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REVERSE SUPPLY CHAIN MANAGEMENT

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Definition

Planning

Implementing

Flow of rawmaterials

In-process

inventory

Finished

goods

FromP

ointof

consumption

Tothepointof

origin

Goal:

To move returned, overstocked, end of-

life, or obsolete assets from the

normal stream of commerce to an

alternative destination to maximizetheir value and reduce risks.

Advantages:

Increase profits

Improve customer relations Comply with government regulations

Support sustainability initiatives

Purpose:

Recapturing value or proper disposal

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Forward Vs Reverse Logistics

Forward Logistics

Straightforward forecasting

One to many distribution point

Destination / Routing clear

Uniform pricing

Consistent inventory management

Negotiation between parties

straightforward

Reverse Logistics

Forecasting more difficult

Many to one distribution point

Destination routing unclear

Pricing depends on many factors

Inventory management notconsistent

Negotiation complicated by

additional consideration

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Centralized and Decentralized RL

Centralized model:

A single planner is acquaintedwith all of the systeminformation and has theauthority to determinedecision variables for the

entire system

One may overestimate thesystem material flows andprofit if the system plannerutilizes a centralized view topredict behaviors of

independent entities in thesystem

Decentralized model:

The entities coordinatebetween tiers of the systemusing a parameterized flowfunction and competewithin tiers based on

reaching a price equilibrium

Decentralized contractmechanisms will requirecareful design to avoidlosses in the efficiency andscope of these systems.

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* evaluation ofproducts at retaileror reseller

Centralized and Decentralized RL

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Environmentallegislations

Economic valuefrom returns

Remanufacturingoptions

Material Resourceconstraints,. Ex.

Lead

Green Image

Impact on thebottom line

Reverse Logistics

as a StrategicWeapon

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Reasons for increase in the importance of Reverse logistics

Tangible benefits from the value that can be recaptured fromunproductive/returned assets

Increased competitive pressure to provide an effective and efficientreturned goods process

Need to clear the distribution channel more frequently due toproduct lifecycle compression and emphasis on new product launch

Increased regulatory requirements regarding recycling & productdisposition, especially around products having environmental hazards

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Important managerial issues in RSCM-

Network DesignCollection Recovery channels and its roles

Reverse Supply Chain Network Design Options

Role of Forward Supply Chains

Integration of FSC and RSC

Role of 3PL

Inspection of returned products-location of facilities

Most of the reverse supply chain activities takes place in downstream forward supply chain of leadorganization.

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Future of Reverse Logistics

Transportation costs will likelyincrease by 50% or more

Internet and catalog sales willcontinue to grow which will drive

up return rates and transportationcost

Government regulations willcontinue to increase

Sustainability initiatives will

increase driving more volume

Many existing reverse logistics networks will costtoo much

Networks must change from a centralized modelto a

decentralized model in order to provide affordablevalue

Limit legal exposure from product liability andlegislation

Increased number of recall events

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Companies going the reverse wayNOKIA

Nokia recently started a Reverse Logistics Campaign.

They asked people to give their old unused mobile handsets to Nokia

through special drop boxes put across different places in various cities.

They claimed to dispose them off or reuse them for new handsets as raw

materials.

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GENCO

Genco, a privately held company in Pittsburgh,

has lately seen brisk reverse-logistics business.

It helps retailers such as Best Buy (BBY), Sears

(SHLD), and Target (TGT) find buyers for

products that are returned as defective or

broken and would otherwise be landfill fodder

Genco has even spun out a reject-pile

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Thank You