- (Definition) Reverse Logistics is a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.
- (Definition) Reverse Supply Chain is moving items from the consumer back to the producer for repair or disposal.
Following are some motivating factors for upsurge of organizations’ interest in reverse logistics:
Saving in the aftermarket
Sometimes there is literally gold in the reverse supply chain, not to mention silver, platinum, copper, zinc, mercury, lead and the whole range of commercial metals. Returned products can be mined for these materials – many of which should definitely be kept out of landfills.
Consumers can be wooed and won with products that promise good service. Ease of return, repair and recycling may add to a products value in consumer’s mind.
Consumer and shareholder pressure
Consumer groups have learned to make themselves heard through direct action and lobbying.
Growing market for environmentally safe products
The desire for access to products that are simple, clean, and less threatening to the health of the environment can be a legitimate source of ideas for innovative approaches to product design.
Environmental awareness and regulations
Environmental regulations provide an immediate reason for logistics managers to pay more attention to the defective or obsolete products that return and move back up the supply chain. But awareness and conscience also play a part.
Reverse Logistics Hierarchy
- The reverse logistics hierarchy is sometimes called the four “R”.
- In order of importance, thy are as follows: Reduce, Reuse, recycle and Recover [energy].
Reduce Resource Use
Reducing the use of resources in the first place is considered the most responsible option in the reverse logistics hierarchy. You can incorporate this principle into your business in the following ways:
Reduce costs by designing products and packaging that make the most efficient use of physical resources.
Design products with an eye to reducing the consumption of energy in the manufacture and use of the product.
Design the logistics network for efficient use of resources and energy in warehousing and transportation. (This is straightforward matter of cost containment.)
Reuse Products or Components
Potential reuse of products or parts of products is considered second in importance to resource conservation. The payoff is a reduction of the costs involved in purchasing, transportation, and disposal. This can be done in couple of ways:
Products can be designed so materials and components can be more easily separated for reuse.
Intelligently designed product upgrades can extend the life of durable components if they are easy to install.
After resource conservation and reuse, recycling is the third most important aftermarket principle. The concept of recycling isn’t easily separable from the concept of reuse, and in fact the two can be combined.
When containers are reprocessed into other products such as landscaping materials, they have been recycled.
When containers (bottles, barrels, totes, drums, etc.) are cleaned, sterilized and filled again, they are reused.
Recycling reduces disposal costs, whereas reuse can reduce purchasing and transportation costs as well.
Disposal with energy recovery doesn’t put a product’s physical materials or components back into service, but it can still provide benefits. “Trash to energy” facilities essentially harvest the energy contained in products that are no longer usable in their physical form and that results in saving for the community.
Dispose in Responsible Landfill
Finally, some physical products must go to the incinerator or the landfill, but this is the least desirable option. Incineration is generally considered the preferable alternative. Its important to choose the best available landfill. Choose a responsible landfill that prevents degrading items from leaching into a water source or polluting air.
Supply Chain Design for Reverse Logistics
When designing the reverse logistics network, one should keep the following factors in mind:
- Cash and information flow backward as well as forward – but not in the same way.
- Reverse supply chain revenues and expenses can be managed to yield profit.
- Reverse logistics affects all stages of a product’s life cycle, not just the last stage.
The benefits of a carefully designed reverse logistics chain that maximizes resource conservation, reuse of components, and recycling of materials include the following:
- Potential for highly lucrative customer service contracts and extended warranties (especially if the products are well designed and reliable).
- Mitigation or elimination of the unprofitable effects of high-volume returns.
- Enhanced customer loyalty and corporate reputation.
- Return of valuable raw materials for other industrial uses.
- Development of more efficient products and logistical tactics.
- Profits from resale of refurbished products and parts that would otherwise go into landfills at a cost to the company.
- Creation of new types of jobs.
- More efficient use of energy.
- Conservation of resources for future generations.
- Reduced emission of many greenhouse gases and water pollutants.
- Development of “greener” technology.
- reduced need for new landfills and incinerators.