GROUP MEMBERS

FAITH MUTUKU -19ZAD103959

CECILIA MUSAU-19ZAD104214

WINNIE KOSGEI-19ZAD103966

JOY MAINA -19ZAD103965

QUESTION ONE

Reverse logistics (REVERSE LOGISTICS) is the process of planning, implementing, and

controlling the efficient and 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 (Rogers & Tibben-Lembke, 2001).

Uses

Common goals for reverse logistics are to improve customer satisfaction, cut costs, and
maximize return on assets. Reversing the supply chain means taking in returns, recalls, damaged
goods and overstocked merchandise and recapturing its value or disposing of it. With the
popularity of online shopping, the supply chain has become more multifaceted, increasing the
importance of an organization’s reverse logistics strategy and inventory management practices.

Framework

Conceptual framework is made of the following seven elements: the coordinating system, the
gatekeeping, the collection, the sorting, the treatment, the information system, and the disposal
system.

1. Coordinating system

The reverse logistics manager is responsible for overseeing the entire reverse logistics system by
means of the coordinating system.

Continuous improvement also plays an integral part in the coordinating system and acts as a link
get to high reverse logistics level management.

The design of a reverse logistics system starts at

Stage 1: the decisions. Once all the decisions are taken, the selection of performance measures
and target setting is undertaken. These first 2 stages define the reverse logistics system to be
implemented in stage 3. Stage 4 ensures feedback on the performance of the system while
providing a means of returning to previous stages in order to improve the system.

Unless the market has new requirements or the company has changed its strategic objectives, the
program review will be more focused at the operational level.

2 .Gatekeeping

According to Giuntini and Andel (1995b), the second element, gatekeeping, is a process that is
encountered once a customer declares the need to return a product back to the company. At this
juncture, the company preliminarily filters which products are allowed to enter the reverse
logistics system, and which are to be rejected due to non-functionality.

Interestingly, a customer who was refused through the process may end up sending his product
back to the company anyway, and the company must plan to deal with those cases as well.

3 .Collection

Collection involves two stages: the pick-up of the returned product and its transportation. The
responsibility may rest upon the company, a third-party, or the customer. The choice depends on
many factors: complexity of products, reason for return, and territories involved, among others.

In the event that the customer is responsible for returning the product, the company must give
clear instructions on packaging, return address, etc. As Rogers and Tibben-Lembke (1998)
indicate, returned products may go to different destinations depending on the return reason.

In defining the return policies, the company must decide on who pays for transportation of the
returned product such as when the product is replaced or repaired when under warranty. Any
decisions made here must be in line with the customer service level set by the company.

The economic aspects of this element can be grouped in two categories of costs: transportation
and consolidation space. These costs depend on the volume of returned products, the
transportation mode, and the desired service level.
4. Sorting

The sorting process is generally present in reverse logistics systems in which many sites and
many processes are involved. A preliminary sorting first occurs upon reception of the returned
product by the company, which must then examine the item in view of deciding how to treat it.
In addition to these decisions, the company must determine the criteria for accepting a return,
decide which products can be stocked, and take into account the intricacies of the sorting process
among other considerations. The economic aspects comprise receiving, warehousing, personnel,
and handling methods. They vary mainly due to the volume of returned products.

5. Processing or treatment

Processing involves activities where treatment options such as repair, reuse, remanufacturing,
upgrade, and repackaging of the returned product are envisaged. Every option must consider the
inventories of each and respect certain criteria, after which the item may be subjected to the
chosen treatment.

Managing the inventory is an important activity that when handled improper reverse logistics
may lead to excessive stocks of returned items and obsolescence.

For example, if a product still fails to function proper reverse logistics after repair decision has to
be made whether to invest in subsequent repairs before scrapping the product, precisely
determining the initial state of the returned item therefore has an influential role in the choice of
treatment.

Where an economic aspect are concerned, this element involves covering costs for working
space, warehousing space, spare parts stocks, equipment, and personnel and represents the most
sub-stantial amount following the transportation costs. As compared to the other elements,
treatment can actually generate revenues.

