Schematic representation of the direct and reverse logistics processes. The practical insights offered here will help you develop that competency. Yet, few companies have looked at reverse logistics as a strategic planning. Secondly, the packaging and defective materials are collected and. In our experience with numerous retailers, reverse logistics remains an overlooked area.
Reverse logistics areas of activity and reverse steps. Reverse logistics is any process that involves moving things from the customer back to the producer. Ernst 2000, reverse logistics involves the return flow, considering either defective parts packages or products returned consumed that should go to a recycling. Reverse logistics the movement of products back toward the manufacturer in a channel of distributionis a topic that has been given scant attention. Reverse logistics must be convergent, collecting used product from many points and transporting them back to one or more manufacturing locations. Setting up reverse logistics provides companies with the following advantages. In the first instance, companies can retrieve defective equipment and parts which are either salvaged or refurbished and thus reclaims value out of the defective parts. Although there are also disadvantages in hiring third party logistics provider in the selection of the outsourcing at the beginning, it is difficult to realize if it is reliable and costeffective between the company and the third party logistics provider. As a business sells products, they can have the products moved from a warehouse directly to.
Well, before you sign on the dotted line with your friendly, local 3pl rep, lets look at both sides of the equation. But given the volatility in transportation rates, booming ecommerce, changing government regulations and the constant rush of new technology, its getting harder to do it all on your own. Do you have a need for a solid reverse logistics process. Basically, reverse logistics in the supply chain revolves around dealing with endoflife, malfunctioning, or hardware upgrades. It is often more costeffective and quicker to add capabilities through thirdparty logistics than to fund inhouse expansion to provide these same capabilities. Reuse of materials in manufacturing processes helps stave off the misuse of unprocessed raw materials and requires less power.
Companies and their supply chain managers can no longer afford to treat reverse logistics as an afterthought. When inventory reaches the zero point, you order just enough to replenish your stock back to its original level. So far, third party logistics sounds like a slam dunk, doesnt it. Interdependence of determinants in reverse logistics management. Meeting the reverse logistics challenge supply and. As the reverse logistics association notes, a variety of names have been applied to reverse logistics, including aftermarket logistics, aftermarket supply chain and the reverse supply chain. The following are common types of reverse logistics. Nowadays cost reduction is a fundamental strategy used in companies during fighting for survival, keeping or increase in sales levels and profits. Keeping track of this level of reverse logistics interaction between trading parties on a manual basis or even in some computerized systems not specifically. A reverse logistics strategy provides a path for removing the existing equipment to make way for the next era of equipment in the case of end of life products or new upgrdes. Reverse logistics gets its name because it is the opposite of forward logistics. The infrastructure of an online business must be on point. One major disadvantage of using 3pl is that it leads to some loss of control over your shipping functions.
The advantages and drawbacks of logistics outsourcing. The process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and the related information flows through the organization and its marketing channels in such a way that current. There is just too much at stake in terms of brand protection, sustainability requirements, and ultimately profitability. Principle and benefits of third party logistics approach when managing logistics supply chain aidas vasilis vasiliauskas 1, grazvydas jakubauskas 2 1 transport research institute, vilnius gediminas technical university, plytin s g. Essentially, reverse logistics is how companies recoup value from returned goods or items that are no. Sabina nylund reverse logistics and green logistics.
This will be another cost to the business because money will need to be invested to ensure proper handling of all aspects of buying and selling, especially with disgruntled consumers that want more than a refund. In business operations, it should always be a goal to do more with less. Paperwork and poor workflow processes tend to plague reverse logistics operations. The nature of reverse logistics process management includes higher uncertainty and threats than forward logistics. Apple manufactures iphones and other products, which are then sold in various stores across the world. While conventional logistics optimizes the flow of goods from producer to consumer, reverse logistics manages the processes for inverting that flow to deal with returned parts, materials and products from the consumer back to the producer. Most often, this includes warranty recovery, value recovery, repair, redistribution, product recalls, used parts and replacement materials for refurbishment, service or product contract returns, and endoflife recycling. This creates a significant disadvantage for retailers, and as. It is a process of flow of goods or material which are unwanted or defective through the logistics chains to the manufacturer so that it can be recycled, reused, or disposed of properly the meaning of reverse logistics. Putting one in place has several benefits for shippers. Reverse logistics offers several advantages to the company in terms of both tangible and intangible benefits. However, the increased contemporary emphasis on reverse logistics appears to be the result of public policy and social marketing influences. Expert answer 100% 1 rating reverse logistics is for all operations related to reuse of products and materials.
Pdf green supply chain management benefits, challenges. This is exacerbated by the multiple entities customer, manufacturer, reseller and disposer that need to partner to develop a smooth reverse logistics. Its most often associated with returns and recalls, but its also used for recycling programs, asset recovery and disposal. Many smalltomediumsized businesses are outsourcing their shipping, warehouse, and even customer service needs to thirdparty logistics 3pl companies. Every firm has to pay great attention at the selection of their third party logistics. The major activities that came out of the literature are.
