As we all know that Logistics is part of supply chain management process. Where as the Logistics deals with forward movement of goods within any supply chain, reverse logistics manages the reverse movement of goods, in other words returns management within supply chain function. Reverse flow is as important as forward movement in any supply chain. By examining a consumer supply chain process flows, one can conclude that reverse flows are very critical and important function within supply chain to recover the product cost comprehensively and at the same time helps in safe disposal of waste.
Source: Krumwiede & Sheu
According to CLM definition, managing reverse flows is part of Logistics Management.
“Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements”
This means, Logistics is part of supply Chain function and reverse logistics is part of Logistics function and both Logistics and Reverse Logistics are part of Supply Chain function. Reverse logistics also deals with moving the product from point to point. However the difference is that it moves from point of consumption to point of origin. Now let us review the scope of reverse logistics by examining the definition of reverse logistics.
“The 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.” Reverse Logistics Executive Council.
What is evident from the above definition is that, reverse logistics helps business in product recycling in order to recapture the value and its disposal. All returns need not be financial write offs, some could be refurbished and sold again and in some cases part of the product could be recycled/remanufactured. Apart from recycling the product, reverse logistics plays a critical role for some organizations in asset (e-waste/chemicals) disposition to protect environment and also recover the data from the IT hardware in order to avoid data thefts.
Reverse Logistics Functions:
By examining the definition one can understand that the objectives of reverse logistics are to maximize the value recovery and safe disposal of waste.
Maximization of Value recovery:
If product intended for a sale is returned by the customer, the product cost is not recovered. One of the basic objectives of supply chain is to maximize the product margins. In order to achieve this objective, organizations through reverse logistics functions under take the following activities to maximize the revenue recovery.
What are the reasons that would result in above mentioned activities?
Materials that contain hazardous elements should be properly disposed to protect the environment from hazardous chemicals and compounds. Materials such as lead, mercury, lithium, and other forms of toxic waste are considered hazardous and subject to strict governmental environmental compliance regulations.
Agencies such as U.S. Environmental Protection Agency (EPA) and state environmental agencies regulate the impact of businesses on the environment. These agencies develop and enforce regulations that implement environmental laws enacted by the government. The second objective of reverse logistics function is safe disposal of waste. Safe disposal has become mandatory due to above mentioned government legislations aimed at protecting the environment.
Reverse Logistics function is critical to all industries but very important to the following industries:
Barriers to Reverse Logistics:
Reverse logistics may not be considered as a priority in many organizations. I was involved in a research supervision in New Zealand and results validated my belief that organizations do not allocate resourced required to manage reverse flows efficiently. Around 24% respondents believe that lack of proper reverse logistics IT systems is the biggest barrier and equal number of respondents felt that lack of importance is also a factor. Apart from above, lack of financial and human resources (36%), management inattention (12%) and legal issues (4%) were identified as barriers. These findings were some what closely matched with the survey conducted by Dr. Dale S. Rogers and Dr. Ronald S. Tibben-Lembke.
Managing reverse flows effectively in any organization is relevant and critical. The reusability of the product would determine the complexity and importance of reverse logistics within an organization. Many retail companies have recognized the importance and established hubs to handle reverse flows. Where as IT industry recognized it long back and outsourced this function for both recycling and safe disposal. The survey conducted in NZ revealed that majority do not outsource the reverse logistics function and at the same time they do not focus on this activity. The best method to handle non-core functions is to outsource the same. Instead of managing operations, manage KPIs to deliver the targeted results. With growing awareness of environmental protection, safe disposal methods will also improve in developed economies and in the process third world countries should not become dumping grounds for hazardous waste.