Reverse logistics

Reverse logist ics is for all operat ions relat ed t o t he reuse of product s and mat erials. It is "t he
process of moving goods from t heir t ypical final dest inat ion for t he purpose of capt uring value,
or proper disposal. Remanufact uring and refurbishing act ivit ies also may be included in t he
definit ion of reverse logist ics."[1] Growing green concerns and advancement of green supply chain
management concept s and pract ices make it all t he more relevant .[2] The number of publicat ions
on t he t opic of reverse logist ics have increased significant ly over t he past t wo decades. The
first use of t he t erm "reverse logist ics" in a publicat ion was by James R. St ock in a Whit e Paper
t it led "Reverse Logist ics," published by t he Council of Logist ics Management in 1992.[3] The
concept was furt her refined in subsequent publicat ions by St ock (1998) in anot her Council of
Logist ics Management book, t it led Development and Implement at ion of Reverse Logist ics
Programs,[4] and by Rogers and Tibben-Lembke (1999) in a book published by t he Reverse
Logist ics Associat ion t it led Going Backwards: Reverse Logist ics Trends and Pract ices.[5] The
reverse logist ics process includes t he management and t he sale of surplus as well as ret urned
equipment and machines from t he hardware leasing business. Normally, logist ics deal wit h event s
t hat bring t he product t owards t he cust omer. In t he case of reverse logist ics, t he resource goes
at least one st ep back in t he supply chain. For inst ance, goods move from t he cust omer t o t he
dist ribut or or t o t he manufact urer.[6]

When a manufact urer's product normally moves t hrough t he supply chain net work, it is t o reach
t he dist ribut or or cust omer. Any process or management aft er t he delivery of t he product
involves reverse logist ics. If t he product is defect ive, t he cust omer would ret urn t he product .
The manufact uring firm would t hen have t o organise shipping of t he defect ive product , t est ing
t he product , dismant ling, repairing, recycling or disposing t he product . The product would t ravel in
reverse t hrough t he supply chain net work in order t o ret ain any use from t he defect ive product .
The logist ics for such mat t ers is reverse logist ics.
Today, t he global reverse logist ic supply chain is valued at $415.20 billion[7] and it is project ed t o
reach over $600.00[7] by 2025

Business implications

In t oday's market place, many ret ailers t reat merchandise ret urns as individual, disjoint ed
t ransact ions. "The challenge for ret ailers and vendors is t o process ret urns at a proficiency level
t hat allows quick, efficient and cost -effect ive collect ion and ret urn of merchandise. Cust omer
requirement s facilit at e demand for a high st andard of service t hat includes accuracy and
t imeliness. It ’s t he logist ic company's responsibilit y t o short en t he link from ret urn originat ion t o
t he t ime of resell."[8] By following ret urns management best pract ices, ret ailers can achieve a
ret urns process t hat addresses bot h t he operat ional and cust omer ret ent ion issues associat ed
wit h merchandise ret urns.[9] Furt her, because of t he connect ion bet ween reverse logist ics and
cust omer ret ent ion, it has become a key component wit hin Service Lifecycle Management
(SLM), a business st rat egy aimed at ret aining cust omers by bundling even more coordinat ion of a
company's services dat a t oget her t o achieve great er efficiency in it s operat ions.

Reverse logist ics is more t han just ret urns management , it is "act ivit ies relat ed t o ret urns
avoidance, gat ekeeping, disposal and all ot her aft er-market supply chain issues".[10] Ret urns
management —increasingly being recognized as affect ing compet it ive posit ioning—provides an
import ant link bet ween market ing and logist ics. The broad nat ure of it s cross-funct ional impact
suggest s t hat firms would benefit by improving int ernal int egrat ion effort s. In part icular, a firm's
abilit y t o react t o and plan for t he influence of ext ernal fact ors on t he ret urns management
process is improved by such int ernal int egrat ion.[11] In a firm's planning for ret urns, a primary
fact or is t he remaining value of t he mat erial ret urning and how t o recover t hat value.[12]
"Ret urned goods, or element s of t he product , could even be ret urned t o suppliers and supply
chain part ners for t hem t o re-manufact ure".[13]

