Reverse Logistics

By

Umar Ahmed Siddiqui

&

Ibtihaj Hussain

CONTENTS

Introduction

Application

Kinds of Reverse Logistics

Advantages of Reverse Logistics

Improvement in Supply Chain by Reverse Logistics

Reverse Logistics Pipeline

Immediate Reverse Logistics

Prelude

In this report we are going to elaborate one of the tools of supply chain management that is “REVERSE LOGISTIC”. Furthermore, kinds,application,advantages and suggested improvement in supply chain.

Introduction

Reveres logistics is the process which fulfills the need of reuse of materials, product return, recycling, waste disposal, refurbishing, repair and remanufacturing. In this process, chain works reversely. In other words, material is collect back from the final destination to the point of origin.

APPLICATION

This function of supply chain can be adopted mainly by those companies that deal in recyclable materials.

Mostly, companies prefer to collect back their primary packaging which can be easily consumable with minimum cost.

Following is the list of industries in Pakistan that applies reverse logistic:

• Beverages
• Confectionery product (especially bread)
• Mineral water

Kinds of reverse logistics

• ·         Collect back for recycling
• ·         Fetch goods for repairing and re-manufacturing
• ·         Collect back for the purpose of disposal ( sale return)

Now, here we are going to discuss the kind of reverse logistics that which one is more beneficial and fruitful for an organization.

Particulars	For recycling	For repairing and re-manufacturing	For disposal
Process Cost	Minimum	Normal	Minimum
Time Consuming	Maximum	Normal	Normal
Capital Investment	Maximum	Minimum	Not Required
Customer Satisfaction	Minimum	Maximum	Normal
Holding Cost Incurred	Normal	Minimum	Normal

                                                                                                                                                                               

Above table shows that reverse logistic for:

·         Collect back for recycling product is more appropriate for “process cost” as it brings the positive financial impact in an organization.

·         Fetch goods for repairing and re-manufacturing is appropriate enough for  “Customer Satisfaction” , “Holding Cost” and “Capital Investment”. As it satisfies the customers’  need ,  in term of repairing their damaged or faulty products and customer satisfaction is one of the core objective of an organization. As far as the holding cost concerns the repaired or re-manufactured products are redelivered from the origin to the final destination within a short time period (i.e.  1 or 2 weeks for mobiles , 3-4 weeks for electronic appliances) that cause low holding cost. In repairing process there is no need of any additional capital investment.

Collect back for the purpose of disposal ( sale return)In this scenario “process cost” is minimum because it does not go through any reimbursement and recycling process and customer satisfaction is minimum because customers’ personally is not getting any benefit as in previously discussed kinds (i.e. recycling and repairing) but customers’ satisfaction is at normal stage because the disposal process gives environmental benefits

Steps for reverse logistics

Following are the steps to be taken in the aftermarket supply chain (Reverse Logistics)

Above process diagram shows the steps of supply chain and after-market supply chain.

Supply Chain (Forward Logistics)

Supplier sells raw and packaging material to manufacturer then manufacturer adds value in such materials and converts it to consumer and industrial products then manufacturer.

After that, manufacturer utilizes it’s supply chain networks and  sells those finished products to distributor or retailer then retailer sell its to final consumer.

This is all about supply chain (Forward Logistics).

After-Market Supply Chain (Reverse Logistics)

Now, the whole process converts into the reverse process. This process starts from consumer end to the appropriate area (i.e. Disassembling, Recycling, Re-manufacturing and Disposal).Before sending the products to the discussed area. All the material are de-stuffed in return management department for categorizing either to recycle, re-manufactured, disassemble or disposal.

In case of recyclable products, Return management department send the recyclable material to the supplier or the vendor. And then the process of forward logistics will take place.

In case of re-manufacturing or repairing products, Return management department send the repairable or repairable products to manufacturer or manufacturing department in order to remove the faulty part of the product or re-manufacture it in its secondary form.

