Reverse logistics is the course of planning, controlling and implementing the course of stock and finished products from the manufacturer, distributer or through the use of point to point recovery or disposal point (Spicer & Johnson, 2004).
Products recall, wrong deliveries, commercial returns, warranties, refurbishment, repairs and end-of life returns are few of the many examples of reverse logistics faced by companies.
Though undervalued, reverse logistics is part of supply chain management that has currently gained much attention due to its direct impact on company’s margins and corporate image in terms of corporate social responsibility.
Operational factors
European Union (EU) Legislation
European countries are producing approximately1.4 Billion tons of waste products, which are dangerous (Guid & Van, 2001). These directives require the manufacturers of products to bear the bigger part of product disposal costs for a sound environment analysis (Owen, 1993).
The goal of these directives is to encourage the manufacture of environmentally friendly products (Owen, 1993). Installation of the necessary reverse logistics systems is not amongst the competence of the producers but requires a third party for implementation.
Examples of the European directives include end of life vehicles (ELV) Directive 2000/53/EC, Battery Directive 2006/66/EC and WEEE Directive 2002/96/EC. However, these directives are not binding laws to the member states, but act as guidelines within which they have to comply.
It is the responsibility of the European Union member states to transpose and implement the EU legislation into national laws to be followed by all members.
The ELV Directive
In Europe, around 9 million tons of waste is produced by ELVs. However, used cars have many parts that can be recycled which include oil, plastic parts, filter and batteries. Notably, 75% of ELVs are recyclable (Spicer & Johnson, 2004).
Important to note is that portion of each end of life vehicle is recyclable, and thus minimizes its environmental impact. The ELV Directive came into force in October 2000, with an aim of achieving environmentally friendly transport.
The WEEE Directive
According to Fiksel (1996), this rule imposes financial and physical responsibility for establishing effective methods of disposal and collection of electronic waste. The directives state that companies should establish an infrastructure for collecting WEEE.
The Battery Directive
This rule has two main purposes, which include reduction of hazardous materials used in batteries and enhancing recycling and collection of batteries. It also aims at achieving optimum collecting and recycling quota for all used batteries (Bellmann & Khare, 2000)
Customer characteristics
The top companies find it very crucial to leverage their reverse logistics capabilities. Many of them use reverse logistics capacity as a promotion strategy. The intention is to make their customers satisfied with their services and products before, during, and after the original delivery.
In addition, it is the duty of the manufacturer to ensure that goods are available to the consumer in the required quantities.
Also, they ensure that the reverse logistics systems are properly functioning, for example, in case of any product defects; it can easily be channeled back to the manufacturer for problem fixing (Vlachos & Dekker 2003).
Volume to weight ratio – Medium
All cargo space involved in transportation of goods bears physical limits. Traditionally, weight has been used for costing individual packs.
The difference between volume and weight costs can be considered, for example, when transporting large volumes with little weight (Vlachos & Dekker 2003).
Value to weight ratio – Low
Throughout the history, seas have been helpful to people as a means of transportation. With the rise of air travel, sea transport is left to shorter distances.
With respect to value of goods and weight capacity, the sea transport in most occasions is used to either transport low cost and bulky products, or high value heavy weight products.
Supply Chain Flow
Supply chain is the process of running the flow of materials and transportation of finished goods, from the vendors to the intended consumers using the available facilities and warehouses as possible intermediate stops.
Transport Mode characteristics
Cost economies
The ability to move goods quickly, safely and cost effectively to the markets is essential to international traders, as well as national distributors of goods and economic developers (Stock, Speh & Shear, 2002).
Availability
The EU continues to advocate for efficient use of infrastructure through elimination of both commercial and operational barriers that obstruct access to infrastructure.
Speed
Effective communication on freight oriented networks prevents barriers that could otherwise arise, hence, avoiding unnecessary complexities that could lead to unnecessary delays. As such, the transport is always fast and meets the customer’s expectations.
Double handling
Double handling is the process where the products on transit pass through one means of transport to the other. Getting customers closer to the available means of transport helps avoid double handling cases which lead to unnecessary costs.
Consignment Factors
Type of Cargo/ Quantity
When shipping goods, it is always important to choose the appropriate mode of transport. The decision on the means of transport depends on careful evaluation of business needs and comparison of the benefits of each method (Meade & Sarki, 2002).
Priority/ Distance
Choice of the appropriate form of transport is heavily dependent on distance, nature of items on transit, budget, geographic location of the products’ destination, and schedules that must be adhered to.
Cost and Service Requirements
Speed of Delivery
For products that require quick delivery over long distances, air voyage is the most expedient mode, whereas load transport can be used in case of shorter distances. However, sea transport is convenient for those products that are transported over long distances, but are not very urgent.
Slow steaming
If ships reduce their speed, they can as well reduce their carbon emissions and save billions in ship fuel bills.
Service Reliability
Sea transport is the cheapest of the three standard modes of transport. Its cargo unit cost per kilometer is typically the lowest one (Bellmann & Khare, 1999).
Sea shipment sets specific conditions for packaging. The speed of product delivery is also essential to consider as well as the bulkiness of the load.
Conclusion
The demand for reverse logistics is driven by two key factors; first, companies have started to realize the economic value of sound return management, and secondly, legal environment developments require manufacturers to take full responsibility for products over their entire life cycle.
Online retailing coupled with shorter product life cycles, have increased pressure to build strong capabilities in this area, or to some extent outsourcing handling of reverse logistics flow.
Different firms have a number of opportunities for improving the way they manage their returns, for example, by improving their business processes through sophisticated software, changing their organization, or even outsourcing the whole process.
Smart company’s executives will be looking to capture the value locked within the reverse supply chain.
References
Bellmann, K, & Khare, A 1999, ‘European response to issues in recycling car plastics.’ Technovation, vol. 19, no.12, pp. 721-34.
Bellmann, K, & Khare, A 2000, ‘Economic issues in recycling end-of-life vehicles.’ Technovation, vol. 20, no. 12, pp. 677-90.
Fiksel, J 1996, ‘Achieving eco-efficiency trough design for environment. ’ Journal on Total Quality Environment Management, vol. 5, no. 4, pp. 47-54.
Guid, D, & Van, L 2001, ‘Managing product returns for remanufacturing. ’ Production and Operations Management, vol. 10, no. 2, pp. 142–155.
Meade, L. &, Sarkis, J 2002, ‘A conceptual model for selecting and evaluating third-party reverse logistics providers. ’ An International Journal, vol. 7, no. 5, pp. 283- 95.
Owen, J.V. (1993), conscious manufacturing.’ Manufacturing Engineering, vol. 15, no. 2, pp. 44-55.
Spicer, A, & Johnson, MR 2004,‘Third-party de-manufacturing as a solution for extended producer responsibility.’ Journal of Cleaner Production, vol.12, no. 5, pp. 37-45.
Stock, J, Speh, T. & Shear, H 2002, ‘product returns.’ Harvard BusinessReview, 80 (7), pp. 16-8.
Vlachos, D, & Dekker, R 2003, ‘Return handling options and order quantities for single period products.’ European Journal of Operational Research, vol. 151, no. 1, pp. 38-52.