undercut another. . Before looking into internal disputes. the association charges a token Rs 100 to ensure that only genuinely aggrieved members interested in a solution come to it with their problems. and the officials' time is not wasted on petty bickering. the association can shift the customer's account to another dabbawala.MUMBAI DABBAWALLAS If a customer complains of poor service.

Not wearing the cap attracts a fine of Rs 25." is operational motto. alternative arrangements are made to deliver the lunch boxes.  The dabbawallas must be extremely disciplined.  Every dabbawalla gets a weekly off. .DABBAWALA METHODOLOGY  "Error is horror.000. usually on Sunday. Consuming alcohol while on duty attracts a fine of Rs 1. In the event of a dabbawalla meeting with an accident en route. Unwarranted absenteeism is not tolerated and is treated with a similar fine.  The Gandhi cap serves as a potent symbol of identification in the crowded railway stations.

pharmaceuticals and other FMCG areas. . transporting the filled bottles to retailers and collecting empty bottles back to the plants).LEARNING FROM DABBAWALAS The belief that technology is indispensable to solve complex problems was shattered. FMCGs and other industries can learn a lot from the simple supply chain logistics and efficient reverse logistics (transfer of empty lunch boxes to the source location) The concept of multi-level coding (colour coding on the lunch boxes for identification) and reverse logistics can be implemented in industries as diverse as soft drinks (where logistics becomes an important aspect.

be simplified with just colour/ number coding  In small and medium scale organisations where bar coding systems would require a lot of resources.  Moreover.  The most enduring lesson that we learnt was to put the customer ahead of everything else. . It is said that when Prince Charles expressed a desire to meet them during his visit in 2003. the dependence on technology could be drastically reduced.LEARNING FROM DABBAWALAS  The bar coding mechanism (a computerised format) which is prevalent and expensive. these systems can prove to be very efficient and cost effective. the dabbawallas requested him to schedule the meeting such that it did not interfere with their mid-day delivery timings.