Running head REVERSE INVENTORY MANAGEMENT & FINANCIAL IMPLICATI.docx
- 1. Running head: REVERSE INVENTORY MANAGEMENT & FINANCIAL IMPLICATIONS REVERSE INVENTORY MANAGEMENT & FINANCIAL IMPLICATIONS 5 Reverse Inventory Management & Financial Implications Desmond K Sangbong Reverse Inventory Management & Financial Implications David Mkhanlall July 9, 2015 Reverse Inventory Management & Financial Implications Reverse logistics refers to the process by which a company recycles, refurbishes and resells products that are spoilt or old. Reverse logistics is advantageous to a company as it add them a competitive advantage over its competitors by adding them trust from their customers. Reverse Logistics is therefore a strategy that will be adopted by most companies in future as a way to add them profitability. The concept of reverse logistics began decades back the late 1800. Reverse logistics originated from the military sector at the end of the American Civil War. According to General William, the supply chain hindered the nature of his army campaigns and he had difficulties in supplying the soldiers into the hostile communities. Later in 1872, the concept of reverse logistics began its operations in the retail market. Later on in 1942, during the world war, countries began to experience shortages in the automobile industry whereby, there were shortages of the automobile parts. For this reason, there was need to create and rebuild the automotive parts then sell them to the consumers (Corrêa & Xavier, 2013). In 1984, McNeil Laboratories responded to the Tylenol scare by getting the tainted products off the shelves of shops and replaced them with new products. This action was all over the new and for this reason, it increased the use of reverse logistics
- 2. by companies in America. The Tylenol scare was the period when the Tylenol capsules were filled with cyanide, which is highly poisonous, and the consumption of these products led to death of many people. it was after this in the year 1991 that the federal government of Germany made in a must for companies to look for ways to recycle products. The recycle program was meant to reduce the environmental reverse flows and the European Union supported this legislation. In the next decade starting from 2000, reverse logistics was more adopted by the business sector as a strategy to counter competition in various industries (Corrêa & Xavier, 2013). Until date, reverse logistics is used as a way to refurbish and remanufacture the unused products. It also acts as a corporate social responsibility by various companies. Reverse logistics consist of various elements that fall under the umbrella of reverse logistics. One of the elements is returns. A company such Dell Company that specializes in manufacturing of electronics may supply their electronics to the final consumer. However, in the mist of the supply, there may be breakages and the consumers will return the breakages to the company. In this case, the electronics that are taken back to the company are known as returns. Another element in the umbrella of reverse logistics is recycling. Recycling is whereby a company buys back the old products from the consumers and then resells the product to final consumers. Recycling is a way that a company shows its sense of corporate social responsibility, as it will reduce environmental degradation. The third element under umbrella of reverse logistics is buying of seasonal inventory. Sometimes the demand of the product may too low in that there will be excess inventory in the market. For this reason, the company will buy the excess inventory so that the customers will not make losses. In this case, the company will be trying to make the customers loyal. The last element is the marketing and reselling. This refers to creating secondary markets for the recovered products and remarketing them in order to create and exploit markets for refurbishing and
- 3. distributing them (do Valle, et. al, 2009). Reverse logistics has been adopted by many companies from 2000 as it acts as a way of increasing their profitability and market share (do Valle, et. al, 2009). 20years from now, reverse logistics will be a strategy that will be implemented by most companies to add them a competitive advantage. For instance, the recycling project will show the society that they consider them before making the company’s decisions on the manufacturing processes. For this reason, the society will embrace the company and this will increase the company’s profits. It will involve mostly, the buying back of old inventory as well as recycling the old products. Companies will be buying back items that are spoilt and then recycles after which they will resell the products. Moreover, with the innovation of technology, new methods of reverse logistics will be invented as well as strategies of inventory management. Companies will have better ways to manage their returns to avoid making losses. In conclusion, reverse logistics has evolved since the 18th century and has been adopted more in business in the 20th century. Companies today adopt the strategy that enables them overcome stiff competition from their competitors. Reverse logistics is a way that companies sometimes buy or collect the old broken products they produce. They then remanufacture or refurbish the product and look for market whereby, they resell them at affordable prices. For this reason, over the next 20years, most companies will adopt this technique due to the rapid improvement of technology. Moreover, there will be new technologies that will be adopted for use in the recycling process as well as reverse inventory management. References Corrêa, H. L., & Xavier, L. H. (2013). Concepts, design and implementation of Reverse Logistics Systems for sustainable supply chains in Brazil. Journal of Operations and Supply Chain
