Reverse Logistics
- 2. IN A COMPETITIVE ENVIRONMENT, THE PHILOSOPHY OF ACCEPTING PRODUCT RETURNS AS AN EDGE OVER COMPETITORS HAS RESULTED IN HUGE CHALLENGES TO LOGISTICS MANAGEMENT TODAY, LOGISTICAL SUPPORT MEANS GOING BEYOND ‘FORWARD LOGISTICS’ TO INCLUDE PRODUCT RECALL, PRODUCT - DISPOSAL AND PRODUCT RECYCLING ETC. THE LOGISTICS OBJECTIVES INCLUDE REVERSE MATERIALS FLOW SYSTEM TO EXTEND LIFE CYCLE SUPPORT TO THE PRODUCT REVERSE LOGISTICAL COMPETENCY IS THE RESULT OF WORLDWIDE ATTENTION TOWARDS ENVIRONMENTAL & ECOLOGICAL PROBLEMS
- 3. REVERSE LOGISTICS A COMPETITIVE TOOL TO REMAIN COMPETITIVE AND DIFFERENTIATED, THE ORGANISATION ACROSS THE WORLD ARE SHOWING SPEED AND RELIABILITY IN SERVICE OFFERINGS SUCH AS REPLACING DEFECTIVE GOODS REPAIRING OF USED PRODUCTS REFURBISHING THE RETURNED PRODUCTS CALLING BACK SUB-STANDARD OR HARMFUL GOODS DISPOSING-OFF PRODUCT WASTE THESE SERVICES ADD TO THE COMPETITIVENESS OF AN ORGN. OPERATING IN A REGULATORY ENVIRONMENT & CREATE CUSTOMER VALUE BY PROVIDING A CLEAN ENVIRONMENT THROUGH REVERSE LOGISTICS SERVICES WITHOUT ANY EXTRA COST TO THE CUSTOMER.
- 4. DEFINITION REVERSE LOGISTICS MAY BE DEFINED AS A PROCESS OF MOVING GOODS FROM THEIR PLACE OF USE, BACK TO THEIR PLACE OF MANUFACTURE FOR RE-PROCESSING, RE-FILLING, REPAIRS OR RECYCLING / WASTE DISPOSAL. IT IS A PLANNED PROCESS OF MOVEMENT OF GOODS IN REVERSE DIRECTION IN AN EFFECTIVE AND COST EFFICIENT MANNER, THROUGH AN ORGANISED NETWORK. IT IS AN INTEGRATED SYSTEM IN AN ORGANISATION’S SUPPLY CHAIN MANAGEMENT REVERSE LOGISTICS REFERS TO THE SKILLS OF LOGISTICS MANAGEMENT TO REDUCE, MANAGE & DISPOSE-OFF WASTE ARISING FROM PRODUCTS & INPUTS
- 5. REASONS FOR REVERSE LOGISTICS RETURN OF GOODS FROM CUSTOMER FOR NON PERFORMANCE SHORT TERM RENTAL RETURNS RETURNS SENT TO MANUFACTURER FOR REPAIRS / RE-FILLING REUSABLE CONTAINERS / PACKAGES RETURN OF INPUTS NOT USED BY MANUFACTURER / GOODS NOT SOLD BY DISTRIBUTORS EXCHANGE OF NEW PRODUCT FOR THE OLD ONES GOODS SENT FOR UP- GRADATION / MODIFICATION RECYCLING OF PRODUCT
- 6. SCOPE OF REVERSE LOGISTICS REVERSE LOGISTICS, THOUGH CONSIDERED AS A DRAIN ON COMPANY PROFITS, IN TODAY’S COMPETITIVE MARKETS, MORE AND MORE MANUFACTURING FIRMS ARE PLANNING OF INCORPORATING THE REVERSE LOGISTICS SYSTEM IN THEIR SUPPLY CHAIN PROCESS FOR FOLLOWING REASONS: GROWING CONCERN FOR ENVIRONMENT POLLUTION GOVEMNMENT REGULATIONS ON PRODUCT RECYCLING AND WASTE DISPOSAL GROWING CONSUMERISM STIFF COMPETITION THE REVERSE LOGISTICS NETWORK CAN BE USED FOR VARIOUS PURPOSES SUCH AS REFILLING, REPAIRS, RE- FURBISHING, RE- MANUFACTURING ETC. DEPENDING ON THE NATURE OF THE PRODUCT, UNIT VALUE, SALES VOLUME AND DISTRIBUTION CHANNELS.