What are the advantages and disadvantages of rever. Reverse logistics refers to the process of moving goods from their typical journeys end, for the purpose of apprehending value or ensuring proper discarding. Reverse logistics can include gaining feedback to make improvements and to improve the understanding of real reasons for product returns from looking at the advantages and importance of reverse logistics. What are the advantages disadvantages of reverse logistics.
Avoiding these common pitfalls will help firms create that differentiation, and help create opportunities for competitive advantage through lower costs and increased revenues from rl programs. Reverse logistics planning tennessee research and creative. In the next section the above idea is reinforced by. Companies like ibm, hp, dell and other equipment manufacturers like xerox have established processes and network of refurbishing centers together with spare parts distribution centers. In addition, the priority list of actions was developed.
The 7 deadly sins of reverse logistics material handling. This paper presents the key elements of a logistics strategy along with fourth party logistics context. This practice will directly benefit society as a whole. Reverse logistics is defined as the practices and processes set up for organising product returns from pointsofsales to the manufacturer in order to repair, recycle or dispose of these articles in the most costeffective way. Reverse logistics programmes can result in significant cost savings when the proper systems are put into place schwartz, 2000.
This allows even boutique operations to have a global reach that easily is scalable to increasing demand. What are the advantages and disadvantages of reverse logistics. Improving reverse logistics with a returns management strategy shippers and their service providers are outlining plans for the new year by identifying pain points in the reverse loop. Why reverse logistics are crucial to customer experiences. Transit lossesdamages need to look after in a serious manner.
Reverse logistics is a poorlyunderstood concept in business, and what is even more poorly understood is the role that technology has in facilitating this important process. Outsourcing the entire function to a trustworthy 3pl partner has become a viable option since it reduces the complexity of achieving deliveries until the last mile. Formally, the reverse logistics executive council defines its namesake process as a. Als advanced logistic systems strategic dimensions of fourth party logistics pawel nowodzinski czestochowa university of technology abstract. Therefore, they just focus on trying to reduce the cost of returns processing. Managing reverse logistics process is as operations intensive and complex as fg supply chain and demands the same focus and involves multiple logistics partners. The author points out the motivations for outsourcing logistics services, the evidence of outsourcing in logistics and analyzes outsourcing reverse logistics. It is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, inprocess 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.
Recovering lost profits by improving reverse logistics 5 impacting the bottom line many executives compare the amount of money spent processing returns to other supply chain activities and conclude that investing resources elsewhere would yield greater results. The difference between forward and reverse logistics pival. Reverse logistics is the process of moving products and materials at least one step back in the supply chain. Challenges to be faced in reverse logistics since reverse logistics involves many to one distribution point there are more challenges need to be faced.
The us army first paid its attention to reverse logistics operations in 1998. Reverse logistics are those used to manage the reverse movement of goods, from the end user to the manufacturer, or even back into raw materials through recycling. The importance of understanding and taking account of a companys strategy which consist. In short, reverse logistics needs to become a core competency.
In reverse logistics, its important to do the right things in the right way. The reverse logistics process is illustrated in figure 1. If reverse logistics were a person, it would say its time to clean up the mess. Reverse logistics programs are typically complicated by a number of factors. Reverse logistics stands for all operations related to the reuse of products and materials. Did you know reverse logistics play a vital role in creating and ensuring positive. The first by stock 1992 recognized the field of reverse logistics as being relevant for business and society in general. Reverse logistics consists of all activities which are performed after the sale of a product. Stock, professor of marketing and logistics, university of south florida. Reverse logistics can be explained as the process where the company takes back the goods for some reason, and green logistics is when the company tries to adapt environmental friendly ways to the logistics chain. Disadvantages cost of running of a reverse logistics program can outweigh the cost saving from recyclingreusing. Key to that process is developing a returns management strategy designed to provide customers with multichannel visibility.
After this, the two companies reverse and green logistics. Specifically, the benefits of utilizing the expertise of a 3pl for reverse logistics process management produces greater controls over inspecting, recovering, testing and disposing of returned products. Apple is a fantastic example of a successful reverse logistics system. Advantages and disadvantages of third party logistics. Remanufacturing and revamping activities also may be included in the definition of reverse logistics. This includes business processes that involve transport from distribution endpoints such as retail locations back in the supply chain to locations such as warehouses and factories. In reverse logistics, its important to do the right things in the right way to obtain competitive advantages and lower costs. The benefits of reverse logistics outsourcing are may, but the key point is to make sure you have a partner you trust and can properly help you. Small companies must make extensive investments to expand its logistic capabilities.
Benefits of an efficient reverse logistics process arcbest. The way forward part i of ii although reverse logistics is often overlooked, retailers that master this discipline can gain competitive differentiation and turn the. Learn more about reverse logistics and how they are implemented in a business. The concept of makeorbuy is also explained and some theories of the selection are presented. The rise of ondemand delivery has forced modernday businesses to rethink their traditional logistic operation models. Sales return are related to eretailers and it is the most important part to fulfill in the process of etailers. Reverse logistics is a new notion in the history of logistics and supply chain management. What are the advantages disadvantages of reverse logistics thanks all. The reverse logistics executive council rlec estimated that the cost of reverse logistics has increased for u. An analysis of what reverse logistics entails where it explains how returned goods are managed, as well as their recycling and reuse.
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