Introduction
Many people who think that the process ends when the customer receives their products have misunderstood the concept of logistics. Contemporary logistics managers do more than superintending the transfer of products to the consumer. Apart from their active role in managing outbound goods, they actively participate in reverse logistics. Reverse logistics involve the flow of goods that have been returned to the manufacturer. In this case, the logistics manager is responsible for providing customer service and checking the condition of the returned goods.
Management of returned goods and waste materials has become crucial in many industries with companies such as Home ad Depot, Xerox, and Ethan Allen among others having successfully developed waste materials recycling programs.
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Reverse logistics have been supported by many industry players due to various reasons. First, reverse logistics increases awareness on the high social cost associated with waste. Reduction of these wastes promotes environmental conservation ( Jain, 2012) . Secondly, recycling of waste and putting in place proper reverse logistics programs greatly reduce costs. Many companies that consider recovering from goods and packaging as an afterthought end up using unplanned finances on waste disposal, transportation, and inventory. These advantages of reverse logistics have seen many modern companies coming up with reverse logistics programs, but unfortunately, many presume that the process just involves a reversal of the outbound distribution process. However, returns management and recycling have complex and unique issues that influence logistics operations. Before commencing a reverse-logistics program, one has to take into account areas that regard to the issues.
One of the issues is the type of resources that are available for the program. The number of resources to be invested in the program largely depends on the expected benefits although companies often fail to accord enough personnel, money, and time to the project. Many companies consider reverse logistics as a side job, hence put less focus. When the process lacks a person who actively manages it, then it is likely to incur higher costs and also fail to secure opportunities for making profits. Many companies have adopted outsourcing as a way of cutting down the resources required to run the program, especially for transportation companies. This outsourcing requires the shipper to weigh the cost against the expected benefit then decide the extent of the process that can be outsourced. Many outsourcing decisions entail focusing on main competencies and ensuring that employees work on the crucial activities.
Components
The main components of the reverse-logistics process include retrieval, transportation, and disposition. The retrieval component deals with the pickup location and the individual responsible for the task. The choice of how the item will be transported depends on the nature of the item.
Carriers who will pick them from the customer’s location, for instance, can easily transport light items. Similarly, heavy or hazardous items require special training for both the carriers and the customer. It is, however, possible to have hazardous products that need to be returned, but the responsible parties lack the expertise. In such circumstances, the involved parties ought to undergo the necessary training to ensure that the hazardous items follow specific packaging procedures for ease of transportation.
Throughout the transportation process, the respective manufacturer should get involved as they are often responsible for settling the incurred costs (Lee, n.d). However, when the company fails to closely monitor the process, customers might overestimate the weight of the product or give incorrect classification that eventually increases the cost of transportation to the detriment of the company. Ken Miller, a consultant suggests that for shippers to prevent the loss of money in transportation, they should be responsible for providing the correct item weight, carrier routing, and item description when customers call to request for authorization of return. Alternatively, the company’s customer care representative can fill the bill of lading with full transportation details on behalf of the customer.
Difficulties facing product disposition relates to whether the handling of the returned goods should be done in a central place or in regional facilities, and how processing of such goods should be done. These challenges can be remedied depending on the product type and what will be done to it upon return. However, many shippers prefer processing returns centrally because it gives room for better data collection and enhances their control over the life cycle of a product. This disposition strategy is more applicable when the returned goods are of high value and short shelf life (Lee, n.d). Further, centralization enables consolidation of shipments, hence reducing the cost of transportation and ensure proper use of containers and equipment that are reusable. Centralized returns-processing also eases documentation of returned goods sold to secondary foreign markets, and provide supporting claims for refund of duty under the U.S. Customs' duty-drawback program.
An effective reverse-logistics program highly depends on collecting helpful information that will assist in managing the returns process while at the same time tracking transport costs. This is eased by using software that will ensure smooth and well-organized reversal of goods from the customer’s location to the final point of disposition. The ability to effectively deal with returned items is inter alia determined by the ability for the information about the return reaching the logistics team at the earliest. This avoids a pile-up of returned items that can trigger a logistical crisis. Among the tried and tested way of ensuring this information reaches the relevant team in time is the internet (Lee, n.d). A good example is Federal Express’ “NetReturn” which uses the internet to acquire information about every customer return and automatically create a schedule about how the returned item will be picked and by which team. The entire process is automated and is always triggered whenever a customer calls to seek a return authorization.
Further, when an item is returned, there is more to the act that just a sale that did not go through. Issues such as taxation, accounting, and credit considerations immediately come into play and need to be considered, factored and applied. As the logistics department works on collecting the returned goods, the accounting department is supposed to be working out the pecuniary implications of the return (Guarnieri, 2009). This is yet another reason why a reverse-logistics program is favorable. Another area of concern when it comes to returned goods is the accounting processes of the other members of the supply chain, such as the wholesalers and retailers. These two groups had, upon the sale made and recorded some profits based on complex profit-sharing agreements. The return of some goods would complicate this to an extent that it would sometimes create altercations between the wholesalers and retailers. These disagreements would also affect the manufacturer who is also embroiled in the profit-sharing agreements.
Traditional manufacturers were not privy to how much profit they made until the end of the financial year when reconciliation was made. This creates a necessity for an efficient and flawless means of establishing the implications of every returned good, to every member of the supply chain (Niroomand, 2017). This enables each member to calculate and record both loss of revenue and loss of profits thus making for a better supply chain system. According to LeMirande of Redwood Systems, one of the reasons that manufacturers and retailers are failing in their logistics is that they only plan for the forward aspect of supply and not reverse logistics. Returned goods come as a surprise, yet logistics is all about planning thus abhors surprises. By failing to plan for the returned items, these organizations by extension also plan to fail in reverse logistics, which affects the efficiency of the entire system.
