Reverse Logistics


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Reverse Logistics

  1. 1. Reverse Logistics Challenges & Benefits Anand Subramaniam
  2. 2. <ul><li>“You can have brilliant ideas, but if you can't get them across, your ideas won't get you anywhere.&quot; </li></ul><ul><ul><li>- Lee Iacocca </li></ul></ul>
  3. 3. Highlights <ul><li>Forward Vs. Reverse Logistics </li></ul><ul><li>Reverse Logistics Vs. Closed Loop Supply Chain Systems </li></ul><ul><li>Reverse Logistics </li></ul><ul><li>Reverse Logistics Educational Council </li></ul>
  4. 4. Forward Vs. Reverse Logistics
  5. 5. Forward Vs. Reverse Logistics Inconsistent Consistent Inventory Management Unclear Clear Destination / Routing Complex Straightforward Contract Negotiation Damaged Uniform Product Packaging Many to One One to Many Distribution Point Complex Manageable Product Life cycle Unclear Transparent Process Visibility Inconsistent Uniform Product Quality Low High Cost Visibility Difficult Straightforward Forecasting Complex Straightforward Marketing Less High Priority Speed Many factors Uniform Pricing Reverse Forward Factors Logistics
  6. 6. Return Models <ul><li>Website </li></ul><ul><li>Disposition challenges </li></ul><ul><li>Credit reconciliation </li></ul><ul><li>Selection of shipping method </li></ul><ul><li>Print label </li></ul><ul><li>RMA procure </li></ul><ul><li>Need infrastructure </li></ul><ul><li>Full Service </li></ul><ul><li>Infrastructure may be necessary </li></ul><ul><li>Returns process not standardised Separation of inventory & information more difficult. </li></ul><ul><li>Value-Added service </li></ul><ul><li>Physical </li></ul><ul><li>Processors </li></ul><ul><li>3PL & 4PL </li></ul><ul><li>Consolidation </li></ul><ul><li>Refurbish </li></ul><ul><li>Recycle </li></ul><ul><li>Replenishment & backorders </li></ul>
  7. 7. Strategic Role of Returns <ul><li>Cash Flow </li></ul><ul><li>Protect Margins </li></ul><ul><li>Clean Channel </li></ul><ul><li>Recover Assets </li></ul><ul><li>Recapture Value </li></ul><ul><li>Product Freshness </li></ul><ul><li>Competitive reasons </li></ul><ul><li>Legal Disposal Issues </li></ul><ul><li>Increase Switching Costs </li></ul><ul><li>Good Corporate Citizenship </li></ul><ul><li>Customer Trust / Risk Reduction </li></ul>
  8. 8. Reverse Logistics Vs. Closed Loop Supply Chain Systems
  9. 9. Extended Supply Chain & Reverse Logistics Regular Supply Chain Extended Supply Chain Develop Deliver Revenue Market Build Sell Develop Deliver Revenue Market Build Sell After Sales Service Replenish RMA Replace Recover Repair Reverse Logistics
  10. 10. Reverse Logistics Process
  11. 11. Reverse Logistics Vs. Closed Loop <ul><li>Reverse logistics </li></ul><ul><ul><li>The process of moving or transporting new or used products “back up stream” for repair, reuse, refurbishing, resale, recycling, or scrap/salvage. </li></ul></ul><ul><li>Closed Loop </li></ul><ul><ul><li>Designed and managed to explicitly consider both forward and reverse flows activities in a supply chain. </li></ul></ul>
  12. 12. Close Loop Supply Chain Disposition Choices Reconditioning Recycle Refurbishing Remanufacturing Resell
  13. 13. Close Loop Supply Chain Close Loop Customer CRM Help desk RMA call center Order tracking Inventory Forecasting Warehousing Demand fulfillment Parts management Surplus inventory sales Inventory ownership model Services Upgrades Component Re-Configuration Warranty Reclamation Continuous Cost Scaling Activity & Quality Reporting Metrics Receive & Triage Testing Return To Vendor Warranty Validation Repair Product Forward-logistics Kitting QA Inspection Pick Pack Ship Global Distribution
  14. 14. Reverse Logistics
  15. 15. Organisation Barriers <ul><li>Legal issues </li></ul><ul><li>Lack of systems </li></ul><ul><li>Company policies </li></ul><ul><li>Competitive issues </li></ul><ul><li>Financial resources </li></ul><ul><li>Personnel resources </li></ul><ul><li>Management inattention </li></ul><ul><li>Importance of reverse logistics relative to other issues </li></ul>
