REVERSE LOGISTICS

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

REVERSE LOGISTICS A COMPETITIVE TOOL

TO REMAIN COMPETITIVE AND DIFFERENTIATED, THE ORGANISATIONACROSS 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 CUSTOMERVALUE BY PROVIDING A CLEAN ENVIRONMENT THROUGH REVERSELOGISTICS SERVICES WITHOUT ANY EXTRA COST TO THE CUSTOMER.

DEFINITION

REVERSE LOGISTICS MAY BE DEFINED AS A PROCESS OFMOVING GOODS FROM THEIR PLACE OF USE, BACK TO THEIRPLACE OF MANUFACTURE FOR RE-PROCESSING, RE-FILLING,REPAIRS OR RECYCLING / WASTE DISPOSAL.

IT IS A PLANNED PROCESS OF MOVEMENT OF GOODS IN REVERSEDIRECTION IN AN EFFECTIVE AND COST EFFICIENT MANNER,THROUGH AN ORGANISED NETWORK.

IT IS AN INTEGRATED SYSTEM IN AN ORGANISATION’S SUPPLYCHAIN MANAGEMENT

REVERSE LOGISTICS REFERS TO THE SKILLS OF LOGISTICSMANAGEMENT TO REDUCE, MANAGE & DISPOSE-OFF WASTEARISING FROM PRODUCTS & INPUTS

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

SCOPE OF REVERSE LOGISTICS REVERSE LOGISTICS, THOUGH CONSIDERED AS A DRAIN ONCOMPANY PROFITS, IN TODAY’S COMPETITIVE MARKETS, MOREAND MORE MANUFACTURING FIRMS ARE PLANNING OFINCORPORATING THE REVERSE LOGISTICS SYSTEM IN THEIRSUPPLY 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 VARIOUSPURPOSES SUCH AS REFILLING, REPAIRS, RE- FURBISHING, RE- MANUFACTURING ETC. DEPENDING ON THE NATURE OF THEPRODUCT, UNIT VALUE, SALES VOLUME AND DISTRIBUTIONCHANNELS.

1. REPAIRS AND REFURBISHING

REPAIR IS A REGULAR FEATURE IN SERVICE BASED PRODUCTSUNDER A WARRANTY PERIOD AND ALMOST ALL CONSUMERDURABLES NEED REPAIRS ON A REGULAR BASIS.

REFURBISHING IS DONE TO GOODS RETURNED BY DAMAGE, DEFECTSOR BELOW PAR PERFORMANCE DURING THE WARRANTY PERIOD.

MANUFACTURER ESTABLISH THE REVERSE LOGISTICS SYSTEM, NOTONLY FOR OFFERING FREE SERVICE DURING THE WARRANTY PERIODBUT 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 SENTTO THE NEAREST SERVICE CENTRE FOR OVERHAUL, REPAIRS OR REFURBISHING.

STORES PRODUCTION WAREHOUSE

SUPPLIERS

RETURNS

REVERSE LOGISTICS FLOW

CUSTOMERSDISPOSAL

REPAIRS

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 FILLEDBOTTLES TO RETAILERS (A, B, C ) ENROUTÈ AND COLLECTSTHE SAME NUMBER OF EMPTY BOTTLES FROM THEM FORDELIVERY TO THE FACTORY.

NO EXTRA TRANSPORTATION COSTS ARE INVOLVED IN THE PROCESSAS THE SAME DELIVERY VAN ORIGINATES AND TERMINATES ITS JOURNEY AT THE FACTORY WHERE THESE REUSABLE BOTTLES AREREFILLED FOR RE-DELIVERY TO CUSTOMERS.

THE ARRANGEMENT IS DONE THROUGH A HUB AND SPOKEDISTRIBUTION SYSTEM.

BOTTLINGPLANT

DISTRIBUTION AREA (A)

DISTRIBUTION AREA (C)DISTRIBUTION

AREA (B)

A3

A2

A1

B3

B4

C1

C2

C3

B1B2

REVERSE GOODS FLOW FOR REFILLING

3. PRODUCTS RECALL

THIS IS AN EMERGENCY SITUATION WHEREIN THE PRODUCTSDISTRIBUTED IN THE MARKET ARE CALLED BACK TO THE FACTORY BECAUSE OF ANY OF THE FOLLOWING REASONS:

