unit 10Reverse Logistics.docx

unit 10Reverse Logistics.docx

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unit10ReverseLogistics

UnitTenReverseLogistics

PartOneText

ReverseLogistics

I.Definitionandactivities

Reverselogisticsisthesupplychainthatflowsoppositetothetraditionalprocessoforder,fulfillmentandcustomerdelivery.Itis“theprocessofplanning,implementing,andcontrollingtheefficient,costeffectiveflowofrawmaterials,in-processinventory,finishedgoodsandrelatedinformationfromthepointofconsumptiontothepointoforiginforthepurposeofrecapturingvalueorproperdisposal⒈.”

OthertermssynonymoustoReverseLogistics（RL）areAftermarketLogistics,Retrogistics,orAftermarketSupplyChain.Thereversesupplychainisalsoatermusedintheindustry.Reverselogisticsisnottobeconfusedwithforwardlogisticsorgettingtheproducttomarketcommonlyknownastheforwardsupplychain.Typesofactivitycommonwithreverselogisticsincludes:

logistics,warehousing,repair,refurbishment,recycling,e-waste,aftermarketcallcentersupport,reversefulfillment,fieldserviceandmanyothers⒉.

Reverselogisticscanbebrokenintotwogeneralareas,dependingonwhetherthereverseflowconsistsprimarilyofproductorpackaging⒊.Productcouldbeinthereverseflowforseveralreasons,suchasremanufactureorrefurbishment,orbecauseacustomerreturnedit.Packaginggenerallyflowsbackbecauseitisreusable（e.g.,palletsorplastictotes）,orbecauseregulationsrestrictitsdisposal（e.g.,corrugated）⒋.Bothproductandpackagingmayberecycledorlandfilled,butiftheyaretobeusedagain,thetwomaygothroughavarietyofdifferentprocesses.Generallyspeaking,whatistobedonewiththeproductorpackagingwilldependinlargepartonwhytheitemwassentbackward.

Reverselogisticsismorethanreusingcontainersandrecyclingpackagingmaterials.Redesigningpackagingtouselessmaterial,orreducingtheenergyandpollutionfromtransportationareimportantactivities,buttheymightbebetterplacedintherealmof“green”logistics⒌.Ifnogoodsormaterialsarebeingsent“backward”,theactivityprobablyisnotareverselogisticsactivity.

Reverselogisticsalsoincludesprocessingreturnedmerchandiseduetodamage,seasonalinventory,restock,salvage,recalls,andexcessinventory⒍.Italsoincludesrecyclingprograms,hazardousmaterialprograms,obsoleteequipmentdisposition,andassetrecovery.

II.ReverseVSforwardlogistics

Areverselogisticsoperationisconsiderablydifferentfromforwardlogistics.Itmustestablishconvenientcollectionpointstoreceivetheusedgoodsfromthefinalcustomerorremoveassetsfromthesupplychainsothatmoreefficientuseofinventoryormaterialoverallcanbeachieved.Itrequirespackagingandstoragesystemsthatwillensurethatmostofthevaluestillremainingintheusedgoodsisnotlostduetocarelesshandling.Itoftenrequiresthedevelopmentofatransportationmodethatiscompatiblewithexistingforwardlogisticsystem.Dispositioncanincludereturningassetsintoinventorypoolsorwarehousesforstorage,returninggoodstotheoriginalmanufacturerforreimbursement,sellinggoodsonasecondarymarket,recyclingassets,oracombinationthatwillyieldmaximumvaluefortheassetsinquestion.

Reverselogisticsisaverycomplexprocess;itisnotsupplychainbackwards.Materialflowcharacteristics,supplyanddemanddynamics,andtechnologyconsiderationsarefundamentallydifferentthanwhattheirforwardlogisticscounterpartsaddress.Forexample:

Irregularmaterialflow:

Returnprocessingishighlydynamicandinconsistent.Factorssuchasproductvariationsandconditions,processingrequirements,warrantyandextendedwarrantyprovisionsdictatetheworkflowstepstowhichagivenreturnissubject⒎.Thereisnosinglesupplychainflow;thereverselogisticspathcanbeverycomplicated.

Multi-conditioninventory:

Supplychainmanagementsystemsarenotdesignedtomanageinventoryinvariousconditionstates,suchasrepaired,remanufactured,defective,damagedorobsolete.Theseconditionsarecriticalfactorsinreverselogisticsprocesses;oftenreverselogisticsconsignmentsaresmallvolumehighvalueshipmentsofgoodswhichareoftenkeycomponentstoanetwork,henceexpressdeliveryisoftenneeded.

Additionallycustomsscrutinyismuchmoreacutewhenscreeningremanufacturedanddefectiveunits;inventoryforecasting,planningandfinancialmanagementspecifictovaluationarealsocrucialfactors⒏.

