Supply Chain Management Basics:

Reverse Logistics

By Angela Carver

What is Reverse Logistics?

• Reverse Logistics Magazine defines the process of reverse logistics as “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…Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.”

What is Reverse Logistics?

Forward Logistics

Reverse Logistics

Raw Material

Part Fabrication

Modules Subassembly

Parts Assembly

Distribution Consumer

ReuseRepairRemanufactureRecycle

*http://cerasis.com/2014/02/19/what-is-reverse-logistics/

Importance of Reverse Logistics

• According to the Reverse Logistics Association , returns volume is $150 to $200 billion annually.

• An article in SupplyChain 247.com noted that reverse logistics average between 7% to 10% of the cost of goods.

• Due to the significant financial impact that this process has on both supply chain operations and their customers, it has started to become a core competency rather than a specialized add-on service.

Reverse Logistics & E-Commerce

• E-commerce has been a driver in the adoption of reverse logistics in the supply chain. As consumers shift towards purchasing more items online rather than in-store returns have increased due to buyers remorse, unmet expectations and improper product sizing.

• Advanced reverse logistics capabilities has become a differentiating factor for many e-commerce retail businesses who can now offer free and fast returns from anywhere.

• Optimizing internal reverse logistics operations allows supply chain businesses to reduce the cost of handling and processing high volumes of customer returns.

SCOR Model

• The Supply Chain Council has released its most recent SCOR model to show recent trends in reverse logistics adoption in the supply chain industry. The SCOR model identified 8 specific return points including:

1. Three return points at the supplier and the supplier’s supplier level

2. Two return points at the manufacturing company level

3. Three return points at the customer and the customer’s customer level

• These eight return points detail all areas supply chain operations must consider when developing their reverse logistics initiative.

Benefits of Reverse Logistics

• In a recent Inbound Logistics article supply chain experts detailed some of the top benefits reverse logistics offers to those who execute it effectively including:

– Reduced costs with remanufacturing

– Increase customer experience with a customer-focused returns processing

– Maximizes return on assets

– Streamlines operations

– Improved inventory management

– Efficient product recall execution

Reverse Logistics Technology

Technology Utilized Retail Manufacturing

Automated material handling equipment 31.1% 16.1%

Bar codes 63.3% 48.7%

Computerized return tracking 60.0% 40.2%

Computerized returns entry at most downstreampoint in supply chain

32.2% 19.1%

Electronic data interchange (EDI) 31.1% 29.2%

Radio frequency 36.7% 24.6%

*http://www.rlmagazine.com/edition01p12.php

• Surveys of top retailing and manufacturing operations show that these operations have made significant investment in technologies to improve reverse logistics processes. The top tech investments are show below.

Conclusion

• Increasing rates of customer returns and the financial burden of processing them has driven many supply chain operators to evaluate the potential of reverse logistics in their supply chain network. The possibilities and the benefits are endless if executed properly.

• Consider both how your system currently operates and how it can be improved with the implementation of standardized returns processing.

• Effectively implementing a reverse logistics program can help your operations to attract and retain clients, save money, reduce inventory waste and much more.

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