- 4. Management, 6(1), 1-25. do Valle, P. O., Menezes, J., Reis, E., & Rebelo, E. (2009). Reverse logistics for recycling: The customer service determinants. International Journal of Business Science and Applied Management, 4(1), 1-17. Running head: LOGISTICS AND LIFE-CYCLE OF PRODUCTS 1 LOGISTICS AND LIFE-CYCLE OF PRODUCTS 7 Logistics and Life-Cycle of Products Desmond K Sangbong LOG670 David Makhanlall July 8, 2015 Introduction Consumer behavior and increased competition are factors that are forcing companies to develop new products and change their supply logistics faster that ever before. Reducing the product life cycle causes significant changes in the supply chain of a business. The company needs to adjust various processes for
- 5. them to maintain the demand forces, stream line their supply networks and also improve reverse logistics. Some changes in demand may also require a company to clear the inventory of unwanted goods. Monitoring the inventory level provides insight into how a company can reduce the costs at the different phases of a product life cycle. Most importantly, the company is able to save costs as the product moves through different stages in its lifecycle that the manufacturing of raw material, production of the product, packaging and transportation, the in- use stage and finally the disposal, re-use and recycle stage (Dyckhoff, 2013). Coca Cola Company indicates cost savings and improvement in its reverse inventory management process at the corporate and other single units’ level during the life cycle of their products. Product’s Life-cycle flow-chart A product life cycle refers to a form of business analysis that helps in identifying the set of phases in the life of a commercial product. It is normally used to map a lifespan of a product in the phases through which it goes through from when it was first developed until after it is used or eliminate from the market. Life cycles includes the idea that particular products have different an interrelated logistical actions during their economic life-time. The figure below shows the different stages of the life time of a product that relates to the supply chain partners according to the current ecological and economic criteria. It includes the coordination, the support and the management activities of the company that ensures there is an efficient use of a product as well as an intelligent use of resources during the planning, initiation, production, operations and final phases of a product’s economic life time. Stages Coca-Cola Products Life Cycle Raw Materials Extraction
- 6. Production of Raw Materials, Components, Packaging Materials, chemicals etc Disposal Recycling Production, Bottling and Packing, Disposal, Re-use and Recycling Re-use Transportation and Unpacking In-use Period Summary of both the forward and backward stages of the product life cycle Complexity in the supply chain can lead to increased input in resources, time and effort. This increases result to high costs and also high impacts on the environment that will also harm the company financially. Product life cycle logistics treats both the forwards and backward logistic processes involved in the products economic life-time. Actions in one phase provide an insight in the better management of the downstream phases (Dekker, 2013). This approach will enable the company to avoid supply chains that are fragmented and also enable the make prompt decisions that will reduce the handling costs, increase the movement of its products and also improve the performance of its supply chain both in long term and in short term. Resources are utilized efficiently and products will move easily through their economic life-cycle. The forward logistics in the life cycle of the products include the production of the product by the company. a company needs to understand he needs of their customers together with the demand of their
- 7. products and make the decisions on the level of output to produce. The next stage is bottling and packaging. Organizations need to ensure optimum efficiency when packaging. Packaging material is subject to environmental pollution. It is important to use material that can be recycled when packing. The next stage involved transportation to warehouses, retailer or customers depending on the most effective distribution channel. After the transportation the products are used by the customers and finally, they are disposed. End products may be reused while some materials such as the packaging materials can be recycled. Organizations must implement the best strategy to deal with the product at its end of life stage. Damaged products can be returned for repair. This increase customer loyalty and the company will benefits in terms of profit and sales. Recycling also reduces packaging costs and the costs relative to environmental pollution by the packaging materials (Dyckhoff, 