Case study on Reverse logistics

Reverse logistics is process of handling goods from their intended final destination to the point of origin with the aim of acquiring their value or for the purpose of proper disposal. The process involves planning and controlling of the inventory process to ensure cost efficiency. The physical processes are remanufacturing and refurbishing of tangible goods. It also involves handling of returned merchandise as a result of recalls, damage, salvage and inventories. The reverse logistics manages the hazarders’ waste materials and asset recovery from the previous dispatches (Rogers & Tibben-Lembke, 1998).

The factors that are driving companies in implementing reverse logistic strategies include the information on the benefits of reverse logistics have resulted to great interest in other companies and legislatives on waste management that require the companies to manage on the disposal of their products from their customers. Other factors are cost reduction and customer satisfaction. Technological developments are rapidly changing the electronic consumer market. This makes companies dealing with electronics the major players in implementing reverse logistics (Price water House Coopers, 2008).

Reverse chain processes involving commercial returns occur when the goods being retuned have value in another market. Electronic products in markets within the developed nations become outdated at a rapid rate due to emergence of new products. The products that had been distributed to the market may lose value as new models of those products are made. Outdated electronics in developed countries are of great value to poor countries like in Africa. The reverse chain strategy employed in dealing with such products involves shifting them to other markets. Commercial returns are caused by customer dissatisfaction, overproduction and other factors.

Products under warranty forms a chain on return based on repairable products or components. Companies develop strategies to deal with the products that are covered under warranty. The repairable returns may be used as modules in other products. Exchange repair can also be carried out in which the returned products are repaired using good components from previously returned products. Manufacturing companies develop strategies on possible product recalls. The recalls may occur due to a manufacturing defect that is identified after the products are already in the market. The manufacturer takes the full responsibility of rectifying the defects. Strategies on refurbishing of products deal with end of user returns in which product may be of no use to the original user but still have value. End of life returns are the products in which their use is void accordance to the set rules. Companies use these products to reduce on the cost of production. The products may be refurbished to add value (Price water House Coopers, 2008).

The process of reverse chain involves five general processes that include: product acquisition, product collection, product sorting testing and deposition, product recovery and product redistribution and sales. Product acquisition involves the retrieval from market or from the consumer use. Acquisition of products from the market requires cooperation with the supply chains especially at the final end of the distribution chain. The collection of products involves shipment and storage in the facilities that will handle processing of the products. The products are then sorted to classify them on their quality. Sorting determines whether the products will be used in the next stages of reverse chain or they will be disposed. Products with quality undergo through recovery process in which they can be repaired, refurbished or dismantled into valuable components that can be reused. The recovered products are then reintroduced in the supply chain and their value obtained through sales (Rogers & Tibben-Lembke, 1998).

Reverse logistics implementation occurs for different reasons which in turn creates two different forms of reverse chains based on cost. Policies on product recall involves a process where the cost incurred is on the manufacturing company. The benefits of value addition are passed to the customers in case of a product recall. In the other forms of product returns the company benefits from the redistribution and sale of the products (Rogers & Tibben-Lembke, 1998).

The barriers to implementation of reverse logistics are costs that cannot be quantified in reverse logistics especially on products which leads to more cost. Lack of a proper management system makes it difficult to keep track of the products in the market especially for big companies. The time of processing claims and returns by customers creates a negative effect to the companies.

The awareness by top management on the benefits of reverse chain has created cross functional collaboration with other partners. Auctioneers form an important part in redistribution of returned products to the market. Products such as furniture can be easily refurbished and auctioned back to the market. The perception of the returned products as waste makes the reverse chain to be easily analyzed in obtaining an insight in cost and performance (Price water House Coopers, 2008).

Reverse logistics are an important part in managing costs that are associated with unprecedented product performance in the market and in sustaining customer needs. The level of awareness on the reverse logistics determines the benefits obtained from the process. Collaborations in the implementation of reverse chain are essential especially in managing product returns and redistribution of products.

References

Price water House Coopers (2008). Reverse logistics. Retrieved on April 14, 2012 http://www.remanufacturing.org.uk/pdf/story/1p293.pdf

Rogers, D. & Tibben-Lembke, R. (1998). Going Backwards: Reverse Logistics Trends and Practices. University of Nevada, Reno Center for Logistics Management Retrieved on April 14, 2012 http://www.rlec.org/reverse.pdf