- 7. 1. REPAIRS AND REFURBISHING REPAIR IS A REGULAR FEATURE IN SERVICE BASED PRODUCTS UNDER A WARRANTY PERIOD AND ALMOST ALL CONSUMER DURABLES NEED REPAIRS ON A REGULAR BASIS. REFURBISHING IS DONE TO GOODS RETURNED BY DAMAGE, DEFECTS OR BELOW PAR PERFORMANCE DURING THE WARRANTY PERIOD. MANUFACTURER ESTABLISH THE REVERSE LOGISTICS SYSTEM, NOT ONLY FOR OFFERING FREE SERVICE DURING THE WARRANTY PERIOD BUT ALSO FOR EXTENDING THE SERVICES BEYOND THE WARRANTY PERIOD ON A CHARGEABLE BASIS. THE SYSTEM OPERATES THROUGH THE COMPANY’S SERVICE CENTERS WHERE REPAIR AND REFURBISHING TAKES PLACE. COLLECTION OF DEFECTIVE PRODUCTS IS DONE, THROUGH THE DEALERS’ NETWORK. THESE COLLECTED PRODUCTS ARE SENT TO THE NEAREST SERVICE CENTRE FOR OVERHAUL, REPAIRS OR REFURBISHING.
- 8. STORES PRODUCTION WAREHOUSE SUPPLIERS RETURNS REVERSE LOGISTICS FLOW CUSTOMERS DISPOSAL REPAIRS
- 9. 2. RE-FILLING REVERSE LOGISTICS IS INTEGRATED TO THEIR CHAIN BECAUSE OF THE REUSABLE NATURE OF PACKAGES SUCH AS GLASS BOTTLES, TIN / PLASTIC CONTAINERS & METAL CYLINDERS ETC. IN CASE OF SOFT DRINKS, THE DELIVERY VAN DELIVERS FILLED BOTTLES TO RETAILERS (A, B, C ) ENROUTÈ AND COLLECTS THE SAME NUMBER OF EMPTY BOTTLES FROM THEM FOR DELIVERY TO THE FACTORY. NO EXTRA TRANSPORTATION COSTS ARE INVOLVED IN THE PROCESS AS THE SAME DELIVERY VAN ORIGINATES AND TERMINATES ITS JOURNEY AT THE FACTORY WHERE THESE REUSABLE BOTTLES ARE REFILLED FOR RE-DELIVERY TO CUSTOMERS. THE ARRANGEMENT IS DONE THROUGH A HUB AND SPOKE DISTRIBUTION SYSTEM.
- 10. BOTTLING PLANT DISTRIBUTION AREA (A) DISTRIBUTION AREA (C) DISTRIBUTION AREA (B) A3 A2 A1 B3 B4 C1 C2 C3 B1 B2 REVERSE GOODS FLOW FOR REFILLING
- 11. 3. PRODUCTS RECALL THIS IS AN EMERGENCY SITUATION WHEREIN THE PRODUCTS DISTRIBUTED IN THE MARKET ARE CALLED BACK TO THE FACTORY BECAUSE OF ANY OF THE FOLLOWING REASONS: PRODUCT NOT GIVING THE GUARANTEED PERFORMANCE QUALITY COMPLAINTS FROM MANY CUSTOMERS DEFECTIVE PRODUCTS CAUSING HARM TO HUMAN LIFE PRODUCTS BEYOND EXPIRY DATE PRODUCTS WITH DEFECTIVE DESIGN INCOMPLETE PRODUCT VIOLATION OF GOVERNMENT REGULATIONS ETHICAL CONSIDERATIONS SAVE THE COMPANY IMAGE PRODUCT RECALL PUTS A HUGE FINANCIAL BURDEN ON THE COMPANY BUT IN THE COMPETITIVE SCENARIO THE COMPANIES CONSIDER “RE-CALL” AS AN OPPORTUNITY TO INCREASE CUSTOMER SATISFACTION.
- 12. 4. RECYCLING AND WASTE DISPOSAL LEFTOVER MATERIALS, USED PRODUCTS AND WRAPPER / PACKAGES WASTES ARE CAUSING ENVIRONMENTAL POLLUTION & CREATING PROBLEMS FOR DISPOSAL. IN MANY COUNTRIES,GOVERNMENTS ARE DEVISING REGULATIONS TO MAKE MANUFACTURERS RESPONSIBLE FOR MINIMISING WASTE BY WAY OF RECYCLING PRODUCTS. RECYCLING PROCESS COLLECTING WASTE MATERIAL & DELIVERING THEM TO ENTITY RESPONSIBLE FOR RECYCLING PROCESSING RECYCLABLES TO CREATE SECONDARY INPUTS USING SECONDARY MATERIALS FOR MANUFACTURING NEW PRODUCTS RETURNING THE PRODUCTS TO THE MANUFACTURER FOR RECOVERING THE INPUTS FOR RE-USE
- 13. 5. RE-MANUTACTURING MANUFACTURERS IN DEVELOPED COUNTRIES ARE PUTTING IN PRACTICE A NEW CONCEPT OF RE-MANUFACTURING. DURING THE USAGE OF THE PRODUCT IT UNDERGOES WEAR & TEAR. WORN OUT PARTS ARE REPLACED WITH NEW ONES AND THE PERFORMANCE OF THE PRODUCT IS UPGRADED TO THE LEVEL OF A NEW ONE. SIMILARLY, EQUIPMENT SOLD CAN BE CHECKED AFTER USE TO THE REMANUFACTURING PROCESS AND BE BROUGHT BACK TO THE REMANUFACTURING UNIT. THE INVESTMENT IN REMANUFACTURING & RELATED REVERSE LOGISTICS SUPPLY CHAIN CAN BE JUSTIFIED ON THE BASIS OF ECONOMIES OF SCALE.
