REVERSE LOGISTICS

IN A COMPETITIVE ENVIRONMENT, THE PHILOSOPHY OF

ACCEPTING PRODUCT RETURNS AS AN EDGE OVER
COMPETITORS HAS RESULTED IN HUGE CHALLENGES TO
LOGISTICS MANAGEMENT
TODAY, LOGISTICAL SUPPORT MEANS GOING BEYOND
FORWARD LOGISTICS TO INCLUDE PRODUCT RECALL,
PRODUCT - DISPOSAL AND PRODUCT RECYCLING ETC.
THE LOGISTICS OBJECTIVES INCLUDE REVERSE
MATERIALS FLOW SYSTEM TO EXTEND LIFE CYCLE
SUPPORT TO THE PRODUCT
REVERSE LOGISTICAL COMPETENCY IS THE RESULT OF
WORLDWIDE ATTENTION TOWARDS ENVIRONMENTAL &
ECOLOGICAL PROBLEMS

REVERSE LOGISTICS A COMPETITIVE TOOL

TO REMAIN COMPETITIVE AND DIFFERENTIATED, THE ORGANISATION
ACROSS THE WORLD ARE SHOWING SPEED AND RELIABILITY IN
SERVICE OFFERINGS SUCH AS

REPLACING DEFECTIVE GOODS

REPAIRING OF USED PRODUCTS

REFURBISHING THE RETURNED PRODUCTS

CALLING BACK SUB-STANDARD OR HARMFUL GOODS

DISPOSING-OFF PRODUCT WASTE

THESE SERVICES ADD TO THE COMPETITIVENESS OF AN ORGN.

OPERATING IN A REGULATORY ENVIRONMENT & CREATE CUSTOMER
VALUE BY PROVIDING A CLEAN ENVIRONMENT THROUGH REVERSE
LOGISTICS SERVICES WITHOUT ANY EXTRA COST TO THE CUSTOMER.

DEFINITION
REVERSE LOGISTICS MAY BE DEFINED AS A PROCESS OF
MOVING GOODS FROM THEIR PLACE OF USE, BACK TO THEIR
PLACE OF MANUFACTURE FOR RE-PROCESSING, RE-FILLING,
REPAIRS OR RECYCLING / WASTE DISPOSAL.
IT IS A PLANNED PROCESS OF MOVEMENT OF GOODS IN
REVERSE
DIRECTION IN AN EFFECTIVE AND COST EFFICIENT MANNER,
THROUGH AN ORGANISED NETWORK.
IT IS AN INTEGRATED SYSTEM IN AN ORGANISATIONS
SUPPLY
CHAIN MANAGEMENT
REVERSE LOGISTICS REFERS TO THE SKILLS OF LOGISTICS
MANAGEMENT TO REDUCE, MANAGE & DISPOSE-OFF WASTE
ARISING FROM PRODUCTS & INPUTS

REASONS FOR REVERSE LOGISTICS

RETURN OF GOODS FROM CUSTOMER FOR NON PERFORMANCE

SHORT TERM RENTAL RETURNS

RETURNS SENT TO MANUFACTURER FOR REPAIRS / RE-FILLING

REUSABLE CONTAINERS / PACKAGES

RETURN OF INPUTS NOT USED BY MANUFACTURER / GOODS

NOT
SOLD BY DISTRIBUTORS

EXCHANGE OF NEW PRODUCT FOR THE OLD ONES

GOODS SENT FOR UP- GRADATION / MODIFICATION

RECYCLING OF PRODUCT

SCOPE OF REVERSE LOGISTICS

REVERSE LOGISTICS, THOUGH CONSIDERED AS A DRAIN ON
COMPANY PROFITS, IN TODAYS COMPETITIVE MARKETS, MORE
AND MORE MANUFACTURING FIRMS ARE PLANNING OF
INCORPORATING THE REVERSE LOGISTICS SYSTEM IN THEIR
SUPPLY CHAIN PROCESS FOR FOLLOWING REASONS:

GROWING CONCERN FOR ENVIRONMENT POLLUTION

GOVEMNMENT REGULATIONS ON PRODUCT RECYCLING AND
WASTE DISPOSAL
GROWING CONSUMERISM
STIFF COMPETITION

THE REVERSE LOGISTICS NETWORK CAN BE USED FOR VARIOUS

PURPOSES SUCH AS REFILLING, REPAIRS, RE- FURBISHING,
RE- MANUFACTURING ETC. DEPENDING ON THE NATURE OF THE
PRODUCT, UNIT VALUE, SALES VOLUME AND DISTRIBUTION
CHANNELS.

