03-03-2012, 02:28 PM
Importance Of Reverse Logistics In Supply Chain Management
Abstract
Product flows in today's supply chains do not end once they have reached the customer. Many products lead a second and even third or fourth life after having accomplished their original task at their first customer. Consequently, a product may generate revenues multiple times, rather than a single time. Capturing this value requires a broadening of the supply chain perspective to include new processes, known as 'reverse logistics', as well as multiple interrelated usage cycles, linked by specific market interfaces. Coordinating the successive product uses is the key to maximizing the value generated.
Profit making is not the only motivation for reverse logistics, legislation also imposing companies to be responsible for the contamination made by their products. Moreover this companies are learning to maintain green image, use information comes back with reverse flow for customer satisfaction.
Keywords: Reverse Logistics, Supply Chain Management, Forward Logistics, 3PL, B2B, B2C.
INTRODUCTION monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.
2. Source — Choosing the suppliers that will deliver the goods and services which we need to create our product.
3. Make — This is the manufacturing step. Scheduling the activities necessary for production, testing, packaging and preparation for delivery.
4. Deliver — This is the part that many insiders refer to as logistics. Coordinating the receipt of orders from customers, developing a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.
5. Return — The problem part of the supply chain generally referred as Reverse Logistics. Creating a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products. Figure 1 representing the return flow clearly.
Order Fulfillment Customers
"a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time in order to minimize system wide costs while maintaining the desired service levels".
SCM have five basic components:
1. Plan — This is the strategic portion of SCM. We need a
strategy for managing all the resources that go towards
meeting customer demand for our product or service. A
big piece of planning is developing a set of metrics toFlow of Information (customer requirements,
orders)
Recyde
Reuse ' Remanufacture
Fig. - 1 : A schematic of a Supply Chain [4]
Typical Supply Chain Management have two types of flow of material, one from supplier to customer (Forward Logistics) and another is from customer to manufacturer (Reverse
INDUSTRIAL ENGINEERING JOURNAL
Logistics). Material purchase, manufacturing, distribution to customers follows aftermarket customer services which includes customer service, depot repair, service logistics, replacement management, end-of-life manufacturing, recycling, refurbishment, etc [8].
ROLE OF LOGISTICS IN SUPPLY CHAIN
The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible. So logistics can be defined as
"Logistics is the art and science of managing and controlling the flow of goods, energy, information and other resources like products, services & people. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging."
Forward logistics and Reverse logistics can be differentiated on the basis of direction of flow. Forward logistics can be defined as : [2]
"Forward Logistics is 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 origin to the point of consumption for the purpose of conforming to customer requirements".
Reverse logistics includes all of the activities that are mentioned in the definition above. The difference is that reverse logistics encompasses all of these activities as they operate in reverse. Therefore, reverse logistics defined by Rogers and Tibben-Lembke (1999) as: [2]
"Reverse Logistics is 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."
Every time it is not necessary material to come back at point of origin, in reverse logistics material tends to come at very different points such as point of recovery or point of disposal. So the European Working Group on Reverse Logistics, RevLog, puts forward the following definition Dekker et al.,
(2003):
"The process of planning, implementing and controlling flows of raw materials, in process inventory, and finished goods, from a manufacturing, distribution or use point, to a point of recovery or point of proper disposal." [2]
DRIVERS OF REVERSE LOGISTICS
The driving forces behind reverse logistics can be categorized as economics, legislation and corporate citizenship. [5]
Economics: A reverse logistics program can bring direct gains to companies from dwindling on the use of raw materials, from adding value with recovery, or from reducing disposal costs. Independents have also gone into the area because of the financial opportunities offered in the dispersed market if superfluous or discarded goods and materials. The indirect benefits include market protection, green image of company and improved customer/supplier relations.
Legislation: Legislation refers to any jurisdiction indicating that a company should recover its products or accept them back. e.g. In European countries there has been an increase of environmentally related legislation, like on recycling quotas, packaging regulation and manufacturing take-back responsibility.
Corporate citizenship: Corporate citizenship concerns a set of values or principles that impel a company or an organization to become responsibly engaged with reverse logistics.
TYPE OF RETURNED PRODUCTS
Generally, products are returned or discarded because either they do not function (anymore) properly or because they or their function are no longer needed. We can list them according to the usual supply chain hierarchy: starting with manufacturing, going to distribution until the products reach the customer. Therefore, we differentiate between manufacturing returns, distribution returns and customer returns. Figure 2 shows types of returns and reasons for returns.
Manufacturing returns: We define manufacturing returns as all those cases where components or products have to be recovered in the production phase. This occurs for a variety of reasons. Raw materials may be left over; intermediate or final products may fail quality checks and have to be reworked and products may be left over during production, or by¬products may result from production.
Distribution returns: Distribution returns refers to all those returns that are initiated during the distribution phase. It refers to product recalls, B2B commercial returns, stock adjustments and functional returns. Stock adjustments take place when an actor in the chain re-distributes stocks, for instance