In case of disposal, This is the fast forward step of reverse logistics in this process products gets disposed off because that product has no secondary usage and cannot be recycled or repaired.

Advantages of reverse logistics

·         Reverse logistics reduces organization’s   ordering cost, holding cost, capital investment, transportation cost and ultimately per unit cost.

·         Reverse logistics connects the manufacturer to the consumer (indirectly).

·         Reverse logistics helps organization to increase its product life cycle.

·         Reverse logistics helps manufacturer to maintain good customer relationship that increases their loyalty.

·         Reverse logistics helps the organization to utilize its assets at optimum level.

·         It improves company’s efficiency, service and flexibility.

·         Company can produce maximum output from scarce resources by reverse logistics.

How to Improve Supply Chain by Reverse Logistics

·         
      Turn Failure into Success

It has been seen many times that 75% of the newly launched products fails in beginning that might create negative perception into customers’ mind so in order to  overwhelmed these scenarios companies take help from reverse logistic.

When Apple Inc. launched their new product  “ IPHONE 6 ” so they had to face some bending problems related with iPhone 6 so that was creating some serious (negative) perception in consumers’ mind that they purchased such an expensive smart phone and it is having a problem so APPLE INC just noticed this problem and in order to retain customers they called back all their smart phone and sent them all back to department for re-manufacturing and spent required amount in R&D process to find the reason of the issue.At last, they resolved the problem and relaunched the product in market, so we can see that how reverse logistic helped  “APPLE INC” in this problem.

·         Discontinued Products

Companies can earn revenues from discontinued items by sending them to secondary market this is also a part of reverse logistics through this process companies call back the products from the primary market in order to send them to secondary market and then company fills up the shelves of primary market in order to generate revenues and they also earn revenues from secondary market.

·         Refurbishment of Damaged Products

Not only losing sales damages companies’ goodwill but the loss of dignity of brand also damages. So companies mostly calls damaged products back  from market in order to refurbish the products and sells to  those irregular customers who can’t afford the same products at high price so they purchase products at lower prices and gives profits to companies.

Reverse Logistics Pipeline

IMMEDIATE REVERSE LOGISTICS

This is a conditional kind of reverse logistic and normally all the companies uses this kind. Immediate reverse logistic is initiated very after delivery of consignment. In other words, goods are returned back at the time of delivery by the customer to manufacturer due to dissatisfaction.

Reasons for Immediate Reverse Logistics

Immediate reverse logistics initiates in various circumstance. There are two main heads of immediate return. Most common returns are discussed below.

Defective Return

This return includes returning of defective products unlike for an example customer purchased a product from online store; let’s have an example of plasma. Now a vendor delivers a product at customer’s doorstep. Now customer unwrap the packing of that product (i.e. plasma) and found it broken after that, customer returned the product on the spot. This process of returning is called a defective return in immediate reverse logistic.

Here are more reasons:

1.       Damaged in transit

2.       Delivery of faulty goods

3.       Expired goods

Non-Defective Return

This returns includes returning of non-defective return for instance a customer purchased a product for any occasion and company delivered that product after the occasion so customer will return the product even though product is non-defective but now it has no value for customer. This return is called non-defective return in immediate reverse logistics.

Here are more reasons:

1.       Delivery of undesired product.

2.       Late delivery.

3.       Delivery of excess quantity.

4.       Launching the product against the cultural values.

5.       Miscommunication in quoted prices.

CONCLUSION

Reverse logistic is a process of returning of materials and products. Furthermore, it is a process of moving goods from the point of disposal to the point of manufacturing. Mainly it is adopted by beverages and Baking  industries. Collecting back for recycling, repairing and disposal are the kinds of reverse logistics.

It improves company’s efficiency, services and flexibility and helps organization to increase product life cycle. It also reduces the cost of organization and it also helps an organization to utilize its asset at maximum level.

It also make strong supply chain channel and give a competitive advantage to entrepreneur.

Generally companies perform immediate reverse logistics to retain their customers’ and maintain their satisfaction level.