Examining Current Trends in Reverse Logistics - Research Paper Example

Examining Current Reverse Logistics Trends of the of the This research paper is all about identifying currenttrends within reverse logistic system. A brief introduction has been given to summarize major points of the study. Theoretical view point also has been included so as to ensure a proper secondary research analysis. There are opinions or views of previous researcher included in the study. Current trends of reverse logistics are analyzed from perspective of business statistics, operations management, production management, supply chain management, etc. Methods reflected upon in the study are waiting line method, transportation and assignment approach, simulation modeling, forecasting, statistical quality control and probability and its applications. Introduction Reverse logistics can be defined as controlling, planning and implementing in-process inventory, flow of raw materials in cost effective manner, efficiently managing related information and finished goods to consumption point from point of origin so as to be aligned with customer requirements. This technique takes into consideration all those activities but in a manner that they are operating in reverse direction. Reverse logistics is a mechanism of moving finished goods from final point in order to facilitate proper disposal or capturing value. The definition of reverse logistics also encompasses refurbishing and remanufacturing activities. This concept is not centered towards only recycling packaging materials or reusing containers. There are other approaches included within reverse logistics such as handling merchandise returned because of any damage, restock, excess inventory control, seasonal inventory, recalls and salvage. It also takes into account hazardous material programs, asset recovery, recycling programs and disposition of obsolete equipments. This research paper shall deal with various current trends of reverse logistics. In current scenario the concept of reverse logistics has gained importance due to rising demand of satisfying hidden needs and wants of customers. The study would comprise of certain theorists views on the trend along with some modern methods used in reverse logistics system. Research question for the study is – “what are the current trends within reverse logistics approach?” Background Most research conducted on supply chain management is inclined towards forward flow in context of raw materials to finished goods. The reverse chain of taking customer query and transferring goods to suppliers has gained less importance. Reverse logistics is incorporated by many industries like chemical, food, PC and electronics, automobile, publishing, chemicals, pharmaceutical, etc. There are firms who have now started to invest in reverse logistic operations and are benchmarking such operations. ISO certification is also given to those firms who have adopted the phenomenon of reverse logistics. This can be stated as a measure to control quality in order to satisfy large base of customers. Literature Review According to Tibben-Lembke and Rogers (2002), logistics basically means movement of goods from one point to another at times supported by third party companies. This approach in industrial context means science and art of producing, distributing and obtaining goods in right quantity from right place. Goods movement has initiated demand towards substantial infrastructure like airports, railroads, sea ports, highways, etc. Reverse logistics on the contrary can be stated as the reverse process of the approach. It is often regarded as recycling mechanism of goods (Tibben-Lembke and Rogers, 2002). As per Daugherty and Myers (2002), supply chain management is all about manufacturing finished goods from raw materials and then delivering it to target group through wide array of distribution channels. Reverse logistics takes into consideration activities responsible for transporting, disposing and retrieving goods. These products are then moved to manufacturer from customer along with flow of information linked with credit and tracking procedure (Daugherty and Myers, 2002). Dekker and Fleischmann (2004) in their studies stated that product recalls majorly occurs when a product has entered within the supply chain system. There are more elements involved in reverse process due to commercial agreements like taking obsolete stock back versus returning. This kind of agreement is usually observed in business to business commercial returns. In business to consumer model, goods are reversed due to inappropriate product quality or timing (Dekker and Fleischmann, 2004). According to Mollenkopf and Closs (2005), reverse logistics is incorporated within supply chain because of multiple reasons like commercial returns, warranty returns, manufacturing returns, product recalls, end-of-use returns, service returns and end-of-life returns. Quality control can be regarded as a major component for growth of reverse logistics. It is essential in current scenario to maintain proper quality standards throughout supply chain activities (Mollenkopf and Closs, 2005). As stated by Prahinski and Kocabasoglu (2006), increased competition in business environment makes it necessary for manufacturers to supply quality goods. When these set standards are not maintained it influences customers to return purchased goods to retailers which are finally transported to manufacturer (Prahinski and Kocabasoglu, 2006). As per Richey and Daugherty (2004), reverse logistics usually takes place in a sequential manner. Firstly return order authorization by customer request. Secondly return is send by customer and it is received. Then is discrepancy handling, followed by issue of customer credit. The next step is