1. REPAIRS AND REFURBISHING

REPAIR IS A REGULAR FEATURE IN SERVICE BASED PRODUCTS
UNDER A WARRANTY PERIOD AND ALMOST ALL CONSUMER
DURABLES NEED REPAIRS ON A REGULAR BASIS.
REFURBISHING IS DONE TO GOODS RETURNED BY DAMAGE,
DEFECTS
OR BELOW PAR PERFORMANCE DURING THE WARRANTY PERIOD.
MANUFACTURER ESTABLISH THE REVERSE LOGISTICS SYSTEM, NOT
ONLY FOR OFFERING FREE SERVICE DURING THE WARRANTY
PERIOD
BUT ALSO FOR EXTENDING THE SERVICES BEYOND THE WARRANTY
PERIOD ON A CHARGEABLE BASIS.
THE SYSTEM OPERATES THROUGH THE COMPANYS SERVICE
CENTERS WHERE REPAIR AND REFURBISHING TAKES PLACE.
COLLECTION OF DEFECTIVE PRODUCTS IS DONE, THROUGH THE
DEALERS NETWORK. THESE COLLECTED PRODUCTS ARE SENT
TO THE NEAREST SERVICE CENTRE FOR OVERHAUL, REPAIRS OR
REFURBISHING.

REPAIRS

STORES

PRODUCTION

WAREHOUSE

RETURNS

SUPPLIERS

CUSTOMERS
DISPOSAL

REVERSE LOGISTICS FLOW

2. RE-FILLING
REVERSE LOGISTICS IS INTEGRATED TO THEIR CHAIN BECAUSE OF
THE REUSABLE NATURE OF PACKAGES SUCH AS GLASS BOTTLES,
TIN / PLASTIC CONTAINERS & METAL CYLINDERS ETC.
IN CASE OF SOFT DRINKS, THE DELIVERY VAN DELIVERS FILLED
BOTTLES TO RETAILERS (A, B, C ) ENROUT AND COLLECTS
THE SAME NUMBER OF EMPTY BOTTLES FROM THEM FOR
DELIVERY TO THE FACTORY.
NO EXTRA TRANSPORTATION COSTS ARE INVOLVED IN THE
PROCESS
AS THE SAME DELIVERY VAN ORIGINATES AND TERMINATES ITS
JOURNEY AT THE FACTORY WHERE THESE REUSABLE BOTTLES ARE
REFILLED FOR RE-DELIVERY TO CUSTOMERS.
THE ARRANGEMENT IS DONE THROUGH A HUB AND SPOKE
DISTRIBUTION SYSTEM.

A2

A3

DISTRIBUTION
AREA (A)

A1

C1

B2

B1

DISTRIBUTION
AREA (B)

BOTTLING
PLANT

DISTRIBUTION
AREA (C)

B3
C3
B4

REVERSE GOODS FLOW FOR REFILLING

C2

3. PRODUCTS RECALL
THIS IS AN EMERGENCY SITUATION WHEREIN THE PRODUCTS
DISTRIBUTED IN THE MARKET ARE CALLED BACK TO THE FACTORY
BECAUSE OF ANY OF THE FOLLOWING REASONS:
1.
2.
3.
4.
5.
6.
7.
8.
9.

PRODUCT NOT GIVING THE GUARANTEED PERFORMANCE

QUALITY COMPLAINTS FROM MANY CUSTOMERS
DEFECTIVE PRODUCTS CAUSING HARM TO HUMAN LIFE
PRODUCTS BEYOND EXPIRY DATE
PRODUCTS WITH DEFECTIVE DESIGN
INCOMPLETE PRODUCT
VIOLATION OF GOVERNMENT REGULATIONS
ETHICAL CONSIDERATIONS
SAVE THE COMPANY IMAGE

PRODUCT RECALL PUTS A HUGE FINANCIAL BURDEN ON THE

COMPANY BUT IN THE COMPETITIVE SCENARIO THE COMPANIES
CONSIDER RE-CALL AS AN OPPORTUNITY TO INCREASE
CUSTOMER
SATISFACTION.

4. RECYCLING AND WASTE DISPOSAL

LEFTOVER MATERIALS, USED PRODUCTS AND WRAPPER / PACKAGES
WASTES ARE CAUSING ENVIRONMENTAL POLLUTION & CREATING
PROBLEMS FOR DISPOSAL.
IN MANY COUNTRIES,GOVERNMENTS ARE DEVISING REGULATIONS
TO
MAKE MANUFACTURERS RESPONSIBLE FOR MINIMISING WASTE BY
WAY OF RECYCLING PRODUCTS.
RECYCLING PROCESS

COLLECTING WASTE MATERIAL & DELIVERING THEM TO ENTITY

RESPONSIBLE FOR RECYCLING
PROCESSING RECYCLABLES TO CREATE SECONDARY INPUTS
USING SECONDARY MATERIALS FOR MANUFACTURING NEW
PRODUCTS
RETURNING THE PRODUCTS TO THE MANUFACTURER FOR
RECOVERING THE INPUTS FOR RE-USE

5. RE-MANUTACTURING
MANUFACTURERS IN DEVELOPED COUNTRIES ARE PUTTING IN
PRACTICE A NEW CONCEPT OF RE-MANUFACTURING.
DURING THE USAGE OF THE PRODUCT IT UNDERGOES WEAR &
TEAR.
WORN OUT PARTS ARE REPLACED WITH NEW ONES AND THE
PERFORMANCE OF THE PRODUCT IS UPGRADED TO THE LEVEL OF A
NEW ONE.
SIMILARLY, EQUIPMENT SOLD CAN BE CHECKED AFTER USE TO THE
REMANUFACTURING PROCESS AND BE BROUGHT BACK TO THE
REMANUFACTURING UNIT.
THE INVESTMENT IN REMANUFACTURING & RELATED REVERSE
LOGISTICS SUPPLY CHAIN CAN BE JUSTIFIED ON THE BASIS OF
ECONOMIES OF SCALE.

