Reverse logistics programs are fast becoming a major requirement in 3PL and procurement contracts. Not long ago “returns” were considered a nuisance by manufacturers, retailers, and logistics providers. They were handled only as a courtesy to customers. Today, environmental legislation is forcing companies to take responsibility for waste. At the same time consumers expect clear and efficient returns programs when making purchases. The EU is leading the way on reverse logistics with strong legislation and policies. In the US reverse logistics is evolving as progressive companies realize the opportunities to enhance their public image, lower operating costs, and improve productivity. In other words reverse logistics is moving from an added cost “returns” program to a value add process. Here are some recovery options in reverse logistics*
- Reuse– inspect, clean, and use again for identical or similar purpose, value add
- Remanufacturing– dismantle and reassemble or use for parts, value add in remanufacturing w/improvements
- Recycle– sorting process for scrap, no real value add but can recover some costs
While the above is good business practice it is difficult to plan and execute from a logistics point of view. One reason for this is uncertainty in timing and quantity of returns. Product life cycle and rate of technological innovation play a big role in timing of returns.
Successful reverse logistics implementation involves both external and internal factors. External factors include legislation, customer demand, and incentive. Internal factors include environmental concerns, strategic cost/benefits, volume and quality of returns, resources utilized, and integration and coordination.
- Customer demand– environmental responsibility is becoming a competitive necessity
- Incentive– companies need to make returns worth it for end users
- Environmental concerns– growing trend, not optional going forward
- Strategic cost/benefit– can help increase sales and asset utilization but will increase costs. Benefit is mostly long run after initial investments in equipment, design, process, and labor.
- Volume and quality– returns must be managed to avoid scrap as much as possible
- Resources– use available resources and assets as much as possible
- Integration and coordination– must use info systems to gain competencies in recovery so reverse logistics does not become a profit drain but a profit center
- Performance measures– forward logistics measures are not adequate for return logistics. Need to develop different metrics for return logistics. Ex: time required for product recovery, % recyclable/reusable at end of product life, core return rate, % product weight or volume disposed in landfills
*Global Logistics and Supply Chain Mgt by Mangan, Lalwani, Butcher, and Javadpour, 2nd Ed, John Wiley & Sons, 2012