Question

These Questions is related to Returns in Supply Chains Management

(1) What do you understand by the term “Reverse Logistics”? Explain 2 ways in which the management of reverse logistics differ from that of traditional logistics in supply chains.

(2) Is reverse logistics beneficial? If you say no, explain why you think so. If you say, yes, explain why you think so.

(3) Explain how depletion of resources, quality issues, and e-commerce serve as key drivers for reverse logistics.

(4) Assume that you are the supply chain manager for a retail store. Clearly explain what you would do to minimize the negative impact of returns in your organization.

Answer 1

(1) Reverse Logistics:-Reverse Logistics can be defined as operations which involve reuse of products and materials. The purpose of reverse logistics is to maintain a cost-effective flow of raw materials from the end product to the point of origin to extract maximum value or an efficient disposal.

Two ways in which management of reverse logistics differs from traditional logistics:-

1. In traditional logistics, the sales forecast is used to meet the demand of the product. The inventory is shipped to distribution centers and then forwarded to retailers. This process is initiated by the company. However, in reverse logistics, the product flows backward due to the action that was taken by the customer and not by the firm.
2. Traditional logistics has a standardized flow of inventory or products based on statistical data and forecast. Reverse logistics process needs to be optimized from the time to time since it is a reactive measure on part of the firm.

(2) Yes, reverse logistics is beneficial due to the following reasons:-

     a)   Transparency in Product Life Cycle:- Its presents a clear picture of how and where every ounce of product is being used. Reverse logistics flows from final product to its origin where the goal is to recapture the value of a product through an efficient recycling process to avoid any wastage and save cost. The process becomes crystal clear and can be optimized from time to time.

    b) Optimum Utilization of Resources:- The goal of every business is to do more with less. It's better to utilize the resources completely rather than dumping it in the garbage. Being scarce in nature, resources which are utilized efficiently saves the cost of new raw material and saves time.

(3) Depletion of Resources:- Resources are scarce and overutilization affects the business and biological environment. In a world where resource does not come cheap, reverse logistics minimizes and heavy cost involved due to wastage or inefficient utilization of resources.

        Quality Issues:- Returns caused due to quality issues becomes expensive for a company if the reverse logistics process is not in place. This helps the managers to identify the root cause from where these issues are arising from and optimize the process so that these issues do not occur. Managers can collect, examine and evaluate quality issues in an effective reverse logistics system.

       E-Commerce:- Reverse logistics is no longer a choice but the need of the hour for e-commerce businesses. The rate of return in e-commerce ranges between 3% to 50%. Many companies face an issue where the cost of processing a return is more expensive than the cost fo selling the product. Reverse Logistics minimizes the damage caused by returns and lays down a process of recapturing its value through reuse or through a cost-effective disposal.

(4) As a supply chain manager of a retail store, this is how I would minimize the negative impact of return on profits:-

a) Identifying the product category:- Using stats, it easy to identify which product category has a high number of returns. I would dive into the problem that is causing these returns using customer emails, chats and customer service reps to make the necessary corrections in the process.

b) Filling Backorders:- Products returned can be reused and sent to customers if the product is on back order. It’s a better option than restoring it in your warehouse for an additional cost.

c) Organize a Return Desk:- Laying down a process to handle return makes it easier to categorize the returned products based on the reason of return and the necessary actions to be taken after that, whether is reuse or proper disposal.