The Impact Of Reverse Logistics On The Transportation And Logistics Field

All about Reverse Logistics
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Abstract
For this research project, the reader will be able to better understand the concept of reverse logistics. Reverse logistics is the ‘reverse’ effect of forward logistics. Apart from having the product go from production to the end user, the product will now go from the end user to the producer. This concept is mainly dealing with products that are recalled, past shelf life, or returned. A product being returned can be for any number of reasons; broken, unwanted, or even returned due to notification of recall. Once a customer brings in a select product for return, it is then inputted into a system to further be processed for return to manufacturer. Once to the manufacturer, there are multiple ways to handle the product. The 3Rs (recycle, reuse, and reduce) is a great guidance tool for this step. The product can be properly recycled, reused for spare parts or fixed itself, or the product can be used to help reduce the product to improve the expected life span. Reverse logistics may have multiple moving parts to the process, but has greatly impacted the operations of transportation and logistics, as will be discussed within the paper.
Table of Contents
TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc499813895 \h 2
Introduction PAGEREF _Toc499813896 \h 4
What is Reverse Logistics? PAGEREF _Toc499813897 \h 5
Step by Step Process of Reverse Logistics PAGEREF _Toc499813898 \h 7
Decisions to Be Made Once in the Hands of the Manufacturer PAGEREF _Toc499813899 \h 8
Challenges Faced By Reverse Logistics PAGEREF _Toc499813900 \h 12
Possible Solutions to the Stated Challenges PAGEREF _Toc499813901 \h 14
Conclusion PAGEREF _Toc499813902 \h 16
References PAGEREF _Toc499813903 \h 18
Introduction
Reverse logistics involves moving products from the end user all the way back to the manufacturer. Reverse logistics is important because it reduces wastage and ensures that the products being moved back to the manufacturers are put to better use. It ensures that consumers utilize the value of a product effectively through use and reuse of the product (Britto & Dekker, 2002). It deals with all the operations involved in the management of products to be recovered. These products are usually moved due to reasons such as recall of products by the manufacturer or expiry of the products. Reverse logistics can be initiated by law, profits that are ripped from the process or the desire of a company to engage in reverse logistics as a result of felt a responsibility (Britto & Dekker, 2002). It is however valuable to any company since the benefits are high. Reverse logistics is more labor intensive than primary logistics since it involves the same process as primary logistics, but instead of large quantities of products, only a few are involved since goods are processed as received from the consumers (Reese, 2011).
Reverse logistics comes with its share of challenges. The whole process of reverse logistics may pose a challenge to the organization since it requires drastic changes in the organization in terms of policies, procedures and structure and failure to be flexible can result in poor reverse logistics. In addition, consumers may become doubtful of the company’s quality of products if they are requested to return products (Badehorst & Nel, 2012). Additionally, most companies have poor technologies and policies that facilitate the return of products from the consumer to the manufacturers. Return of products is usually accompanied by uncertainties and unexpected costs, which when not well managed may cause the company not to focus on the related benefits. However, despite the many challenges experienced, reverse logistics has a positive impact on transportation and logistics management.
What is Reverse Logistics?
Reverse logistics can be defined as the movement of products from the user back to the manufacturer or an organization via a distribution channel which can be initiated by the industry, the customer, or the government. Industry and government-initiated reverse logistics are normally due to recalls of products and happen on large scale whereas customer reverse logistic is normally voluntary. The costs incurred in government or industry initiated reverse logistics are usually higher than those that are customer initiated.
According to Stanciulescu (2011), reverse logistics is the process of planning, implementing, and controlling the movement of raw materials, finished goods, and all other processes in an effective and efficient way from the consumer to the manufacturer, with the aim of properly utilizing the products’ value. This definition is close to one by Rogers (1998) who defines reverse logistics 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” (p. 2). Through reverse logistics, companies are able to save more by reclaiming the value of their products through effective management and disposal of products that have been returned from the consumer. It is, therefore, a strategy that should be adopted by companies that want to retain a competitive advantage.
In reverse logistics, distribution of products is from different points to a single point, and there are usually no specified routes to the final destination (Partyk, 2006). Reverse logistics involves open and closed loop systems. In an open loop system, the responsibility of collecting products and sourcing for markets lies entirely on the manufacturers whereas, in a closed loop system, the company usually refurbishes the products and then sell them. Alternatively, the company can reuse or recycle the products so as to maximize the benefits of reverse logistics.
Returned products are as a result of distribution returns, manufacturing returns, and customer returns (Britto & Dekker, 2002). Manufacturing returns occur when the end products fail to meet the quality checks, necessitating a repeat of the product to ensure it meets the quality requirements. Distribution returns happen when products are damaged during distribution, recalled or when there are stock adjustments in the supply chain. Customer returns are usually returns made by the customer voluntarily if the product does not meet the customer's expectation and the customer comes to claim reimbursement or warranty for the product. Finally, the customer can return the product if they are obliged to return it after it has reached the end of its economic life.
