36632930 reverse-logistics
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  • 1. Praveen Singh Bhandari
  • 2. To start - Definition 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 –Reverse logistics may be defined as a process of moving goods fromtheir place of use, back to their place of manufacture for re-processing, re-filling, Repairs or recycling / waste disposal.
  • 3. Reverse Logistics ActivitiesHandling of returned merchandise Damage Seasonal inventory Resell via outlet Salvage of outdated products Stock–balancing returnsRecycling and reuse Material reuse Remanufacturing / refurbishing Hazardous materials disposition
  • 4. Forward Vs Reverse Logistics Forward Logistics Reverse Logistics Straightforward forecasting Forecasting more difficult One to many distribution point Many to one distribution point Destination / Routing clear Destination routing unclear Uniform pricing Pricing depends on many factors Consistent inventory management Inventory management not consistent Negotiation between parties Negotiation complicated by straightforward additional consideration
  • 5. Publishing Industry Highest rate of unsold copies (28% on average) Growth of large chain stores: More square footage requires more books To secure a prominent display in superstores, publishers must supply large quantities of books Superstores sell less than 70% of books they order Shorter shelf life Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 6. Computer / Electronic Industry Shorter life cycles Approximately 325 million PC’s became obsolete in the US between 1985 and 2005 Opportunities to reuse and create value out of a nearly omnipresent asset How to recover and reuse materials contained within E-waste? Lead, copper, aluminum gold, plastics and glass E-waste includes computers, televisions, cell phones, audio equipment and batteries Remanufacturing of toner cartridges: 12,000 remanufacturers, employing 42,000 workers, sell nearly $1 billion annually Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 7. Automotive Industry Three primary areas: Components in working order sold as is Other components, such as engines, alternators, starters, and transmissions are refurbished before they can be sold Materials are reclaimed through crushing or shredding Automotive recyclers handle more than 37% of the nation’s ferrous scrap Remanufactured auto parts market is estimated at $34 billion, annually Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 8. Retail Industry Profit margins are so slim that good return management is critical Returns reduce the profitability of retailers marginally more than manufacturers Returns reduce the profitability of retailers by 4.3% The average amount that returns reduce profitability among manufacturers is 3.80% Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 9. Drivers in Reverse LogisticsThe success of reverse logistics system depends on the efficiency and effectiveness offollowing sub-systems1. 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. Tracing the product location becomes easier if proper documentation is maintained at each channel level.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. Proper instructions have to be given to motivate the customer for returning the products.
  • 10. Drivers in Reverse Logistics – Product Location3. 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.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.
  • 11. Strategic use of reverse logistics Strategic Weapon o Reduce the risk of buying products that may not be “hot selling” items. o Increase the switching costs of changing suppliers. Competitive Reasons o Liberal return policies over the last few years due of competitive pressures. o Taking back unwanted products or products customers believe do not meet needs. Good Corporate Citizenship o Use reverse logistics capabilities for altruistic reasons, such as philanthropy. o These activities enhance the value of the brand and are a marketing incentive to purchase their products. Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 12. Strategic use of reverse logistics Clean Channel o Clean out customer inventories, so that they can purchase more new goods. o Fresher inventories can demand better prices, which in turn, protects margin. Recapture Value and Recover Assets o Large portion of bottom-line profits is derived from asset recovery programs. o Profit derived from materials that were previously discarded. Legal Disposal Issues o As landfill fees increase, and options for disposal of hazardous material decrease, legally disposing of non-salvageable materials becomes more difficult. Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 1998
  • 13. Strategic use of reverse logistics Operational Factors in Reverse Logistics Systems – A holistic view of reverse logistics is essential for a profitable and sustained business strategy. Source: Dowlatshahi S. Developing a theory of reverse logistics. Interfaces; May/Jun 2000
  • 14. Reverse Logistics – Cost ImplicationsThe reverse logistics system is a cost centre. However, thesecosts are incurred for achieving company’s certainobjectives and can be attributed to the followingactivities:1. Product location (investment & operating costs)2. Transportation3. Product collection (customers > retailers > plant)4. Disposal (Plant > Suppliers / Disposal)5. Refilling, repairs, refurbishing, remanufacturing, recyclin g6. Documentation (for product tracking and tracing during entry, exit and flow in the system) .
  • 15. Reverse Logistics – Barriers Legal issues o 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. o This is a very cumbersome & time consuming process and non-compliance may mean that the manufacturer will have to face legal action. o Many organizations term reverse goods as ‘junk’ and they don’t want to waste their resources on these ‘junks’ The goods are considered unworthy of any investment