1. PRODUCT NOT GIVING THE GUARANTEED PERFORMANCE2. QUALITY COMPLAINTS FROM MANY CUSTOMERS 3. DEFECTIVE PRODUCTS CAUSING HARM TO HUMAN LIFE4. PRODUCTS BEYOND EXPIRY DATE 5. PRODUCTS WITH DEFECTIVE DESIGN6. INCOMPLETE PRODUCT7. VIOLATION OF GOVERNMENT REGULATIONS8. ETHICAL CONSIDERATIONS9. SAVE THE COMPANY IMAGE PRODUCT RECALL PUTS A HUGE FINANCIAL BURDEN ON THECOMPANY BUT IN THE COMPETITIVE SCENARIO THE COMPANIESCONSIDER “RE-CALL” AS AN OPPORTUNITY TO INCREASE CUSTOMERSATISFACTION.

4. RECYCLING AND WASTE DISPOSAL

LEFTOVER MATERIALS, USED PRODUCTS AND WRAPPER / PACKAGESWASTES ARE CAUSING ENVIRONMENTAL POLLUTION & CREATINGPROBLEMS FOR DISPOSAL.

IN MANY COUNTRIES,GOVERNMENTS ARE DEVISING REGULATIONS TO MAKE MANUFACTURERS RESPONSIBLE FOR MINIMISING WASTE BYWAY 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

5. RE-MANUTACTURINGMANUFACTURERS 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 ANEW ONE.

SIMILARLY, EQUIPMENT SOLD CAN BE CHECKED AFTER USE TO THEREMANUFACTURING PROCESS AND BE BROUGHT BACK TO THEREMANUFACTURING UNIT.

THE INVESTMENT IN REMANUFACTURING & RELATED REVERSELOGISTICS SUPPLY CHAIN CAN BE JUSTIFIED ON THE BASIS OFECONOMIES OF SCALE.

SYSTEM DESIGN CONSIDERATIONS(DRIVERS IN REVERSE LOGISTICS)

THE SUCCESS OF REVERSE LOGISTICS SYSTEM IN ACHIEVINGTHE DESIRED OBJECTIVES DEPENDS ON THE EFFICIENCY ANDEFFECTIVENESS 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 OFTHE FIRM.

PRODUCT LOCATION BECOMES MORE DIFFICULT AFTER IT IS SOLDAND 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 DIRECTSELLING.

2. PRODUCT COLLECTION SYSTEM

ONCE THE PRODUCT LOCATION IS IDENTIFIED, THE COLLECTIONMECHANISM GETS INTO OPERATION. THIS CAN BE DONE EITHER THROUGH COMPANY’S FIELD FORCE, CHANNEL MEMBERS OR THIRD PARTY. HOWEVER, PROPERINSTRUCTIONS 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 SOMEFIXED LOCATION IN THE REVERSE LOGISTICS NETWORK.

THE CALLED BACK PRODUCTS ARE INSPECTED BEFORE THEY AREFURTHER PROCESSED FOR FURTHER REPAIRS, REFURBISHING, REMANUFACTURING OR WASTE DISPOSAL.

INVESTMENTS IN FACILITIES FOR THESE ACTIVITIES DEPEND ON THEOBJECTIVES OF THE SYSTEM, COST IMPLICATION, COMPLEXITY OF THE OPERATIONS & EXPECTED GAINS.

4. DOCUMENTATION SYSTEM TRACING THE PRODUCT LOCATION BECOMES EASIER IF PROPERDOCUMENTATION IS MAINTAINED AT EACH CHANNEL LEVEL.

HOWEVER, AT THE TIME OF HANDING OVER THE PRODUCT TOTHE CUSTOMER, THE DETAILED INFORMATION IF COLLECTED THROUGH PROPER DOCUMENTATION, CAN FORM A GOOD DATABASETHAT CAN BE USED IN CASE OF PRODUCT CALL BACKS.

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 1. PRODUCT LOCATION (INVESTMENT & OPERATING COSTS)

2. TRANSPORTATION

3. PRODUCT COLLECTION (CUSTOMERS > RETAILERS > PLANT)

4. DISPOSAL (PLANT > SUPPLIERS / DISPOSAL)

5. REFILLING, REPAIRS, REFURBISHING, REMANUFACTURING, RECYCLLING

6. DOCUMENTATION (FOR PRODUCT TRACKING AND TRACING DURING ENTRY, EXIT AND FLOW IN THE SYSTEM)

Contd.

BARRIERS TO GOOD REVERSE LOGISTICS1. 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.

2. 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