Logistics management is typically concerned with moving goods through production and downstream to the point of consumption. However, there is growing interest in Reverse Logistics, which is the process of moving goods from their point of consumption back to their point of origin. This can be done for either disposal or recapturing value through recycling as shown in Figure 6:
Figure 6 Reverse Logistics
Examples of Reverse Logistics include:
- The recycling of finished goods and/or raw materials at end of life
- The return of goods due to inferior quality of unfitness for purpose
The growing importance in Reverse Logistics can be attributed to a number of factors which include:
- Sustainability and Environmental legislation such as:
- Recycling legislation
- Producer responsibility which makes manufacturers responsible for the environmental impact of products and packaging at end of life.
- End of Life Vehicle legislation which makes vehicle manufacturers responsible for the collection, recycling and disposal of vehicles at end of life
- The growth of online retailing which generates high levels of returned goods. Indeed, returned goods are three times more likely for online retailers
An entire industry has grown up around Reverse Logistics ranging from recycling service providers to charity shops and online consumer to consumer selling platforms such as eBay.
For the retail industry, operating an efficient, user friendly and convenient Reverse Logistics process for the return of goods can be instrumental in achieving good levels of customer satisfaction and generate customer loyalty.
Organisations should operate a strategy for Reverse Logistics within their business models. Importantly, this ensure that costs associated with Reverse Logistics are planned for and captured in the organisation’s overheads. These costs fall into four categories:
- Communications Costs
- Registered and certified mail
- Return receipts
- Instructions on returned goods
- Telephone and internet/e-mail costs
- Assigning a messenger or courier service for the physical return of goods
- Documentation Costs
- The filing of receipts and notice recalls
- Estimates for disposition and replacement
- Plans for items recalled
- Plans for replacement items
- Instructions for replacement and or repair
- Authorisations for work to be carried out
- Receipts for items replaced or repaired
- Replacement Costs
- Manufacture and installation
- Shipping, packaging and warehouse
- Testing of the product
- Invoicing
- Disposition Costs
- Locating all items
- Inventory of items
- Removal via customer’s property
- Packaging and unpacking
- Labelling and shipping
- Repair and replace
- Refunding or compensation for the loss.