  16. 16. Impact on Organisation Customer Asset Manage-ment Customer Service Finance Sales Transport Receipt W/House Repair <ul><li>Warranty policies </li></ul><ul><li>Service contracts </li></ul><ul><li>Product rules </li></ul><ul><li>Credit rules </li></ul><ul><li>Advance replace </li></ul><ul><li>Special customer needs </li></ul><ul><li>Record of RMA </li></ul><ul><li>Financial impact </li></ul><ul><li>Process, approval rules </li></ul><ul><li>Debits </li></ul><ul><li>Problems found in Receiving </li></ul><ul><li>Ability to reconcile </li></ul><ul><li>Write-offs </li></ul><ul><li>Account mgmt </li></ul><ul><li>Ineligible returns </li></ul><ul><li>Revenue recognition </li></ul><ul><li>Margin protection </li></ul><ul><li>Special programs </li></ul><ul><li>Quality impact </li></ul><ul><li>Return rate forecasts </li></ul><ul><li>Carrier control </li></ul><ul><li>Non-contract rates </li></ul><ul><li>Transit damage – claim recovery </li></ul><ul><li>One-off shipments </li></ul><ul><li>Inability to track the routing effectively </li></ul><ul><li>Facility and labor planning </li></ul><ul><li>Priority conflict </li></ul><ul><li>Very manual effort </li></ul><ul><li>Owner-ship issues </li></ul><ul><li>Product std cost </li></ul><ul><li>Internal visibility </li></ul><ul><li>Repair – ship back </li></ul><ul><li>Replace </li></ul><ul><li>Credit </li></ul><ul><li>Invoice </li></ul><ul><li>Float stock </li></ul><ul><li>Resale </li></ul><ul><li>Scrap & reclaim value </li></ul><ul><li>“ Green” needs </li></ul><ul><li>Return policies </li></ul><ul><li>Customer-specific issues </li></ul><ul><li>Product eligibility </li></ul><ul><li>Credit timing issues </li></ul><ul><li>Warranty support </li></ul><ul><li>Perception </li></ul>
  17. 17. Business Drivers Internal External Operational Strategic Legislation <ul><li>EC distance selling directive </li></ul><ul><li>WEEE EU directive </li></ul><ul><li>Potential EU legislation on re-use of packaging material </li></ul><ul><li>RoHS directive </li></ul><ul><li>Sarbanes-Oxley </li></ul>Business Strategy <ul><li>Customer Retention/Loyalty </li></ul><ul><li>Corporate citizenship </li></ul><ul><li>Market/customer behavior analysis </li></ul><ul><li>Reduce risk for forward channel </li></ul><ul><li>Drive sales </li></ul><ul><li>Feedback to new product development </li></ul><ul><li>Recover assets </li></ul><ul><li>Recapture value </li></ul><ul><li>Drive down costs </li></ul><ul><li>Control gray market </li></ul>Economic Benefits Customer Service Initiatives <ul><li>Return of defective products </li></ul><ul><li>Product disposal after end-of-life </li></ul><ul><li>Product upgrades </li></ul><ul><li>Product recall </li></ul><ul><li>Warranty returns </li></ul><ul><li>Product defect analysis </li></ul>
  18. 18. Organisation Value <ul><li>Ensure environmental protection </li></ul><ul><li>Leverage returns to accelerate giving back to the community </li></ul>All of the above, + Corporate Social Responsibility CEO <ul><li>Feed returns data back upstream to drive process and product design improvements </li></ul>Improve customer experience Quality <ul><li>Control the gray market </li></ul>Build the brand Marketing <ul><li>Make returns process painless, to increase customer satisfaction </li></ul><ul><li>Support growth by making product available to surgically resell </li></ul>Grow the business Sales <ul><li>Control costs with efficient operations </li></ul><ul><li>Recover value from returns </li></ul>Maximise profitability Finance How Reverse Logistics Can Help Key Objective Function
  19. 19. Challenges <ul><li>Incident prevention </li></ul><ul><li>In-store risk reduction </li></ul><ul><li>Resources to control transport risk </li></ul><ul><li>Assessment of the reverse logistics issues </li></ul><ul><li>Introduce policies, standards and guidelines </li></ul><ul><li>Implement systems : improve training & education : “portal’ to capture knowledge </li></ul><ul><li>Increase reuse/recycling; improve sustainability </li></ul>
