The paper examines the role of depot repair in reverse logistics and closed loop chains. It studies the key milestones of the depot repair development and analyzes the importance of this services at each stage. A significant part of the paper is devoted to the overview of the relevant literature. This analysis helps to understand the key trends in reverse logistics operations and the way depot repair can be applied to this market segment. A particular focus is likewise put on the analysis of the depot repair structure and the key models of its operation to provide a better idea of the service significance. Additionally, the paper provides a brief comparative study of the way depot repair is applied to closed loop system and reverse logistics in the modern context. The final part of the paper provides a brief summary of the most critical findings. It also points out the key gaps in the existing research base providing a guideline for further research. The paper illustrates that the significance of depot repair service can be considered through two dimensions. The first dimension s its effectiveness in performing cost-effective logistics operations. The second dimension implies its valuable assistance in enhancing the sustainability concept.
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Special attention is being currently paid to the problem of closed loop supply chains and reverse logistics which might be partially explained by the growing awareness of the products and technologies’ value as well as the increasing pressure imposed by the so-called “green” laws. Therefore, modern logistics needs to implement alternative approaches to fit in the market environment. Depot repair is an important element of the closed loop supply chains and reverse logistic procedures. Hence, its key function resides in repairing the parts and materials returned by the customer so that they can be further reused. The role of depot repair service has been changing throughout the past decades in response to the new needs and conditions in the relevant market. The relevant business has generally completed fours growth phases: the pre-1980-s, the 1980-s, the 1990-s, and the modern period. Each of which implied that its role for closed loop supply chains and reverse logistics acquired a new significance. Gradually, it has turned into an independent party market. In other words, depot providers might be regarded as the fourth party that supply chain firms have to consider in order to ensure effective reverse logistics and supply chain management that guarantee a substantial competitive advantage in the present context (Blumberg, 2004).
Hence, the paper at hand targets to provide an overview of the role of depot repair in closed loop supply chains and reverse logistics. It analyzes the phases of its development and such critical aspects as deport repair structure, its operating models, and the most common practice applied to the supply chain optimization. A special emphasis is put on the examination of the associated research findings to provide a relevant representation of the current role of depot repair in the market. Some practical recommendations are likewise provided in order to guide further research.
The role of depot repair for logistics has been undergoing several milestones enhancing its significance gradually. Thus, stages of the service development might be differentiated within four periods: the pre-1980s, the 1980s, the 1990s, the 00s (Blumberg, 2004). A brief overview of each stage is represented below.
The First Stage: The Pre-1980s
Thus, the first milestone might be marked by the pre-1980s. At this stage, the depot repair operations would be commonly performed by the original equipment manufacturers that included the operations in the service options. Organizations would regard depot repair centers as cost centers aimed at supporting general sales. The operations would be carried out with the use of excess labor power typical for low sale periods. Therefore, little priority was given to the operations of this type. The completion time was very long. Generally speaking, manufacturers were not interested in prolonging product life cycles as their key aim resided in introducing new products. Some manufacturers would exclude depot repair services from their offer list at all (Blumberg, 2004).
The Second Stage: The 1980s
The second phase began in the 1980s when manufacturers were obliged to retreat from the component repair and introduce their own depot services. Independent depot repair companies appeared which focused especially on repairing – they did not manufacture or use the equipment. Due to this independent status, these companies were named “fourth parties.” The companies would simultaneously appear both in the US and the UK. At first, they were small organizations specialized in the support of computer components. They would be commonly located close to the relevant field service resource minimizing in such a manner the time and cost of both time and travel. Larger companies would naturally follow the example of small depot organizations and began entering the relevant consolidations. In the meantime, at that point, the service would still focus on bench repair, oriented at data processing. The competitive advantage was gained through low price (Blumberg, 2004).
The Third Stage: The 1990s
Large companies began realizing the need for broadening their service in the 1990s. Hence, the depot portfolio would be naturally extended comprising new logistics and value-added options. This stage might be characterized by emerging acquisitions and consolidations. Hence, for instance, the example of Aurora, acquired by Cerplex illustrates such acquisition. The market competition would naturally increase forcing large and average companies to extend their service portfolio. This phenomenon drew the attention of such market segments as distribution logistics, e-commerce, transportation, to name but a few (Blumberg, 2004).
The Fourth Stage: The 00s
In the 00s the consolidation process continued to be carried out through acquisitions and mergers. The competitiveness grew more intense making smaller providers consolidate as well. Hence at present, depot repair is an integral part of the reverse logistic systems. The increasing power of “green” laws makes manufactures give special consideration to the problem of final product disposal. The failure to ensure consistent control of the full return process implies significant expenses.
Therefore, the new vendors – fourth party depot providers – are an essential element of the closed loop chain and reverse logistics. They help to manage the reuse and repair of high-tech parts, subassemblies, unwanted or unsold products, obsolete products, etc. (Guide & Wassenhove, 2009).
The Areas of Reverse Logistics Operation
In order to evaluate the role of depot repair in closed loop chains and reverse logistics, it is, first and foremost, critical to distinguish the key areas within which the latter operates. First, the reverse logistics manages the product installation or fixation. Otherwise stated, complex technologies are initially fixed or repaired by field services before they are actually sent to the end user. The role of depot repair in this operation resides in evaluating and processing the valuable materials that are left after the unit fixation.