6. Information system

The information system has to manage information for every element with regard to stocks and
production planning, and must be able to provide information for product and customer
satisfaction improvements. According to Yang and Wang(2007), information transparency in a
reverse logistics information system improves information sharing through the entire supply
chain.

This system needs to be connected to the enterprise system for inventory management, items, or
the production data.

These costs depend on the volume of returns, the basic requirements of each activity, the number
of users, and the technology choices.

In a reverse logistics system, decisions for locating the different sites involved, for example in
the gatekeeping, the sorting, and the treatments are influenced strongly by logistical
considerations, such as transportation cost, customs, etc.

The economic aspects of the process include transportation costs, packaging material, space for
preparing orders, and shipping. These costs vary depending on the volume of products and the
transportation mode used.

7. Disposal system

The disposal system is the exit of the reverse logistics system. The decision to compensate a
customer may occur at various points in the process and depends on company policy. The
company may also decide to do nothing about the return. There is also the possibility that the
same returned item needs to be shipped back to the customer. This last obligation requires that
the information system and all the elements in the reverse logistics system track down individual
products.

If an exchanged product is sent back to the customer, it must be the same model or of equivalent
quality, performance, and functionality. In the event that no such product exists, a monetary
credit may be issued to the customer. The amount of the credit, however, may be litigious. The
last sub-process is concerned with the shipping of the product.

Challenges

i. Forecasting is more difficult compared to forward logistics.

ii. Tracking the defectives is more complex.
iii. Transit losses/damages which needs to be looked after in a serious manner.
 iv. Customer induced damage which do not match to the expectations of the defectives
standards from original equipment manufacturer which in turns creates a huge loss to the
logistics provided.
v. Poor screening and repairing process.

QUESTION TWO

Definition of RFID

It’s a technology that uses radio waves for communication between a tag and a reading device.it
allows a business to identify individual’s product and components, and to track them throughout
the supply chain from production to point-of-sale.

Advantages of RFID

It provides location to the reader along with its ID.

➨RFID tags are used for tracking luggage as well as for monitoring health history of patients in
the hospitals.

➨RFID technology is versatile in nature and hence smaller and larger RFID devices are
available as per application.

➨Tags can be read only as well as read/write unlike barcodes.

➨The technology is used for security and attendance purpose in schools, colleges as well as
office establishments. The time-in and time-out is recorded it the database of the server.

Disadvantages of RFID

Following are the disadvantages of RFID:

➨Active RFID is costly due to use of batteries.

➨Privacy is a concern with the use of RFID on products as it can be easily tapped or intercepted.

➨RFID devices need to be programmed which requires enough amount of time.

➨Use of RFID technology at inventory control and for other such applications lead to loss of
jobs for unskilled labourer.

➨The external electromagnetic interference can limit the RFID remote reading.

➨The coverage range of RFID is limited which is about 3 meters.

QUESTION THREE

If you are responsible for striking that delicate balance, here are nine factors that you need to
consider when planning your inventory:

1. Forecast Quality

An inventory forecast can be basic or complex. In some operations, it is a straightforward

calculation using sales and current inventory value over a year to predict turns. Other
calculations such as economic order quantity (EOQ) include an estimate of annual demand,
holding costs, ordering costs, and carrying costs to predict optimal inventory levels. Regardless
of the method of calculation, the quality of the forecast has a big impact on business operations.
Inaccurate sales calculations and seasonal surges or drops can mean missed deliveries and
disruptions in production.

2. Lead Time and Cumulative Lead Time

As the global economy has grown, supply chains have become more complex. This complexity
is in part due to the far-flung nature of sourcing and purchasing raw materials and components.
Some companies must source inventory locally, regionally, and globally to secure the lowest
cost. Lead time on distant products may include latency in logistics at ports or airports on the
shipping end as well as on the receiving end, adding time to the process. Long lead times for
individual components often also increase the cumulative lead time for finished products. Item
lead times exceeding replenishment time expectations require deployment of various inventory
and capacity strategies to achieve satisfactory results.

