Reverse logistics

• Reverse logistics stands for all operations related to the reuse of products and materials.
• Reverse Logistics can be defined as “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.”
• More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.
• The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business.
• Normally, logistics deal with events that bring the product towards the customer. In the case of reverse logistics, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer.
• When a manufacturer’s product normally moves through the supply chain network, it is to reach the distributor or customer. Any process or management after the sale of the product involves reverse logistics.
• If the product is defective, the customer would return the product. The manufacturing firm would then have to organise shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing the product. The product would travel in reverse through the supply chain network in order to retain any use from the defective product. The logistics for such matters is reverse logistics.

Scope of Reverse Logistics:

(a) Return of unsold goods: In certain industries, goods are distributed to downstream members in the supply chain with the understanding that the goods may be returned for credit if they are not sold e.g., newspapers and magazines. This acts as an incentive for downstream members to carry more stock, because the risk of obsolescence is borne by the upstream supply chain members.

(b) Refusal of the products in the cash on delivery: In case of e-commerce business, many websites offer the flexibility of cash on delivery (COD) to their customers. Sometimes customers refuse the product at the time of delivery, as there is no commitment to take the product. Then the logistics service provider follows the process of reverse logistics on the refused cargo.

(c) Reusable packaging: Reusable packaging systems require a closed-loop logistics system. Examples include reusable pallets, bulk boxes such as containers, Reusable bottles for milk, soda, and beer, compressed gas cylinders, beer kegs, etc.

(d) Reverse Logistics for Demonstrations: In case of the Demonstration of Products to the client as part of Pre-Sales process, The Demonstration equipment is sent to the Customer and has to be returned to maintain Revolving Inventory.

(e) Repairs and Refurbishing: Goods can be returned back for the purpose of repairs. Goods can also be sent back in case of quality, defect or damage issue. In such situation, companies may opt for refurbishing.

(f) Product Recall: Some times as a part of customer service strategy, company may opt for product recall i.e. withdrawal of a product from the market. It mainly happens when product defect or quality is the major concern. For instance, when Nestle found high level of lead in Maggi, they opted for recalling their product back and disposing the same.

Benefits of Reverse Logistics:

(a) Return on Investment: When a business purchases equipment, parts, or remanufactured equipment it is an investment. Over time, this equipment improves profitability and has a positive return on investment. When the time comes to get rid of this equipment, business owners can employ reverse logistics practices to reap a second return on investment from the equipment.

(b) Enhances Corporate Image: Reverse Logistics is a part of green management. People value those companies that value environment. Growing awareness among consumers have change the mind set of end users of the products. Companies that practice environmental friendly approaches are loved by the public and thus it leads to increase in the corporate image of such companies.

(c) Minimizes cost: Reverse Logistics allows a trader to receive products back from the consumer or send unsold merchandise back to the manufacturer to be taken apart, sorted, reassembled or recycled; minimizing overall costs for an organization.

(d) Greater customer service and higher retention levels: Reverse logistics can include gaining feedback to make improvements and to improve the understanding of real reasons for product returns. Reverse Logistics is an attempt to provide better customer service. It generates customer satisfaction and thus increases customer loyalty and customer retention.

(e) Productivity and Growth: Reverse logistics can be valuable in increasing product lifecycles, supply chain complexity, maintainable practices and consumer preferences; which have to be improved on to maintain productivity and growth.

(f) Additional Benefits: Gains from Revere Logistics may include:

(i) Increasing speed of production,

(ii) Reducing costs (transportation, administrative, and aftermarket maintenance, repair and replacement),

(iii) Meeting sustainability goals.

(iv) Extracting more value from used/returned goods instead of wasting manpower, time and costs of raw materials involved in the original supply chain.