Challenges in Reverse Logistics

Challenges in hoist LogisticsReverse logisticsthe s beak of outputs back toward the manufacturer in a line of business of statistical dispersionis a offspring that has been given s cleart attention. However, the profit contemporary emphasis on bowl over logistics appears to be the result of public policy and social marketing influences. generally speaking, tump over logistics may be the result of one of the following types of foremostCustomer initiativevoluntarily returned goods.Government initiativeproduct call backs.Indus hand over initiative cycle.The latter two factors have a bun in the oven a distinct consumerist/public policy flavoring, and have become mainstream issues largely in the past thirty geezerhood. For instance, while product recalls have existed since the early years (Schneider 1974) of the 20th century, they have become prevalent only since the mid-1960s. Two historic pieces of federal legislationthe Motor Vehicle vivid rubber Act of 1966 and the C onsumer Product Safety Act of 1972have generated an increased number of product recalls. Similarly, interest in recycling surged in the late 1960s and early 1970s.As a result, front to the mid-1960s, it appears as if tump over logistics considerations primarily involved customer initiative. Since customer prompt return of goods is a relatively small-scale phenomena, it was overlooked by scholars. As a result, the plough logistics costs, both direct and indirect, associated with voluntary returns ar seeming to be miniscule. This low cost scenario provides one explanation for why the distribution ramifications of voluntary returns have gone unstudied.On the other hand, government-initiated and industry-initiated twist logistics atomic number 18 generally conducted on a much larger scale than is the pillowcase with voluntary returns. For instance, with respect to recalls, in 1979, one firm (Corning Glass Works) had to recall nearly 18,000,000 (CPSC Annual Report, Fiscal Year 1 979) defective items of the same product. As a result, the costs associated with recall and recycling are desirely to be greater than those of voluntary returns. And, since physical distribution is concerned with costs, it is only natural for there to be greater interest in either government-initiated or industry-initiated reverse logistics.Virtually all companies must deal with returns. Consider such(prenominal) diverse organizations as Phillips Electronics and Aurora Health Care Pharmacy. Both companies are highly successful in dealing with returns. Phillips reduced the number of returns from 1.2-1.3 meg per year to less than 500,000 (Sciarrotta, 2003). Aurora keeps returns at less than 2% of its pith inventory despite stringent FDA regulations related to expiration dates, manufacturer recalls, and becoming disposal of drugs (Morton, 2006). The common success factor both firms have realized and meticulously enforced returns-related policies and procedures. They each put a str uctured computer syllabus in place to manage returns (Morton, 2006 Sciarrotta, 2003). Regardless of products and/or work involved, managers deal to get control of their return operations.Control has been recognized as a crucial component of supply chain charge (SCM) The first stair (in SCM) is to introduce structure and discipline to the supply process, tightening up procedures, and pickings control of all activities in the supply chain. (Sandelands, 1994, p. 44). One valuable charge to introduce such structure is to schematicize the operation. Level of formalisation is indicative mood of how much control a given firm has over its reverse logistics operations. Thus, the issue of control becomes associated with the formal evolution and implementation of written down in the mouth policies, rules, and procedures related to reverse logistics.Literature review and practitioners perspectives indicate that formalisation is a necessity for managing all aspects of the distributio n effort including the return movement of goods and services from the market. The take of the current research is to provide an analytical tool for mensuration the level of reverse logistics process formalization achieved. Such a tool will allow for a much precise assessment of firms grooming to deal with the complexities involved in managing reverse logistics. Accordingly, this study examines the relationship mingled with reverse logistics program complexity and reverse logistics process formalization.James (1974) recognized that transportation and warehousing are key components of a reverse distribution placement. Large companies are heavy users of hidden warehousing. One advantage to closed-door warehousing is control perhaps one aspect of control is an economical procedure for calculating warehousing expenses. The transportation-related research that has been done suggests that, for the most part, moved(p) companies bear (Yaros 1976) the freight expense for recalled p roducts. However, only about one-quarter of the affected companies (Yaros and forest 1981) have control over carrier alternative.Three warehousing-related variables contract warehousing, mystic warehousing, and relative use of private warehousing that show statistically strong relationships with revenues at all locations. Contract and private warehousing are more prevalent among larger firms this may be an indication that larger firms pass on to exhibit more distribution control than smaller firms. Among those firms who utilize private warehousing in both forward and reverse distribution, large firms melt down to use private warehousing more in the forward channel. This may be an indication that larger companies are more flexible in their warehousing patterns. That is, the magnitude of a recall might influence whether or not private warehousing is used in the reverse channel (e.g., for small recalls, private warehousing may not be utilized).Reverse LogisticsReverse logistics i s the process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, accurate goods and related information from the point of consumption to the point of origin for the purpose of recapturing or creating apprize or for proper disposal. (Rogers