Reverse Logistics

 

Logistics is defined by The Council of Logistics Management 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 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 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.

More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.

Reverse logistics is more than reusing containers and recycling packaging materials. Redesigning packaging to use less material, or reducing the energy and pollution from transportation are important activities, but they might be secondary to the real importance of overall reverse logistics.¹

The Importance of Reverse Logistics

 

If no goods or materials are being sent “backward”, the activity probably is not a reverse logistics activity. Reverse logistics also includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory. It also includes recycling programs, hazardous material programs, obsolete equipment disposition, and asset recovery.²

Two Primary Components

 

1. Returns Management: Reverse logistics requires some specific processes of supply chain management, and returns management ensures optimally efficient reverse logistics through activities such as gatekeeping and avoidance.

Gatekeeping involves decision making to manage the number of products or materials that are allowed to enter the reverse flow of the supply chain. This activity is very important for cost management, since it eliminates the costs for returning materials that shouldn’t have been returned or were returned to the wrong place. If you can control (and reduce) return rates without negatively impacting customer service, you have a successful gatekeeping system. The point of entry is the ideal spot in the reverse flow to operate your gatekeeping and screening process.

Avoidance is a process that works similarly to gatekeeping to screen products before they enter the reverse flow, but instead of eliminating returns, avoidance minimizes the returns that must happen. Some of the successful avoidance techniques include quality control, user friendliness, and strategic promotional programs.⁴

 

2. Reverse Logistic Processes:

Resell: Returned merchandise are sold to liquidators or professional resellers

Reuse: Increasing and extending the use-cycle of products.

Remanufacture: The rebuilding of a product to specifications of the original manufactured product using a combination of reused, repaired and new parts.⁵

Repair: Fixing applicable damages in order to re-integrate the inventory into the warehouse or the distribution chain for re-sale.⁶

Refurbish: Products are repaired by the manufacturer, tested for functionality and defects and verified to function properly before they are sold.

Recover: Or ‘Cannibalization’ is the recovering of reusable parts from used products in order to facilitate remanufacturing or refurbishing activities.⁷

Recycle: Reusing materials from another product or sub-assembly to create new products or refurbish others.⁸

References:

  1. ‘What is Reverse Logistics?’ by Karen Hawks, VP Supply Chain Practice, Navesink, published in Reverse Logistics magazine, Winter / Spring 2006, Reverse Logistics Association.
  2. Ibid
  3. Image ‘Logistics Product Life Cycle‘ – Reverse Logistics Association.
  4. ‘Components of Reverse Logistics’ – Hollingsworth Guide to Reverse Logistics
  5. Remanufacture – Wikipedia
  6. ‘Components of Reverse Logistics’ – Hollingsworth Guide to Reverse Logistics
  7. Ibid
  8. Ibid
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