2013). How the stages of the product life cycle relate to Coca Cola company. In the coca cola company, the company produces brands and flavors that are preferred by their customers. They produce in response to the tastes and preferences in the beverages category. Customers’ demands are constantly evolving and for the company to maintain profitability, they need to constantly evolve with the market by establishing and producing relevant brand priorities. During the packaging phase, the company uses the packaging that is important in meeting the needs of their consumers. In the company, packages comprise 22% of the total cost of goods sold. This percentage can be reduced through reducing raw material used and this can be through the reverse logistics of re-use and recycling of packaging materials (Dekker, 2013). The company also ensures that the containers used guarantee safety and quality. They work closely with their supplier to determine the new ways that will improve packaging and create mutual value. The company aims at increasing the renewable and recycled content of bottles and cans. In the
- 8. distribution phase, the company uses its well established distribution network to sell their products across the world. After the customers use the products, the containers and bottles are renewed and recycled by the company as shown in the figure above. Reverse life cycle of coca-cola products is well established. This has been beneficial to the company. The recycling of glass and metal bottles is well established in the company with the recycled content accounting for half the material in their bottled and cans (Jain, 2012). They also use refillable packaging. This enables the company to save on the cost of packaging materials. The company is also able to prove that it is environmentally friendly and this has created a positive image for the company. The company has in turn benefited by gaining more customers who have made the company very profitable. The company has also partnered with its suppliers and distributors in each region of operations to ensure that unwanted goods, damaged goods and packaging material are collected back from the end users (Jain, 2012). Conclusion Reverse logistics promote efficient and effective management of a supply chain. It includes activities such as physical movement of products, supplier partnership, supply chain information sharing and meeting customer demands. All these activities are found in the product life cycle. During the lifecycle, a company needs to estimate customer needs, establish effective and efficient deliveries, collaborate with suppliers in the supply chain and share relevant information. This will help a company in the planning, implementation and control a cost effective and efficient flow of raw material, inventory, finished goods and the related information from the company to the consumption point. Companies also engage in reverse logistics which involves moving goods from the end of life cycle for proper disposal, re- use or capturing value (Dekker, 2013). The revere logistic includes activities such as collecting unwanted or damaged stock to improve their quality and also the packaging material
- 9. for the purpose of proper disposal, maximizing liquidation values, re-use them or to recycle them. References Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse logistics: quantitative models for closed-loop supply chains. Springer Science & Business Media. Dyckhoff, H., Lackes, R., & Reese, J. (Eds.). (2013). Supply chain management and reverse logistics. Springer Science & Business Media. Jain, V. (2012). Special issue on sustainable supply chain management and reverse logistics. International Journal of Production Research, 50(5), 1239-1242. Running head: COCA-COLA DISTRIBUTION PROCESSES 1 DISTRIBUTION PROCESSES 6
- 10. Coca-Cola Distribution Processes Desmond K Sangbong Revers Inventory Management & Financial Implications David Makhanlall July 10, 2015 Introduction An organization that has a strong focus on distribution is Coca Cola Company. The Company has one of the best planned and executed distribution system compared to any other company in the beverages category. This has made it to have a big impact on consumers and hence a greater impact on distributers and wholesalers since the product has taken an essential part in the mind of the consumer. Their high visibility has made the company to achieve its goal by making the product available across the whole world even to the most remote places. The company has made its branded beverage products to be available to customer in over 200 countries through an effective distribution system. Coca cola puts a strong focus on distribution to expand its marketing presence. Their stable and strong distribution system helps them to capture growth by distributing enhance and innovative products to its consumers around the world. Coca Cola’s Forward and Reverse Distribution Processes Coca Cola Company has both forward and reverse distribution processes. Their conventional forward freight distribution