Tibben-Lembke, 1999, p. 2). Despite the growing intelligence of the importance of reverse logistics, many companies are not ready to acquire the challenges involved in handling returns. The rapid growth in the hoi polloi of returns far outpaces the abilities of firms to successfully manage the returns (Rupnow, 2007). Because of all the uncertainties involved, reverse logistics program development and implementation becomes very complex. The major challenges involve the considerable number of unknowns that have to be accounted for in ontogeny reverse logistics programs (A.T. Kearneys Executive Agenda, 2004).The process of measuring and analyzing returns-related proceeding cr iteria is aimed at improving reverse logistics quality and identifying potential bother areas. The following metrics were identified by returns managers as the most in-chief(postnominal) reverse logistics indicators 1) tidy sum of returns 2) type/condition of returned product 3) dollar value 4) percent of gross sales and 5) resources, including human resources, dedicated to returns. In-depth analysis of these measures laughingstock supporter oneself to identify problem areas. Analyzing the volume, type/condition of returns, dollar value, and percentage of sales clear provide a comprehensive list of reasons for returns and identify trends. For example, if a particular customer is constantly abusing the returns policy, this will be apparent when volume of returns and percent of sales data are analyzed. Type/condition of the returned product measures can uncover damage-related problems with specific carriers. RD product designs and/or supplier selection procedures can be recons idered if the number of defective products coming back exceeds a pre-determined level.Measuring and analyzing reverse logistics programs can streamline resource allocation decisions as well. Targeting resources to potential efficiency gains should be a priority. Some firms start to fancy reverse logistics-specific ROI ratios to identify the value-added to both the firm and the customers. Investments in employee cooking and in the raw reverse logistics technological solutions, for example, are tied to pre-determined performance outcomes. Process formalization will enable the application of standardized analytical and measurement tools, like ROI, which can provide feedback useful in improving the service-quality and economic performance of the reverse logistics program.The Effects and Implications of Reverse Logistics Process FormalizationConsistent with the RBV of the firm, in its dynamic capabilities extension, (reverse logistics) processes/competences help to transform property- based and knowledge-based resources into enhanced (reverse logistics) capabilities and (reverse logistics program) performance (Teece et al., 1997). The formalization of these processes/competences becomes a incumbent condition for haveing a state-of-art reverse logistics program. The formalization of the reverse logistics processes addresses the issue and provides several related benefits discussed bellow.First, the formalization of the reverse logistics program can serve as a foundation for developing and implementing a unattackable monitoring system. Specific measurement items can be developed to help companies get control over their reverse logistics operations through increased visibility of the processes and activities involved. In summation to enhancing control, multiple monitoring/check points can help firms to modify certain processes and related activities. A constant feedback system can be established allowing for continuous process improvement.Second, reverse logisti cs program formalization defines roles and responsibilities. A clear and shared understanding of what is involved in managing returns can increase employee motivation and top to increased operational efficiency. slip away delineation of required activities and associated responsibility can reduce returns processing time. The managers interviewed desire that reverse logistics process formalization allows employees to focus on ways to increase productivity. Measurable gains can be achieved, for example, by avoiding discussing potential options for every returned product. Instead, the official policy/rule can be automatically applied. In addition to pure operational gains, providing structure to the reverse logistics program can contribute to enhanced performance by enabling reverse logistics personnel to build upon shared and in-depth, firm-specific knowledge and experience. Capturing standard policy through written formal procedures provides institutional memory and creates a firm -specific knowledge database.Next, reverse logistics program formalization can help to identify necessary resources and indicate how resources should be utilized. A step-by-step schematic of what exactly is involved in handling returns can greatly contribute to securing senior management support. Problem areas can be readily identified as well as potential economic and strategic benefits. Tailored investments can be made, for example in returns inspectors training and wireless technologies. These investments should be related to clear-cut performance outcomes through developing distinct IT, innovation, and responsiveness capabilities. More importantly, gaining support for reverse logistics was cited as the necessary first step in changing the attitude toward returns, the culture from lets try to lose less money to lets try to identify opportunities.The development of an effective, formalized reverse logistics program can also help companies to improve relationships with customers. W hen reverse logistics processes are formalized and documented at the detail level, preparing a customer-tailored religious offering can become less burdensome. Different activities can be adjusted as necessary and presented to the customer. The reverse logistics program can become an important element of the overall selling effort. Leading firms in reverse logistics management already include returns experts as part of their sales team. Formalization of reverse logistics processes can become a key, customer-oriented strategic tool.