Third-part y logist ics providers see t hat up t o 7% of an ent erprise's gross sales are capt ured by
ret urn cost s. Almost all reverse logist ics cont ract s are cust omized t o fit t he size and t ype of
company cont ract ing. The 3PL's t hemselves realize 12% t o 15% profit s on t his business.[14]

An average of 8-10% of brick and mort ar ret ail purchases are ret urned, compared t o 20% of E-
commerce purchases. In t he USA alone, it is est imat ed t hat ret urn deliveries will cost $550 billion
in 2020. December is t radit ionally t he busiest mont h for reverse logist ics in t he Unit ed St at es,
wit h UPS processing over 1 million ret urned packages daily t hrough Christ mas. [15]
Reverse logist ics research has also found t hat 84.6 percent of companies in t he Unit ed St at es
use secondary market and 70 percent see t he secondary market as a "compet it ive
advant age."[16]

A Taiwanese research paper suggest s t hree influent ial fact ors t hat drive t he need for Reverse
Logist ics in businesses: Economic needs, Environment al needs, and Social needs. The st udy, who
polled 12 environment al management expert from Taiwanese elect ronic firms, found t hat
Economic needs are most import ant wit h an import ance weight of 0.4842, followed by
Environment al needs wit h an import ance weight of 0.3728, while Social needs are relat ively
unimport ant wit h a import ance weight of 0.1430.[17]

While t he Economic need is caused by a company's desire t o profit off of t he recovery value
such as in t he US, t he Taiwanese st udy reasons t hat t he import ance of Environment al needs is
due t o t he concern for wast e management shared by t he developed count ries such as t he
count ries of t he EU, Japan, and t he US. For example, in t he EU, t here exist s t he "Wast e
Elect ronics and Elect rical Equipment (WEEE) direct ive" which makes EU producers responsible
for collect ion, t reat ment , recycling, and recovery of all WEEE, "Rest rict ion of t he Use of Cert ain
Hazardous Subst ance in Elect rical and Elect ronic Equipment direct ive" which rest rict s t he use of
t oxic mat erials in elect ronics, and "Eco-design Requirement s for Energy-using Product s
direct ive" which encourage t he recycling of elect ronic product s.[17]

Return of unsold goods

In cert ain indust ries, goods are dist ribut ed t o downst ream members in t he supply chain wit h t he
underst anding t hat t he goods may be ret urned for credit if t hey are not sold e.g., newspapers
and magazines. This act s as an incent ive for downst ream members t o carry more st ock, because
t he risk of obsolescence is borne by t he upst ream supply chain members. However, t here is also
a dist inct risk at t ached t o t his logist ics concept . The downst ream member in t he supply chain
might exploit t he sit uat ion by ordering more st ock t han is required and ret urning large volumes. In
t his way, t he downst ream part ner is able t o offer high level of service wit hout carrying t he risks
associat ed wit h large invent ories. The supplier effect ively finances t he invent ory for t he
downst ream member. It is t herefore import ant t o analyze cust omers’ account s for hidden cost s.

Reusable packaging
Reusable mineral water bottles in crates

Reusable packaging syst ems require a closed-loop logist ics syst em. Examples include reusable
pallet s, bulk boxes such as Euro cont ainers, Reusable bot t les for milk, soda, and beer,
compressed gas cylinders, beer kegs, et c.

Refusal of the products in the cash on delivery (COD)

In case of e-commerce business, many websit es offer t he flexibilit y of cash on delivery (COD) t o
t heir cust omers. Somet imes cust omers refuse t he product at t he t ime of delivery, as t here is no
commit ment t o t ake t he product . Then t he logist ics service provider follows t he process of
reverse logist ics on t he refused cargo. It is also known as Ret urn t o Origin (RTO). In t his process,
t he e-commerce company adds t he refused cargo t o it s invent ory st ock again, aft er proper
qualit y checks per t he company's rules.[18]

Reverse Logistics for Demonstrations

In case of t he Demonst rat ion of Product s t o t he client as part of Pre-Sales process, The
Demonst rat ion equipment is sent t o t he Cust omer and has t o be ret urned t o maint ain Revolving
Invent ory.

References
 1. Hawks, Karen. "What is Reverse Logistics?" (http://www.rlmagazine.com/edition01p12.php) ,
Reverse Logistics Magazine, Winter/Spring 2006.