According to Stanciulescu (2011), reverse logistics goes beyond recycling and re-using packaging materials. It is concerned with asset recovery, processing excess and seasonal inventory and has to involve a backward process. In addition, there must be a channel through which goods flow from the consumer to the manufacturers while going through all the activities involved in forward logistics. There are various threats to reverse logistics which include increased consumer awareness since information about companies' environmental activities is easily available, reduced product life cycles which results in an increase in returns and high competition between companies that have learned the importance of reverse logistics.
Reverse logistics requires a return handling process that involves receiving, inspecting and sorting returned products to determine the condition of the returned goods before making decisions on what to do with products. The products have to be grouped according to the available recovery options, based on the condition of the products. Reverse logistics is an area that has attracted the attention of many organizations, and it is important to find out the challenges, solutions and the effect of reverse logistics on transportation and logistics fields so as to give more insights on the subject.
Step by Step Process of Reverse Logistics
The first process in reverse logistics involves retrieval of the product from the consumer, retailer or distributor (Gupta, 2013). Mostly, the products are returned to a store which acts as the collection point for returned products.
The second step involves products inspection and sorting is done so as to determine the condition of the products. During this step, the returned products are sorted with respect to the company’s recovery options and depending on the condition of the products.
The third step involves direct recovery whereby the products can be re-used or re-sold. This is done if the product is in good condition and it is redistributed for re-use (Graczyk & Witkowski, 2011).
The final step involves processing of the products to decide what will be done to each batch. In this step, the product can be repaired, refurbished, reused or re-manufactured if it is in good shape. If the condition of the product is not good, the product can either be recycled or disposed of (Britto & Dekker, 2002). Disposing off may either entail incineration or landfilling. Organizations can adopt waste incineration technologies that are environmentally friendly and involve converting waste into energy.
When the products have been retrieved from the customers, it is important to check whether the product is under warranty or not. If it is under warranty, the right warranty claims procedures should be followed (Blumberg, 2005). Having a proper warranty management system also ensures that there is an accuracy in warranty claims. The importance of tracking returned products under warranty is to ensure that the profits realized from the warranty are assigned to the warranty and not the product. Warranties are a source of profits to the organization because in most cases, customers usually don’t remember that they purchased the product and were issued with a warranty. It is important to consider the mode of transport back to the manufacturer during this step. The involved parties in the reverse logistics process should consider using a reusable internal transport. Since transportation of products may require different modes of transport, the carriers should be rotational to minimize the number. It can be beneficial to the company if they can share the mode of transport with others so as to reduce costs. In addition, it will be easy to track the returned products in transit since all the products in the shared mode of transport are tracked to ensure they do not get lost and ensure they arrive to the right owners (Britto & Dekker, 2002). However, it is important for a company to have a system in place that facilitates tracking of return products, especially due to the uncertainties involved in the reverse logistics. This will ease the process of tracking products back to manufactures.
Decisions to Be Made Once in the Hands of the Manufacturer
Once the manufacturer gets hold of the returned products, a few decisions have to be made regarding what to do with the products. This section examines some of the decisions that manufacturers should make. The product can be reconditioned, remanufactured or refurbished and depending on the outcome of these activities, the manufacturer can make further decisions. 3Rs plays a critical role in this stage as they help a firm reduce the loss that comes with returned products.
The manufacturer can reduce the product through revisiting the design process with the aim of making the product better. Reducing the number of returns or completely stopping it can help a company save some significant amount of money. Returns always result to loss for the firm and one way of lowering such loss is through reduction of the returns. Completely stopping is most desirable, but it can take a considerable amount of investment to get there. A firm may choose to implement no return policy, but the negative consequences may outweigh the benefits. The brand of the firm can be affected negatively and this can have adverse long-term impact on the firm. The concept of reducing the returns, therefore, can work best for the firm. In this sense, revisiting the design process in order to improve quality can be instrumental towards reducing the returns. The products can be returned due to mechanical defects or usability problems. In this case, it is the role of the manufacturer to implement measures that deal with such challenges. Examples of measures that can be taken by the manufacturer, in this case, include pre-sales testing, factory audits, and tracking customer warranty. Carrying out these practices can help the company decide where to invest money and resources with the aim or reduc returns. According to Busch (2015) when seeking to invest money in improving the product quality, it is important for a company to consider the primary sales channel. In this case, if retail is the primary sales channel of the firm, investing money in quality improvement may not result in significant change in reverse logistics volumes (Busch, 2015). The reason for little impact of investment is that most of the returns are as a result of customer’s remorse. Therefore, the firm can reduce returns by improving the customer support quality. One way of doing this is through upgrading enclosed instructions or the information on packaging materials. As mentioned earlier, usability problem can be a reason for the returns of the products by the customer. Therefore, by upgrading instructions and information, the customer can understand better the usage of the product and consequently the volume of returns can be reduced. In addition, t...