centered towards taking decision associated with return dispositioning. Return is then generally repaired and shipped back to respective customer. In certain circumstances, customer is provided with a replacement. The overall concept of reverse logistics is difficult and complicated by nature. There are some key differences between the concept of reverse and forward logistics. The first unique characteristic of reverse logistics is diversified sources. Increasing customer demand and technological advancement has enabled diversified commodities with small life cycle. There are various reasons for which goods are returned. Those products being returned also varies in terms of quality. Administrative expenses also results in this form of goods return. Differences in context of quality conditions also create problems in cost analysis and return processing. On the other hand, return processing can be extended due to damage of packaging material (Richey and Daugherty, 2004). According to Stock and Speh (2002), return processing is often complicated because it might arrive at any time from a customer because of any reason. In this process, product life cycle is uncertain because some goods are returned earlier while some may arrive after information has been completely removed. Complex cost structure can also be denoted as another characteristic of reverse logistics. This factor is hard to calculate due to its ambiguous nature. Often it is witnessed that companies send full credit back to customers instead of forwarding correct credit. There is another issue related to returns like original order quantity is minimized once returns are generated. The quantity is minimized and is much lower than promotional quantity. It can be stated that responsibility, costs and return reason is not clear to organizations. Reverse logistics at times it regarded as a strategic weapon. Strategic variables have to be managed efficiently so as to facilitate firm’s viability (Stock and Speh, 2002). As stated by Tibben-Lembke (2002), retailers utilize the concept of reverse logistics as a strategic tool through keeping products interesting and fresh for customers. Retail space is an essential asset of a retail store. These stores have to highlight fresh goods in order to maximize selling space utilization. On the other hand, supermarkets need to regulate their inventories to maximize return and prevent loss of spoilage. The approach of reverse logistics enables wholesalers or retailers to minimize risks of product purchase. These products at times might not be most selling items (Tibben-Lembke, 2002). Findings The entire study is based on secondary research. There are wide array of data available in secondary sources which states that current trends in reverse logistics is aligned with business purpose and goals. In real world scenario reverse logistics has a particular format to follow whether it is linked with operations management, business statistics, operations research or management science. There are three distinct stages involved like disposition, retrieval and transportation. These stages have to be undertaken by all companies but in recent scenario there have been some changes in reverse logistics trends. Product valuation is the major concern for majority firms. Productions or operation management segment of a company is focused on creating value through reverse logistics. This value needs to be created at a sooner stage rather than at a later stage. Retailers or manufacturers are witnessed to derive value from product recovery that is sent back through supply chain. In current scenario, retailers and manufacturers work in collaboration in order to initiate product testing. At certain circumstances it is even seen that liquidation or remarketing takes place at retailer’s end without transporting goods back to manufacturer. This is also known as smart returns. Reverse logistics is highly dependent upon product value. For instance some products might have high value whereas other products might be least selling items at retail outlets. Remarketing process is usually conducted as soon as possible to avoid value degradation. At each stage in supply chain process value of products keep on reducing which is the major area of concern for manufacturers. It is important for manufacturers to put back returns into the supply chain in least time possible. This helps to reduce transportation costs and other packaging costs. Reverse logistics usually is associated with increasing cost factor. Decreasing product value tends to increase cost for manufacturers as well as other supply chain participants. Many companies implement reverse logistics systems through same distribution center. This trend has been incorporated in current scenario so as to reduce costs. Distribution center facilitates both reverse and forward flows. Return goods are originally processed in order to put them back into the stock shelf. These products have little refurbished, re-kit, re-package or repair conditions. Other items are then sold to wide array of secondary markets so as to dismantle landfill, recycle or harvest components. Collaboration is another recent trend in reverse logistics. The companies undertaking reverse logistics system collaborates with or forms long-term alliance with strategic partners. Effectiveness and quality of collaboration are facilitated through joint planning arrangements, joint forecast arrangements, process information and sharing process, collaborated performance measures, etc. In such circumstances vendor managed inventory is considered to be most appropriate. There are certain techniques which are adopted by firms to solve problems related to reverse logistics. Simulation modeling is often observed in logistics system. Simulation model