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Reverse Supply Chain Management

Article · November 2017

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Amit Karamchandani Samir K. Srivastava

International Management Institute (IMI) New Delhi Indian Institute of Management, Lucknow
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 Reverse Supply Chain Management
: Amit Karamchandani and Samir K Srivastava
Reverse supply chain management (RSCM) is defined as the effective implementation of the series of
activities involved in collecting a product from any stage of the forward supply chain to either dispose it or
recover value. In reverse supply chain, there are a sequence of steps required to pick up the used product and
to carry out the most suitable product disposition strategy like reuse, remanufacturing and/or recycling. The
reverse supply chain initiates with accumulation of products from different stages of supply chain which
includes firms as well as customers. These members of supply chain are generally widely dispersed
geographically.
From a broader perspective, when the forward and reverse supply chains are combined, it forms a closed
loop supply chain. Reverse Logistics is a part of such reverse supply chains.

Product Disposition alternatives in a Reverse Supply Chain

There are a wide array of products, which in the forward supply chain reach at the end of their supply chain
before even reaching the consumer. These products need to be transported back to the initiating stages of
forward supply chain for product disposition. Some such products are:
 Broken down products which are repairable or reusable,
 Obsolete products which still have some remnant value,
 Products unsold at retail stores,
 Products withdrawn from sale,
 Products that cannot be used for their main function but which can be used in alternate ways
 Waste which can be collected and used for energy production like waste wood, etc.
 Packages which need to be returned back to their point of origin or point of consolidation
Reverse Supply Chain Process
Reverse supply chains despite being different in its each unique case, generally has following five key
processes:
1. Product acquisition,
2. Reverse logistics
3. Inspection
4. Product disposition
5. Sale and distribution
1-Product Acquisition
At acquisition stage, the product is collected from the customer. There are three main sources of product
acquisition: from forward supply chains, which is associated with collection of defective or damaged
products; from an established RSC, called market-driven systems; or from the waste stream, where the
consumer has discarded the product. Market-driven systems have less variation since they follow a minimal
standard in quality. Although reverse supply chain may include the same contact partners as the forward
supply chain, generally the reverse flows are partially or entirely supported by alternative channel partners
such as junkmen, scavengers, dealers, brokers and non-OEM remanufacturers.
2-Reverse Logistics
Due to growing concern of going green, sustainable development, fierce globalised competition, future
legislation, increased product returns, environmental consciousness of customers and so on, reverse logistics
(RL) has gained increasing attention among researchers and practitioners worldwide. It 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 or creating value or proper disposal". RL involves planning, implementation and
controlling backward flows of raw materials, in-process inventory, packaged and finished goods, from a
manufacturing, distribution or end-use point, to a point of recovery or to a point of proper disposal.

According to the Reverse Logistics Executive Council, the cost of reverse logistics and disposition method
determination is $35 billion annually for US firms. Remanufacturing constitutes $50 billion per year
industry in the US. The implementation of reverse logistics can be categorised as a part of firm’s
environment management practices, specifically environmental recycling practices, as it promotes reuse and
recycling of materials. Complexity in product disposition process requires expertise of skilled labour which
drives up the cost of inspection and disposition.
3-Inspection
The core objective of inspection is to know the quality level of returning material and to select appropriate
product disposition strategy for the same.
4- Product disposition
If product upgrade is found to be the most suitable disposition plan for a product, it is assigned to a
reconditioning operation, such as refurbishing, repair, or remanufacturing. Disassembly operation involves
complications. Due to difficulty involved in separating and sorting the components, and the diverseness and
complexity of materials, the process is predominantly manual. There are four kinds of product disposition
strategies which have further sub-types in each of them:
• Direct Reuse: It involves reuse or reselling the product immediately.
• Product upgrade: It implies repairing, repackaging, remanufacturing or refurbishing the product. “Repair”
involves returning the used products to "working condition”. “Refurbishing” involves evolving used
products up to a defined quality level. “Remanufacturing” involves evolving the used products up to new
product like quality standards.
• Materials recovery: It includes cannibalization and recycling. Cannibalization involves recovering a
limited set of reusable parts from used products or components. For example, Aurora a US firm cannibalizes
integrated circuits. The firm separates the parts it needs from a computer and then tests, straightens, redips,
polishes, and sells the chips.
• Waste management: It includes incineration and landfilling the product for proper disposal.

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