III.ReverseLogisticsChallenges

Itisestimatedthatmanaging“returnandrepair”processesalonecontributetoatleast10%ofoverallsupplychaincosts.Ineffectivereversesupplychainprocessescompoundthiscostandcanreduceanorganization'sprofitbyapproximately30%.Typically,reversesupplychainshavelittleautomation,andarecharacterizedbyunknownsandpoorlymanagedassetsthatsitinwarehouses,wherelossesaretypicallyacceptedorabsorbed⒐.Anopportunityofthismagnitudehasdrivenmanycompaniestofindnewwaystooptimizereverselogisticspracticesandtostreamlineoperationsanddriveprofits.

Thepursuitofprofitandcompetitiveadvantagedriveever-evolvingreverselogisticmodels.CompaniestodayhaveshiftedtheirreverselogisticsoperationstobusinessmodelsthatrequirethecoordinationofmultipletiersofadministrationandlogisticsoperationswithoutsourcedpartnerssuchasOEM,contractrepaircenters,4PLnetworksetc⒑.Ifanenterpriselacksanintegratedreverselogisticsprocessbeforeoutsourcing,anextendedenterprisebusinessmodelwilladdcomplexitytoanalreadychallengingbusinessenvironment.

IV.LeveragingthePowerofReverseLogistics

Thekeytosuccessfulreverselogisticsistheabilitytointegratebusinessproposaldevelopment,internationaltradecompliance,projectmanagement,contractadministrationandproductmanagementintodailyoperationsacrosstheenterprise⒒.Thiscanonlybeachievedthroughintelligent,dynamicdecision-making.Tooptimizeperformance,reverselogisticsfunctionsmustoperateinamannerthatisbothtacticalandoperational.Tacticalplansandschedulesreversethesupplychaininordertomeetsupplyanddemand.Theoperationalteamexecutesplansinthecontextofdynamicandchangingbusinessenvironmentsincludingfrequenttechnologyupdates,outsourcingofmanufacturingorthechangeofOEMsuppliers,internationaltraderestrictions,foreignexchangecontrols,etc⒓.Tacticalandoperationalleveldecision-makingfunctionsarebynaturedistributedacrossreversesupplychains.Asaresult,thesefunctionsmustbeoptimizedbothlocallyandacrosstheextendedenterprise.

Thechallengeisforcorporateentitiestoovercomemanagementandexecutionbarriersastheyapplytothevaluethatintegratedreverselogisticsdelivers.First,bringreverselogisticstotheboardroom.Thelackofrecognitionforthestrategicimportanceofreverselogisticsandthecross-functionalnatureofreverselogisticsprocessesspansmultipleorganizationswithinanenterprise⒔.Executiveleadershipisfundamentaltothealignmentofpeople,process,technologyandfinancialsthathinderthepathtointegration⒕.Secondly,executeflawlesslyateachpointintheprocess.Theabilitytoexecutewellacrossthereverselogisticslifecycleisthefoundationforachievingintegratedreverselogistics.Thosethataresuccessfulunderstandthatthedynamicsofreverselogisticsintegrationrequiresanewapproachtoexecutionthat:

----Involvestheenterpriseasawhole（sales&marketing,finance,projectmanagementsupplychainoperations,contractadministrations,customerserviceetc.）

----Addressesthecomplexitiesoftoday’ssupplychainenvironments

----Understandsthelimitationsimposedbycross-bordertransactions,suchas:

--inabilitytoexportdefectivegoodsduetocustomsregulationsrequirementsforadditionalexportlicenses

--levyofadditionaldutiesandtaxesondefiniterestrictionsregardingtheremittanceofforeignexchangerelatedtoexports:

--onlypermitTemporaryExportsforrepairandreturn

--typicallyimposetimelimitationfortherepaircycle

--requirementtotrackserialnumbersthroughtherepairprocess

--noallowanceforwarrantyprovisions

--requireproofofpriorimport

Tobuildanintegratedreverselogisticsenterpriseitisessentialthatyouunderstandyourcustomersandtheirmarkets.Youneedto:

----Involveyourcustomerinthestrategyplanningforrepairsandreturns

----Understandconstraintsimposedbycustomsinyourcustomermarket

----Provideinventorytofacilitateefficientreplenishment

----Identifythetruecostsassociatedwiththeimportofreplacementinventory

--Determineifre-manufacturedinventoryispermitted

--Evaluatecomplexitiessurroundingexportpermits

--Assurethatdefectiveorobsoleteinventorymayberecoveredi.e.exportofinventorytodestinationsotherthaninitialorigin

--Investigateifinternationalwarrantyprovisionsarehonoredbylocalauthority

--Determineif"likeforlike"operationsarepermissible

--Understandqualitycertificationrequirementsimposedbylocalauthority

--ClarifyifdutyreimbursementispossibleforDOA（deadofarrivals）andifitissubjecttolimitations

WhilethebusinessofReverseLogisticsisnotnew,thecomplexitiesassociatedwithinternationalbusiness,manufactureroutsourcing,andremotelogisticsmanagementhaveaddedcostandtimetoefficientexecution⒖.Leadingcompaniesarefindingwaysthroughtheuseoftechnology,processimprovements,andanunderstandingoftherestrictionsimposedbyforeigncustomstocontinuouslyexpandtheboundaryofintegration.Understandingandprovisioningforthesefactorswillassurecustomersatisfactionanddirectlyimpactthebottomline.

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