Another area of reverse logistics operation is the work with unsold and unwanted goods. Hence, in the context of the modern market, retailers are enabled to return the goods even if their condition meets the set requirements. Sometimes the goods are unwanted due to the particular flaws. The role of depot service resides in fixing the existing problems and preparing the product for further reuse.
Reverse logistics likewise focuses on the processing of obsolete products. In other words, manufactures might introduce new products so that the previous versions are no longer required. The materials essential for their production are also considered unclaimed. As a result, depot repair helps to process the “waste” and prepare it for potential reuse.
Finally, reverse logistics operations help to meet the requirements of “green” legislations. Otherwise stated, the emerging “green laws” impose additional responsibilities for product disposals on manufacturers. Thus, the latter has to employ the depot repair service to fit in the legislative framework. As a result, Guide and Wassenhove (2009) suggest that depot repair enables reverse logistics to carry out two important functions: minimize the costs and make the operations more activity-oriented.
The Key Principles of Depot Repair Functioning
In order to evaluate the depot repair’s significance, it is likewise useful to understand the key principles of the service functioning. Therefore, the depot repair service might be analyzed within three different dimensions: technologies, market segments, and the type of vendors. The former comprises the types of technologies that the service helps to maintain and repair: displays, power supplies, tapes, keyboards, etc. Market segments include the fields within which operations need to be carried out: process control, data processing, medical electronics, to name but a few. The former, in its turn, implies the terms of the market status: dealers, end users, value-added resellers, etc. On the whole, Blumberg (2004) suggests distinguishing the following key areas of depot repair operation: computer components, process control, DOD technologies, telecommunications, office products, medical electronics and other categories such as electromechanical equipment and ATE software.
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The Models of Depot Repair Services
Additionally, Blumberg (2004) notes that the modern reverse logistics uses two main models of depot repair services: a job shop and “just in time.” The former model implies that particular bench technologies are assigned to the target repair parts from the field. The depot repair service examines their conditions and returns the parts. Research shows that this model is less effective that the “just in time” scheme from both cost and operation perspectives (Blumberg, 2004)
The “just in time” model means that repairs are carried out applying the productive line model. Thus, the material is initially examined in order to determine potential flaws. After that, it can be either sent back to the field, or to the WIP inventory. The WIP inventory might further send it to the final diagnostic that will determine the need for a special repair schedule. The subsequent repair operations are carried out in accordance with the set schedule, and the product is sent to shipment after it has undergone an independent examination.
The Role of Depot Repair in Closed Loop Chains
Examining the role of depot repair in closed loop chains, it is necessary to point out the two critical functions that this service implies in support of such chains. The first function is repairing. Thus, depot services might repair the received part, unit or subassembly so that it can be sent back to the field and further resold. The second function implies disaggregation. Otherwise stated, the depot service helps to disaggregate the received part into separate materials for further reuse (Blumberg, 2004).
Upon the analysis of the relevant literature, the findings might be summaries down to a series of insights.
First, the role of depot repair service in closed loop chains and reverse logistics has changed significantly throughout the past decades. The main change that occurred in this field is that supply chain providers have turned into independent market players. This change was provoked by the need to minimize the waste costs and optimize the material management. Additionally, the emerging power of “green” laws made manufacturers give additional consideration to the product final disposal.
Second, the depot repair service can play different roles in closed loop chains and reverse logistics. From the former perspective, it helps to meet the objective of returning required parts or units at the lowest cost possible. This objective is meet through the two types of operating models: job shops and “just in time” services. The key value of depot repair within this dimension is that it enables manufacturers to analyze and assess the root of the flaws, as well as to forecast potential problems. From the latter perspective, depot repair helps to meet the objective of maximizing the processing and disposal value. This objective is met through compacting, hinting, and grinding operations that help to help to reach the maximal fragmentation extent. The main value of depot repair within this dimension is that it assists in enhancing the buyer sources knowledge (Blumberg, 2004).
Finally, research shows that external depot repair is more effective than internal practices. The effectiveness is evaluated through a comparison of the service quality and costs. Thus, Blumberg (2004) illustrates that external service implies higher service quality, shorter completion time and lower operational cost (p. 118). As a result, it might be proposed that manufacturers use external providers to increase the service efficiency.
In conclusion, it should be pointed out that the problem of depot repair significance seems to be under-evaluated in the modern market. Few studies can be found in association with the service application to particular market segments as well as the prospects of its potential development. In the meantime, it is evident that depot repair service plays a critical role in closed loop chains and reverse logistics. First, it enables manufacturers to minimize the cost of production by reusing old parts, units or subassemblies. Additionally, it helps to manage the waste material that is unclaimed due to the product elimination. Thus, manufacturers receive a chance to reuse the old materials for new production. Most importantly, depot repair service meets the legislative framework that offers more “green” laws and legislations. Otherwise stated, it assists manufacturers in enhancing sustainability strategies. It is proposed that the problem is further investigated in order to examine the future of this market segment and the opportunities it can offer to improve logistics operations.
Blumberg, D. (2004). Reverse logistics and closed loop supply chain processes. Boca Raton, Florida: CRC Press.
Guide, V. D. R., & Wassenhove, L. V. (2009). The evolution of closed-loop supply chain research. Operations Research, 57(1), 10-18. Web.