Part 10- Reverse logistics Flashcards
Reversed logistics
It is defined as the process of planning, implementing, and controlling the efficient flow of recyclable and reusable materials, returns, and reworks from the point of consumption for the purpose of repair, remanufacturing, redistribution or disposal.
- important aspects with todays environmental concerns
Examples of activities related to reverse logistics:
- processing returned goods
- green initiatives- important element for manufacturing companies, the ones using plastic etc now try to use recycled plastics and packaging - also try to sell and user that for their marketing - use it commercially
- reconditioning, refurbishing, remanufacturing of returned product → which is the part that is not working well
- disposal of obsolete inventory
- hazardous materials recovery and electronic waste disposal
Repairs and refurbishing
Repair: A regular feature in service-based products under a warranty period, almost all durables need repairs on a regular basis
Refurbishing: Applied to goods returned because of damage, defects, low performance etc during the warranty period
Refilling
Reverse logistics applied to reusable nature of packages such as glass bottles, plastic containers, print cartridges, large refillable water bottles etc.
- usually used in a hub-and-spoke distribution system for that kind of products
Recall
Emergency situation where products distributed in the market are called back to the factory for any of the following reasons.
- low performance
- quality complaints
- detective product causing harm to human life
- incomplete product
+++
It is a large financial burden for the company.
Example: Volkswagen diesel gate fraud- had to call back cars
Remanufacturing
A used product is upgraded to the level of a new one. Remanufacturing and related reverse logistics costs can be justified on the basis of economies of scale
Recycling and waste disposal
Leftover materials, used products, package and waste are causing environmental pollution and causing problems for disposal.
In many countries governments are enacting regulations to make manufactures responsible to minimize waste by recycling products.
Reverse logistics activities (the 5 R´s)
- repairs and refurbishing
- refilling
-recall
-remanufacturing - recycling and waste disposal
Returns vary with sector:
Publishing sector: average of 28% unsold copies
Computer sector: Short lifecycle- some equipment and components can be reused
Automotive sector: automotive recyclers handle 37% of metal scrap in the US
Retail sector: Profit margin in this sector is very low- good return management is critical because returns reduce profitability of retailers
Reverse logistics process (important for the exam)
1) Receive:
- important to get the documentation of the return with the correct details
- product returns are received at a centralized location, normally a warehouse
2) Sort and stage:
- the first sorting activity classifying the different types of items
3) Process
- the second sorting activity - classification done more precisely
- items are classified following their SKU numbers
- a precise sorting/classification activity
4) Analyse
- employees decide what should be done with all the items
- repaired, refurbished, renewed etc
- some are in good working conditions, other are not → maybe trying to fix them is a waste of time and they are sent for disposal
5) Support
- do the job they have decided to after the analysis
- repaired, refurbished, renewed etc
Some positive elements obtained from reversed logistics:
1) Returns to revenue → higher profitability, returned items is a good business
2) Protecting profits → helps avoid fines, penalties from the government
3) Customer loyalty → 95% of customers could not buy from a company if they had a bad return experience + the best companies in reverse logistics have 12% advantage in customer satisfaction agains competitors
4) Disposal benefits- makes it easier for companies to deal with regulatory issues and evaluate returned stock for possible secondary sales channels
5) Objective, maximize recovery rates- to improve earnings or savings obtained from reverse logistics and improve companies profitability
Reverse logistics system design
Product locations:
- first step in callback process is to identify the product location within the physical distribution system- More difficult if its already sold and handed over to the customer
Product collection system:
- after location identification the product must be collected either by company’s resources, channel members or third party companies
Recycling and disposal centers:
- they may be company’s plants and warehouses or some fixed locations in the reverse logistics network. Callback products are inspected before they are further processed for further repairs, refurbishing, remanufacturing or waste disposal.
Documentation system:
- tracing the product location becomes easier if proper documentation is maintained at each channel level
Reverse logistics challenges:
Retailer- manufacturer conflict:
- must develop a good relationship if not inefficiencies are created that can lengthen the processing returns time
Problematic returns and their symptoms:
1) large inventory of returns held in the warehouse
2) unidentified or unauthorized returns
3) lengthy processing cycle times
4) unknown total cost of returns process
Causes and effects:
- poor data collection can lead to uncertainty about return causes. It is important to show that information by attaching a problem code to the product.
Reactive response:
- pressure from governments and environmental agencies has forced companies to begin focus on reverse logistics policies.
- some have been able to see it as an opportunity to differentiate and improve profitability
The importance of reverse logistics
The importance of transforming the potential negative impact on companies of reverse logistics into some benefits, competitive advantage against companies playing in the same market.