2. Srivastava, Samir K. "Network Design for Reverse Logistics", Omega, 2008, 36(4), 535-548.

3. James R. Stock, Reverse Logistics (Oak Brook, IL: Council of Logistics Management, 1992)

4. James R. Stock, Development and Implementation of Reverse Logistics Programs (Oak Brook, IL:
Council of Logistics Management, 1998)

5. Dale S. Rogers and Ronald S. Tibben-Lembke, Going Backwards: Reverse Logistics Trends and
Practices (Reno, NV: Reverse Logistics Executive Council, 1999)

6. Rengel, P. & Seydl, C. (May 2002). Completing the Supply Chain Model (http://www.seydl.at/papers/Re
ngel_Seydl_Reverse_Logisitics_2002_23_05_en.pdf) at seydl.at. Retrieved on 2019-07-28.

7. "Topic: Reverse logistics" (https://www.statista.com/topics/4323/reverse-logistics/) . Statista.

Retrieved 2021-05-25.

8. Harrington, Ryan. "Reverse Logistics: Customer Satisfaction, Environment Key to Success in the 21st
Century" (http://www.rlmagazine.com/edition01p14.php) , Reverse Logistics Magazine.
Winter/Spring 2006.

9. Greer, 2004

10. Rogers, 2002

11. Mollenkopf, D.; Russo, I.; Frankel, R. (2007), "The returns management process in supply chain
strategy" (http://www.dea.univr.it/jsp/visualizzaAllegato.jsp?id=26331&mime=application%2Fpdf&file
name=Russo+Supply+chain+strategy+IJPDLM.pdf&localname=allegatooa_26331.pdf) (PDF),
International Journal of Physical Distribution & Logistics Management, 37 (7): 568–92,
doi:10.1108/09600030710776482 (https://doi.org/10.1108%2F09600030710776482) , retrieved
2008-05-05

12. Srivastava, Samir K. "Value Recovery Network Design for Product Returns", International Journal of
Physical Distribution and Logistics Management, 2008, 38(4), 311-331.

13. Madaan, J. & Wadhwa, S. (2007) Flexible Process Planning Approaches for Sustainable Decisions in
Reverse Logistics System, Global Journal of Flexible Systems Management. Vol. 8, No. 4. p. 1-8

14. Malone, Robert (3 November 2005). "Reverse side of logistics: The business of returns" (https://www.f
orbes.com/2005/11/02/returns-reverse-logistics-market-cx_rm_1103returns.html) . Forbes.
Retrieved 2008-03-14.

15. "Number Of Packages Returned Expected To Peak Before Christmas, Reflecting E-Commerce Shift" (ht
tps://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1
545149633056-650) . UPS Pressroom. Retrieved 2020-08-28.
16. Reverse Logistics Sustainability Council. "Secondary Market Research"
http://www.reverselogistics.com/ "Secondary Market Research" (http://www.reverselogistics.com/) .
Retrieved 9 August 2018. {{cite web}}: Check |url= value (help); Missing or empty |title=
(help)

17. Chiou, Cherng Ying; Chen, Hui Chiu; Yu, Cheng Tao; Yeh, Chun Yuan (2012-01-01). "Consideration
Factors of Reverse Logistics Implementation -A Case Study of Taiwan's Electronics Industry" (https://d
oi.org/10.1016%2Fj.sbspro.2012.03.203) . Procedia - Social and Behavioral Sciences. ASIA PACIFIC
BUSINESS INNOVATION AND TECHNOLOGY MANAGEMENT SOCIETY. 40: 375–381.
doi:10.1016/j.sbspro.2012.03.203 (https://doi.org/10.1016%2Fj.sbspro.2012.03.203) . ISSN 1877-
0428 (https://www.worldcat.org/issn/1877-0428) .

18. Vogt, J J; Pienaar, W J; de Wit, P W C (2002). Business Logistics & Management - Theory and Practice.
OXFORD. p. 236.

External links

Glossary of t he Reverse Logist ics Execut ive Council (ht t p://www.hollingswort hllc.com/guide-r
everse-logist ics/)

Retrieved from
"https://en.wikipedia.org/w/index.php?
title=Reverse_logistics&oldid=1071975851"

Last edit ed 4 days ago by KH-1