- 11. involves the distribution of the syrup and finished products to suppliers, bottlers wholesalers and customers. Coca Cola Company sells about 1.8 billion Coca cola products in a day across the world. They ensure that every customer gets their product at the right place and time through their supply chain. Coca cola reverse distribution process is also a common activity of the company. Most of its packages are brought back in the supply chain for refilling. In some cases like when their product is defective the distributor will take back the products. Other packages such as the plastic packages are collected and recycled. The reverse distribution is mainly concerned with the movement of goods that were previously shipped from the customers to the distribution centers or the manufacture for recycling, replacement, returns or for refilling (Lee, 2012). These processes have changed greatly over the last 20 years. The company has entered into partnerships with companies across the world to recycle its waste products like the packaging material and make other products such as brushes from them. It has also intensified its forward distribution processes by establishing many distribution channels to reach customer across the world. Company Financials Relating To Distribution Costs and Volume Coca cola products are distributed and sold via different channels. They include direct sales to retail stores and outlets across the country such as institutional accounts, vending machine outlets and food markets. In the financial year 2014, 68% of Coca cola’s bottle volume was sold to be consumed in the future and 32% was sold to be consumed immediately. The largest customer for Coca Cola is Walmart store who account for about 22% of the total bottle volumes of the company and about 15% of the total net sales of Coca Cola in 2014. The second largest customer is Food Lion who accounted for about 9% of the total volume of the company product. Distribution fees recorded by the company in net sales amounted to $6.2 million. The distribution costs that include transportation of finished goods t customer outlet amounted to $ 211.6 million
- 12. (Coca-Cola, 2015). The company has been focusing on converting the distribution system to the predictive distribution system from a conventional routing system. This willhelp the company to handle the number of products that have been increasing year by year. To reduce its sixed warehouse costs, the company has closed down some small sales distribution centers. The Overall Health of the Coca Cola Company The coca cola company overall health is good. The company has a well planned distribution system that has enabled them to succeed in availing their products to over 200 countries across the world. This has made them to earn good revenues. the net income of the company in 2014 attributable to shareholders was $7,098 million. The company also has a good management system that has maintained a very healthy cash flow in the company. The total cash flow from the company’s operations was $8,958 (Coca-Cola, 2015). This has enable the company reduce its debt, raise its dividends and also buy back some stock. The company is therefore doing very well and its health attracts a lot of investors. Opportunities That Lie in the Company’s Supply Chain Coca Cola Company has many opportunities lying in its supply chain. The company can partner with organization providing supply chain data to access the supply chain data. This will help it to identify the risks that lie in the supply chain and drive improvements from the sourcing. Coca Cola’s responsible and sustainable growth depends on its open and positive relationship with its suppliers. This partnership will increase the visibility throughout its supply chain. A company that has data regarding the supply chain in drinks industry will help coca cola collaborate with its suppliers and ensure long-term sustainability of it products and hence its business (Bozarth, 2015). Coca Cola Company can also develop a distribution system that has many segments. This will help them get their products to the broad customer base through different outlets. The company
- 13. should consider a direct-to-store delivery to the larger outlets and the key customers. They should also establish local distribution nodes to reach their products to the small rural outlets that are located in areas with poor roads. This opportunity will increase the sales of the company and also enables it reach a wide range of target customers (Bozarth, 2015). Conclusion From doing this research, I have learned a lot about the importance of a well established distribution network to companies. A company that has put strong focus on distribution is able to reach its target customers more easily. Companies will also in most cases use both the forward and the reverse distribution processes. Companies that use the reverse model to recycle their packaging material save a lot of money used in packaging. They also tend to be environmentally friendly and this creates a good public image. A good supply management system is essential for the success of any business. References Bozarth, C. C., & Handfield, R. B. (2015). Introduction to
- 14. operations and supply chain management. Prentice Hall. Lee, Y. J., Baker, T., & Jayaraman, V. (2012). Redesigning an integrated forward–reverse logistics system for a third party service provider: an empirical study. International Journal of Production Research, 50(19), 5615-5634. United States Securities and Exchange Commission, (2015): Retrieved from: http://assets.coca- colacompany.com/d2/78/7d7cad454f3fbd033d55d786b890/2014- annual-report-on-form-10-k.pdf