REVERSE LOGISTICS

REVERSE LOGISTICS

Definitions • Logistics (Forward) “Process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements” - Council of Logistics, 1988 - • Reverse Logistics “Process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal” - Rogers and Tibben-Lembke -

Size of Reverse Logistics “Reverse logistics costs in the United States are estimated to be approximately 4% of total U.S. logistics costs” - ROGERS, D., Reverse Logistics Challenges, 2002 - - Roughly $47 billions in 2006 “It is estimated that reverse logistics costs account for almost 1% of the total United States gross domestic product” • MOORE, R., Reverse logistics: The least used differentiator, 2006. - Roughly $132 billions in 2006 “The Center for Logistics Management at the University of Nevada conservatively estimates that 6% of all goods may be returned, but concedes that the true number may be closer to 8%” • MOORE, R., Reverse logistics: The least used differentiator, 2006.

Return Percentages Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998

Size of Reverse Logistics In this context can Reverse Logistics be ignored ?

INTRODUCTION • Studies have been around since 1960’s • Received considerable attention in the recent past • Drivers behind Reverse Logistics • Government Legislation • Awareness of consumer • Responsibility towards the environment

Reverse Logistics in Literature • There is confusion in the literature regarding Reverse Logistics. The term is often interchangeably used with • Green Logistics • Sustainable Logistics • Closed Loop Logistics

GREEN LOGISTICS AND REVERSE LOGISTICS • Green logistics is concerned with all the factors that are related to making the supply chain green be it efficient handling of freights or the warehouses • On the other hand, RL looks at the operations that are related to returned products from the retailers. • Green logistics involves both forward and reverse operations (DeBrito & Dekker, 2003).

GREEN LOGISTICS AND REVERSE LOGISTICS • The point of commonality is the desire for “greenness” emphasized the need for RL in the early 1990’s • Green logistics has further increased the need of environmentally friendly RL strategy in the urban environment where pollution, road congestion, poses challenges.

Sustainable Logistics • This concept emerged with the desire of balancing between profit and the planet. • Green logistics focuses on increasing the environmental benefit of the logistics activities where as sustainable logistics looks at ways on how the reverse activities can be converted into profitable operations.

Sustainable Logistics • From profit making organisations perspective the concept of Sustainable Logistics is more acceptable because : 1) To gain & to retain the environment conscious consumers. 2) To comply with the environmental legislation. 3) To anticipate the necessary changes to deal with further legal environmental standards.

Sustainable Logistics

CLOSED LOOP LOGISTICS • The RL involves sending the product back upstream whereas closed loop supply chain is designed and managed for both flows. • Companies use closed loop logistics by not having to dispose off items in the landfills • in Europe Xerox has got a closed loop supply chain that handles copiers , printers and office products with a return rate of 65 % . All of these activities are carried out with the hope of resale.

URBAN RETAIL ENVIRONMENT & REVERSE LOGISTICS • Blumberg (2005) classified three major types of retail channels. These Channels include • Mass discount merchandisers • Major retail chains with service capabilities • Small local retailers Major Retail Chain are more sensitive to Reverse Logistics

ISSUESS FACED IN THE URBAN ENVIRONMENT • Sustainability, Mobility and Livability

URBAN DISTRIBUTION CENTRES ( UDC ) AND REVERSE GOODS • The increase in volume of goods through the UDC (Urban Distribution Center) has put an extra stress on retail operations in the urban environment. • Companies are looking at ways through which they can better structure their distribution centers for dealing with the forward as well as returned products. HOW ARE THE RETURNED GOOD GOING TO BE HANDLED ????

URBAN DISTRIBUTION CENTRES ( UDC ) AND REVERSE GOODS • Considering the constraint on UDC, the concept of CRC (centralized returns center) has emerged that is used for sorting and packaging of the product in the reverse flow (Smith , 2005 ). • It is mainly because DCs has little room for the functions that are related to RL. Once a product arrives in the CRC it is decided where the product needs to be sent ( Rogers & Lembke, 2002 )

GATEKEEPING • Retailers are now looking for ways to make the RL operations more profitable. For screening purposes ”Gatekeeping“ process is being considered. In Gatekeeping unwarranted returned products are inspected at the point of entry into the RL ( Rogers & Lembke,1998 ).

Forward vs. Reverse Logistics

BIAS TOWRDS FORWARD LOGISTICS IN THE LITERATURE • In Forward operations the objective is to take product from the manufacturer customer for attaining profit. On the contrary in RL there are varieties of options that are available to retailers depending on the way the way they want to utilize the different streams of revenue .

BIAS TOWRDS FORWARD LOGISTICS IN THE LITERATURE Possible options for returned goods include • return to the vendor • sell as new • repackaging , sell as new • sell via outlet • remanufacture / refurbish • sell to broker • donate to charity • recycle • landfill ( Theirry et. al, 1995 cited in Roger, Lembke , 2002 )

REVERSE LOGISTICS PRACTICES CARRIED OUT INTERNATIONALLY • According to Rogers & Lembke (1998) USA is ahead of effective management of RL as this is still an emerging field in Europe . • When it comes to environmental and green issues Europe seems to be ahead of USA. Unlike USA in Germany the packaging legislation has been around since 1991. Germany is processing 86% of all the recycling waste from its house holds and small business (Rogers& Lembke,1998) .

CONTRIBUTION OF TECHNOLOGY FOR THE SUCCESSFUL IMPLEMENTATION OF RL • technology is being attributed with the growing success of RL. EDI (Electronic data Interchange) Barcode (Return processing labels) RF technology (More rarely a difference) • Technology has allowed real time visibility of inventory levels, order confirmation, demand & status visibility and exception handling through the supply chain (Blancard, 2002).

BARRIERS TO RL

WHAT CUSTOMERS ARE LOOKING FOR

HOW TO MAKE RETAILERS ADOPT REVERSE LOGISTICS • The answer lies in theory related to Competitive Advantage • Cost differentiation & Value creation

WHY THE ANSWER LIES IN COMPETITIVE ADVANTAGE FOR ADOPTING RL

COMPETITIVE ADVANTAGE SHOULD BE LONG TERM

A NEW MODEL FOR SUCCESSFUL IMPLEMENTATION OF RL

REVERSE LOGISTICS