SYSTEM DESIGN CONSIDERATIONS

(DRIVERS IN REVERSE LOGISTICS)
THE SUCCESS OF REVERSE LOGISTICS SYSTEM IN ACHIEVING
THE DESIRED OBJECTIVES DEPENDS ON THE EFFICIENCY AND
EFFECTIVENESS OF FOLLOWING SUB-SYSTEMS

1. PRODUCT LOCATION
THE FIRST STEP IN THE CALL BACK PROCESS IS TO IDENTIFY
THE PRODUCT LOCATION IN THE PHYSICAL DISTRIBUTION SYSTEM OF
THE FIRM.
PRODUCT LOCATION BECOMES MORE DIFFICULT AFTER IT IS SOLD
AND HANDED OVER TO THE CUSTOMER.
IT IS A BIT EASIER IN THE CASE OF INDUSTRIAL OR HIGH VALUE
PRODUCTS DUE TO THE LIMITED NUMBER OF CUSTOMERS &
PERSONAL INTERACTION WITH THE CLIENTS DUE TO DIRECT
SELLING.

2. PRODUCT COLLECTION SYSTEM

ONCE THE PRODUCT LOCATION IS IDENTIFIED, THE COLLECTION
MECHANISM GETS INTO OPERATION.
THIS CAN BE DONE EITHER THROUGH COMPANYS FIELD FORCE,
CHANNEL MEMBERS OR THIRD PARTY. HOWEVER, PROPER
INSTRUCTIONS HAVE TO BE GIVEN TO MOTIVATE THE CUSTOMER FOR
RETURNING THE PRODUCTS.

3. RECYCLING / DISPOSAL CENTRES

THESE MAY BE THE COMPANYS PLANT/ WAREHOUSES OR SOME
FIXED LOCATION IN THE REVERSE LOGISTICS NETWORK.
THE CALLED BACK PRODUCTS ARE INSPECTED BEFORE THEY ARE
FURTHER PROCESSED FOR FURTHER REPAIRS, REFURBISHING,
REMANUFACTURING OR WASTE DISPOSAL.
INVESTMENTS IN FACILITIES FOR THESE ACTIVITIES DEPEND ON THE
OBJECTIVES OF THE SYSTEM, COST IMPLICATION, COMPLEXITY OF
THE OPERATIONS & EXPECTED GAINS.

4. DOCUMENTATION SYSTEM
TRACING THE PRODUCT LOCATION BECOMES EASIER IF PROPER
DOCUMENTATION IS MAINTAINED AT EACH CHANNEL LEVEL.
HOWEVER, AT THE TIME OF HANDING OVER THE PRODUCT TO
THE CUSTOMER, THE DETAILED INFORMATION IF COLLECTED
THROUGH PROPER DOCUMENTATION, CAN FORM A GOOD
DATABASE
THAT CAN BE USED IN CASE OF PRODUCT CALL BACKS.

COST IMPLICATIONS
THE REVERSE LOGISTICS SYSTEM IS A COST CENTRE. HOWEVER,
THESE COSTS ARE INCURRED FOR ACHIEVING COMPANYS
CERTAIN
OBJECTIVES AND CAN BE ATTRIBUTED TO THE FOLLOWING
ACTIVITIES
1. PRODUCT LOCATION (INVESTMENT & OPERATING COSTS)
2. TRANSPORTATION
3. PRODUCT COLLECTION (CUSTOMERS > RETAILERS > PLANT)
4. DISPOSAL (PLANT > SUPPLIERS / DISPOSAL)
5. REFILLING, REPAIRS, REFURBISHING, REMANUFACTURING,
RECYCLLING
6.

DOCUMENTATION (FOR PRODUCT TRACKING AND TRACING

DURING ENTRY, EXIT AND FLOW IN THE SYSTEM)
Contd.

BARRIERS TO GOOD REVERSE

LOGISTICS
1. LEGAL ISSUES
UNDER INDIAN REGULATIONS EXCISE PAID GOODS ONCE SOLD BY
THE MANUFACTURER CANNOT BE BROUGHT BACK TO THE PLANT
WITHOUT PROPER DOCUMENTATION AND DECLARATION TO
EXCISE AUTHORITIES.
THIS IS A VERY CUMBERSOME & TIME CONSUMING PROCESS AND
NON-COMPLIANCE MAY MEAN THAT THE MANUFACTURER WILL
HAVE TO FACE LEGAL ACTION.
2. MANY ORGANIZATIONS TERM REVERSE GOODS AS JUNK AND
THEY DONT WANT TO WASTE THEIR RESOURCES ON THESE
JUNKS
3.

THE GOODS ARE CONSIDERED UNWORTHY OF ANY INVESTMENT