International Reverse Logistics
The return of goods across international borders comes with an enhanced level of complexities when compared to local returns. In this regard, even the ground for the return also becomes a bearing factor. The logistician must not only factor the fact that goods are getting returned but also if this return is for a rejected sale, recycling, resale or rejuvenation. According to Kevin Sheehan, president of Dallas, Texas-based Processors Unlimited, these complexities are sometimes so vast and expensive that they outweigh the value of the goods that ought to be returned leading some logisticians to consider just leaving those goods in their international destinations. This is a loss-making option.
To extenuate on this loss, it is sometimes better to carry the products back and seek to make some money out of it. Among the plausible means of achieving this is through the refurbishment of the goods so that they can be resold ( Bhattarai, 2016) . It would be better to seek a means of making even a fraction of the value of the goods through a refined reverse-logistics process, rather than lose the entire value of the goods. A good example is when goods sold outside the USA are returned unused and are, therefore capable of being sold as new products once again. Instead of having the goods returned all the way to the USA, they can be shipped to a nearby third country where they shall be resold. The taxes that had been paid to the government of the country that they had been sold earlier can then be recovered through duty-drawback regulations. The manufacturers losses will have been mitigated in two ways. The first is the resale amount and the second the refunded taxes.
The combination of at least two sets international laws, rules and regulations relating to transport creates a major challenge for many companies more so when sensitive goods such as hazardous materials are being transported. Instead of a company having to develop the secondary specialty of reverse logistics and international law, it can hire a reverse logistics specialist. A good example of this company-reverse logistics relationship is the one between CF Reverse Logistics, a division of Consolidated Freightways and Witco Corporation of Greenwich, Connecticut, a global manufacturer of specialty chemicals.
Witco supplies large volumes of the chemicals to customers in Canada using container totes to ensure that there is norisk of hazardous material leakage. The entire process falls under strict and rigid rules in both Canada and the USA ( SmallBusiness.com, 2015) . When the customers offload the cargo, the totes must be transported back to Witco and under the same strict rules operating independently within the two countries. Instead of developing a complex secondary logistics system to handle the sensitive returns, Witco has hired CF Reverse Logistics to handle the returns. When a customer call for the collection of the tote, all Witco has to do is give the particulars of the return to the specialists CF Reverse Logistics who handle it from there. This leaves Witco to concentrate on manufacturing and deliveries.
Among the advantages that come with the hiring of CF includes the fact that CF is able to monitor the transport of the transport of this highly regulated totes as long as they are outside US borders to avoid international liabilities that can be crippling to a company. To avoid the payment of duty when the containers are making the return trip, agency paperwork between CF and Witco ensures that customs offices are made to understand that no sale or purchase has taken place with regard to the totes. The return for the totes is something that Witco has to handle on a continuous basis as one of its core operation hence the need to plan for it. Entrepreneurs who handle can learn a lot from the Witco CF relationship. Outsourcing helps Service Merchandise manage returns
The right to return consumer goods that eventual customers are not happy has become an integral aspect of modern entrepreneurship. This is because marketing has taken precedence over manufacturing. No matter how well manufactured an item is, few customers will elect to purchase it unless they are sure that they can return it if they are not happy with it. This concept has sometimes gotten out of hand with customers getting extremely petty leading to high volumes of returns. The vendor has two main options for the investable handling of returned items. The first is to develop the internal capability of handling the returns through a secondary but effective reverse logistics department (Lee, n.d). The second is to follow the lead by Service Merchandise in Bowling Green, Ky. and find a company that specifically deals with return logistics. Service Merchandise deals in personal items and thus a high volume of returns. Yet it mainly uses a mail service to send its items meaning it does not have a physical presence in most of its market areas. The company has hired a reverse logistics company that handles all returns for on its behalf in anefficient manner. This prevents the company from having to develop its own reverse logistics department. Conclusion
Information technology has changed the world including the world of logistics thus enabling the development of effective logistical procedures that save both time and energy. Among the areas that have greatly benefited from IT is reverse logistics. Ordinary logistics focus on getting the product to the customer. However, the continued increase in movement of goods from the customers back to the manufacturer has created a need to also factor in reverse logistics. This can be undertaken internally through the development of a system for the same or externally through a professional service. Either way, information must be at the epicenter of reverse logistics.
References
Bhattarai, A. (2016). After shoppers return items, some buyers try selling them again. Washington Post . Retrieved from https://www.washingtonpost.com/business/capitalbusiness/after-shoppers-return-items-some-buyers-try-selling-them-again/2016/06/30/5d1f4886-2363-11e6-aa84-42391ba52c91_story.html?utm_term=.66ed84c0988c
Guarnieri, P. (2009). Measurement of financial impacts of the reverse logistics implementation. Retrieved from http://www.supplychainforum.com/showthread.php/968-Measurement-of-Financial-Impacts-of-the-Reverse-Logistics-Implementation
Jain, V. (2012). Editorial: Special issue on sustainable supply chain management and reverse logistics. International Journal of Production Research, 50 (5), 1239–1242
Lee, J. (n.d). Critical issues in establishing a viable supply chain/reverse logistics management program. Reverse Logistics Magazine, Edition 82
Niroomand, I. (2017). The importance of reverse logistics in your supply chain network . 21 St Century Supply Chain
SmallBusiness.com (2015). Guide to Federal and State regulations related to merchandise returns and refunds . Retrieved from http://smallbusiness.com/selling/federal-state-return-regulations/