3. Variability of Demand and Supply

Demand variability is the difference between a forecast’s projected sales and what actually ships.
It is measured as the standard deviation of demand divided by the mean. If the ratio is low,
demand is consistent. If it is high, demand is sporadic or volatile. If a product has stable mean
but wide variations above and below the mean, you need to decide when and how to cover
shortages that will inevitably occur when demand is high. While decision-making will always be
a part of planning, demand variability relies on accurate statistics to allow you to make those
decisions with confidence.

From time to time, disruptions or variability in vendor supply will occur. These disruptions may
be related to weather, shipping and logistics issues, or other factors. As disruptions occur, quick
communication is necessary to inform customers of their order status. In complex global supply
chains with manual systems and inadequate tracking and monitoring of goods movement, delays
can multiply and significantly impact the reliability of supply.

4. Service Level

Service level is the expected probability of not stocking out during the next replenishment cycle.
It is a balance between safety stock required to cover lead times and customer demand versus
carrying costs. It is a trade-off between opportunity and operations costs. Manual approaches to
applying service levels to safety stock calculations tend to be “one size fits all” across all items.
Such approaches result in the right level of inventory for some items, too much for others, and
too little for the rest. The most accurate method of calculation is a statistical approach requiring
several data elements for each item. This method can be challenging without a planning system.

5. Customer Order Visibility

The farther in advance from a requested ship date that customers communicate their needs, the
less you need to rely on forecasting and the corresponding risk of forecast inaccuracy. Firm
commitments replace uncertainty, which reduces the need for safety stocks. Additionally,
predictive information related to customer ordering behavior can supplement statistical forecasts
to improve accuracy.

6. Customer Response Time

Response time refers to the speed at which the customer expects delivery of an order. Shorter
response times compared to cumulative lead times require greater investments in inventory,
capacity, and flexibility to comply.

7. BOM Complexity

Whether from a discrete manufacturer with complex recipes or assembly companies, multi-level
bill of materials (BOMs) can be difficult to navigate. In some cases, there may be different
versions of BOMs for the same product within different departments. In other cases, there may
be differences in units of measure adding complexity when the numbers must be netted up or
down formulaically to reach a value understood by planners. Situations where the BOM and
planning system are not linked and instead rely upon manual calculations can be especially
complicated. The process is also impacted when there is inadequate or unautomated change
management for BOM updates, which can result in incorrect ordering or stocking of
components—leading to stock outs or obsolescence.

8. Capacities

In conjunction with sales and demand forecasting, capacity planning can drive inventory
forecasts. Capacity miscalculations coupled with inaccurate demand estimates can have a major
impact on supply, resulting in inventory shortages or overstock. Because many operations still
use a silo approach between capacity, inventory, and lead time, the trade-offs may never be fully
understood, and the system will continuously incur inventory shortages or overages.

9. Supply Network
Modern supply chains are vast, diverse, and loosely connected systems that stretch across the
entire globe. Weather, labor disputes, customs issues, regional conflict, and a host of other
factors can impact one or more parts of the supply network at any given time. If communication
and monitoring are not in place, each disruption adds time or creates the condition for inventory
risk.

You need to take all of these factors from the simple to the complex into account when planning
inventory. The problem is that for so many companies, planning processes are still manual, or
they consist of spreadsheet-based systems that can’t easily consider all inputs or else
miscalculate the input. With inadequate systems, replenishment planning establishing and
monitoring stocking levels and then triggering replenishment actions at the correct lead time is
extremely difficult.

An automated inventory planning system that includes material requirement planning (MRP),
distribution requirements planning (DRP), rough cut capacity requirement planning (RCCP), and
order planning can help alleviate these issues. The system can automate the generation of
statistical forecasts to supplement actual customer orders, and it can automatically calculate
safety stocks using statistical methods. Consumption policies can guide staff on stocking
requirements. Inventory levels can be automatically adjusted as demand changes. And items can
be segmented based on business importance, accuracy, forecastability, and order frequency.

Each of the factors outlined in this blog can be better managed with an inventory planning
system. Such a system will enable you to accurately control and monitor inventory in real time to
ensure optimization. Additionally, the move to an automated system will mitigate factors related
to manual tasks, lack of monitoring, inadequate communication, and human error.