  20. 20. Benefits <ul><li>Incident control </li></ul><ul><li>Quality control </li></ul><ul><li>Limit waste generation </li></ul><ul><li>Investigate product failure </li></ul><ul><li>Recycling or remanufacturing </li></ul><ul><li>Verification of return or replacement </li></ul><ul><li>Ensure proper disposal (“Green initiative”) </li></ul><ul><li>Improve economies of scale for reuse, recycle, disposal </li></ul><ul><li>Sustainability impact – reduction in transportation miles </li></ul><ul><li>Maintain safety and value of the product (eliminate unauthorised sales in flea markets, garage sales, and over the Internet) </li></ul>
  21. 21. Management Elements <ul><li>Negotiation </li></ul><ul><li>Gate-keeping </li></ul><ul><li>Zero Returns </li></ul><ul><li>Asset Recovery </li></ul><ul><li>Outsourcing </li></ul><ul><li>Financial Management </li></ul><ul><li>Centralised Return centers </li></ul><ul><li>Compacting Disposition Cycle Time </li></ul><ul><li>Reverse Logistics Information Systems </li></ul><ul><li>Remanufacture and Refurbishment </li></ul>
  22. 22. Customer & Product - Elements Customer Touch Gate-keeping “ Severe Desk” Technical support Sale save Routing Product Touch Routing Disposition Gate-keeping Asset recovery Refurbishment Recycling
  23. 23. Reverse Logistics Steps incinerator recycling containers retailer consumer 1. Collecting 2. Selection & Sorting 3. Transport 4. Disassembling & Crushing 5. Transport collecting point production Treatment centre
  24. 24. Reverse Logistics Activities <ul><li>Asset recovery </li></ul><ul><li>Recycling programs </li></ul><ul><li>Hazardous materials programs </li></ul><ul><li>Obsolete equipment disposition </li></ul><ul><li>Processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory </li></ul>
  25. 25. Recovery Processes & Value Reclaimed Landfill Disposal with energy recovery Recycling Reuse Resource Reduction Resource Reduction Reuse Remanufacturing Recycling Disposal with energy recovery Landfill
  26. 26. Recommendation - Reverse Logistics Educational Council
  27. 27. Recommendations Financial Management Avoidance Gate Keeping Reverse Cycle Times Information Systems Return Centres Asset Recovery Pricing Zero Returns Outsourcing RLEC Recommendation
  28. 28. RLEC Recommendation (Contd.) <ul><li>Avoidance — Producing high-quality products and developing processes to minimise or eliminate returns </li></ul><ul><li>Gate-keeping — Checking and screening merchandise at the entry point into the reverse flows process to eliminate unnecessary returns or minimise handling </li></ul><ul><li>Reducing reverse cycle times — Analysing processes to enable and facilitate compression of time for returns to enhance value recapture </li></ul><ul><li>Information systems — Developing effective information systems to improve product visibility, reduce uncertainty, and maximise economies of scale </li></ul><ul><li>Returns centers — Developing optimum locations and facility layouts for returns centers to facilitate network flow </li></ul>
  29. 29. RLEC Recommendation (Contd.) <ul><li>Asset recovery — Classifying and disposing of returned items, surplus, scrap, and obsolete items to maximise returns and minimise cost </li></ul><ul><li>Pricing — Negotiating the best price for products being returned and resold </li></ul><ul><li>Outsourcing — Considering a relationship with a third-party organisation to handle and manage reverse flows in cases where existing personnel, infrastructure, experience, and/or capital may not be adequate to implement a successful program </li></ul><ul><li>Zero returns — Developing a policy to exclude returns by giving a returns allowance and/or “destroying” the product in the field </li></ul><ul><li>Financial management — Developing guidelines and financial procedures to properly account for charges against sales and related financial issues when items are returned by customers </li></ul>
  30. 30. <ul><li>“ If you don't ask why this? often enough, somebody will ask why you?&quot; </li></ul><ul><ul><li>- Tom Hirshfield </li></ul></ul>
  31. 31. <ul><li>Good Luck </li></ul><ul><li> </li></ul>