Reverse Logistics

Posted in Operations & IT Articles, Total Reads: 5510 , Published on 30 October 2010
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Supply chain is a complete system which is involved in moving the product (or a service) from a supplier (or a manufacturer) to the end customer.

A typical scenario is :

This is the traditional supply chain or the forward supply chain. What if this gets reversed ?

By reverse means the goods start to move from the end customer to the manufacturer. Why would a business ever need that ?

 

Forward SCM

Imagine a simple scenario, you bought a phone from a shop which is covered by a warranty. The phone starts giving you headaches after a week as it is faulty. The shop from where you had bought the phone says it needs to go back to the company (the manufacturer). Now does the phone automatically go back ? The answer is a clear No. There has to be a process where in that faulty phone needs to go back to the company who made it through all the stakeholders but in a reverse order. This is what is known as Reverse Logistics or Supply Chain.

Reverse Supply chain is the system which facilitates the flow of product/system from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

There are many cases under which a company needs to use reverse logistics to get the finished good back from the end point.

Cases can be

1) Defect in the model

2) A New Product launch

3) Customer Complaint

4) Discontinuation of the product/brand

5) Change in Government policy

The list is not exhaustive but presents a good number of cases which might demand for a Reverse SCM system in place.

There are also other scenarios under which goods might have to be returned. A typical example is given of the magazine and newspaper industry.Majority of the times, all the magazines taken by the retailer or the distributor are not sold so have to be returned to the media house.

The media house overstocks in order to push sales but have a proper reverse logistics in place to ensure that the unsold copies are returned easily so that next time again the distributor doesn’t have any issues keeping extra copies.

 

Industry Trends

 

The chart above shows the return percentage data for various industries.The next bar chart actually shows the reason for return.

 

Reasons

Do the products brought back add to loss or waste items ? No, Not at all

For a mobile handset manufacturer the returned sets can be reused to make new handsets. The returned items can act as raw materials. Same can be the case for a magazine publisher, the magazines can be reused as raw material as paper for next magazines.

And if the items were recalled because of security issues so its best to dispose them off by the actual manufacturer so as to avoid any future implications.So having a proper Reverse Logistics can always be beneficial to all the stakeholders in the supply chain.

Such initiatives also help building the brand. Often we listen that the company recalled the product as it was not as promised.

Nokia recently started a Reverse Logistics Campaign in which they asked people to give their old unused mobile handsets to Nokia through special drop boxes put across different places in various cities. They claimed to dispose them off or reuse them for new handsets as raw materials.

This was projected as a CSR campaign and gave Nokia a positive push.

So Reverse logistics is a very important concept in Operations Management for any company.Reverse SCM can prove very beneficial and profitable in long term.

So to win a long race going ‘Reverse’ can help sometimes.


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