- 14. SYSTEM DESIGN CONSIDERATIONS (DRIVERS IN REVERSE LOGISTICS) THE SUCCESS OF REVERSE LOGISTICS SYSTEM IN ACHIEVING THE DESIRED OBJECTIVES DEPENDS ON THE EFFICIENCY AND EFFECTIVENESS OF FOLLOWING SUB-SYSTEMS 1. PRODUCT LOCATION THE FIRST STEP IN THE CALL BACK PROCESS IS TO IDENTIFY THE PRODUCT LOCATION IN THE PHYSICAL DISTRIBUTION SYSTEM OF THE FIRM. PRODUCT LOCATION BECOMES MORE DIFFICULT AFTER IT IS SOLD AND HANDED OVER TO THE CUSTOMER. IT IS A BIT EASIER IN THE CASE OF INDUSTRIAL OR HIGH VALUE PRODUCTS DUE TO THE LIMITED NUMBER OF CUSTOMERS & PERSONAL INTERACTION WITH THE CLIENTS DUE TO DIRECT SELLING.
- 15. 2. PRODUCT COLLECTION SYSTEM ONCE THE PRODUCT LOCATION IS IDENTIFIED, THE COLLECTION MECHANISM GETS INTO OPERATION. THIS CAN BE DONE EITHER THROUGH COMPANY’S FIELD FORCE, CHANNEL MEMBERS OR THIRD PARTY. HOWEVER, PROPER INSTRUCTIONS HAVE TO BE GIVEN TO MOTIVATE THE CUSTOMER FOR RETURNING THE PRODUCTS. 3. RECYCLING / DISPOSAL CENTRES THESE MAY BE THE COMPANY’S PLANT/ WAREHOUSES OR SOME FIXED LOCATION IN THE REVERSE LOGISTICS NETWORK. THE CALLED BACK PRODUCTS ARE INSPECTED BEFORE THEY ARE FURTHER PROCESSED FOR FURTHER REPAIRS, REFURBISHING, REMANUFACTURING OR WASTE DISPOSAL. INVESTMENTS IN FACILITIES FOR THESE ACTIVITIES DEPEND ON THE OBJECTIVES OF THE SYSTEM, COST IMPLICATION, COMPLEXITY OF THE OPERATIONS & EXPECTED GAINS.
- 16. 4. DOCUMENTATION SYSTEM TRACING THE PRODUCT LOCATION BECOMES EASIER IF PROPER DOCUMENTATION IS MAINTAINED AT EACH CHANNEL LEVEL. HOWEVER, AT THE TIME OF HANDING OVER THE PRODUCT TO THE CUSTOMER, THE DETAILED INFORMATION IF COLLECTED THROUGH PROPER DOCUMENTATION, CAN FORM A GOOD DATABASE THAT CAN BE USED IN CASE OF PRODUCT CALL BACKS .
- 17. COST IMPLICATIONS THE REVERSE LOGISTICS SYSTEM IS A COST CENTRE. HOWEVER, THESE COSTS ARE INCURRED FOR ACHIEVING COMPANY’S CERTAIN OBJECTIVES AND CAN BE ATTRIBUTED TO THE FOLLOWING ACTIVITIES PRODUCT LOCATION (INVESTMENT & OPERATING COSTS) TRANSPORTATION PRODUCT COLLECTION (CUSTOMERS > RETAILERS > PLANT) DISPOSAL (PLANT > SUPPLIERS / DISPOSAL) REFILLING, REPAIRS, REFURBISHING, REMANUFACTURING, RECYCLLING 6. DOCUMENTATION (FOR PRODUCT TRACKING AND TRACING DURING ENTRY, EXIT AND FLOW IN THE SYSTEM) Contd.
- 18. BARRIERS TO GOOD REVERSE LOGISTICS LEGAL ISSUES UNDER INDIAN REGULATIONS EXCISE PAID GOODS ONCE SOLD BY THE MANUFACTURER CANNOT BE BROUGHT BACK TO THE PLANT WITHOUT PROPER DOCUMENTATION AND DECLARATION TO EXCISE AUTHORITIES. THIS IS A VERY CUMBERSOME & TIME CONSUMING PROCESS AND NON-COMPLIANCE MAY MEAN THAT THE MANUFACTURER WILL HAVE TO FACE LEGAL ACTION. MANY ORGANIZATIONS TERM REVERSE GOODS AS ‘ JUNK’ AND THEY DON’T WANT TO WASTE THEIR RESOURCES ON THESE ‘ JUNKS’ 3. THE GOODS ARE CONSIDERED UNWORTHY OF ANY INVESTMENT