takes into consideration physical network of logistics along with operations or activities of different entities of logistics. This kind of model enables collaboration between transportation, warehousing and value added services. In reverse logistics system cost and value degradation are two major issues. To certain extent simulation modeling in operations management is based on mathematical grounds. On basis of this model, functional relationships are established between various logistical activities like inventory, material movement, transportation, facility location and order processing. Simulation modeling initiates coordination amongst all supply chain activities and reduces time required to return goods to manufacturer. Information technology forms a central component in reverse logistics. Probability applications are incorporated within IT infrastructure so as to ensure that manufacturers are aware of return probabilities. This technique supports a company to analyze probability of goods return in order to take proactive measures. Statistical quality control is used by real world companies to maintain quality standards of products and services. This generally includes statistical tools for maintaining and monitoring service or product quality. Sampling is a common mechanism adapted to judge quality of wide range of goods. Acceptance sampling is a new trend implemented in reverse logistics procedure to minimize the amount of defects or returns. It indicates rejection or acceptance of items totally based on quality standard measured for a sample. Process design is another framework that helps to design an entire path required for transformation of materials. Through this design approach every step in supply chain process is evaluated before transporting goods to end customers. This in turn helps to reduce the scope of goods being returned and thus facilitates maximum utilization of time. Forecasting is another technique that takes into account current market demand and supply goods accordingly. Inventory controls are based on advanced technology to predict level of inventory and reducing time of goods return to manufacturer. Queuing theory encompasses the concept of waiting line method (Autry, Daugherty and Ellinger, 2001). There are three parameters in this method used as a reverse logistic trend such as cost of waiting, time taken in waiting line and cost of service. All these cost factors help to estimate the time taken and costs associated with return process. On the other hand, transportation and assignment methods are related to allocating jobs and calculating minimum time interval required in forward and backward logistics. Conclusion As per this research study, reverse logistics is a common phenomenon in every organization. This mechanism is strongly aligned with consumer expectations and product quality. In highly competitive business environment it is important to supply goods as per demand of customers. Reverse logistics is a procedure through which any defects in product purchased can be returned to manufacturer. Similar steps are followed in this procedure as in case of forward logistics. However in recent scenario there have been certain emerging trends of reverse logistics. This research study states that manufacturer work in collaboration with retailer to minimize cost and time linked with reverse logistics. The cost factor can be reduced to a minimum level if remarketing takes place in between supply chain process rather than transporting goods to manufacturer. At times it is observed that goods lose their value while they are being transported to manufacturer. These new trends comprise of certain statistical methods to retain product value. Summary The study is centered towards analyzing recent trends of reverse logistics. Some theoretical background also has been included in this study. Secondary research is used in the study to outline different trends. There are new approaches used in logistics like simulation modeling, waiting line approach, etc. It helps to eliminate challenges related to reverse logistics. Future Research Recommendation There is a great scope for further research in this particular area. It can be stated that researcher can further analyze problems associated with reverse logistics. These issues could result in better approaches which can be utilized for retaining product quality and enhancing level of customer satisfaction. Quality control measures could also be further researched so as to predict better results in context of reverse logistics. References Autry, C., Daugherty, J. and Ellinger, A. (2001). Reverse logistics: the relationship between resource commitment and program performance patricia. Journal of Business Logistics, 22(1), pp. 107-123. Daugherty, P. J. and Myers, M. B. (2002). Information support for reverse logistics: the influence of relationship commitment. Journal of Business Logistics, 23(1), pp. 85-106. Dekker, R. M., and Fleischmann, et al. (2004). Reverse logistics: quantitative models for closedloop supply chains. Berlin: Springer. Mollenkopf, D. A. and Closs, D. J. (2005). The hidden value in reverse logistics. Supply Chain Management Review, 24 (5), pp. 34-43. Prahinski, C. and Kocabasoglu, C. (2006). Empirical research opportunities in reverse supply chains. Omega, The International Journal of Management Science, 34, pp. 519-532. Richey, R. G. and Daugherty, P. J. (2004). Reverse logistics: the impact of timing and resources. Journal of Business Logistics, 25(2), pp. 229-250. Stock, J. and Speh, T. (2002). Many happy (product) returns. Harvard Business Review, 80(7), pp. 16-17. Tibben-Lembke, R. S. (2002). Life after death: reverse logistics and the product life cycle. International Journal of Physical Distribution & Logistics Management, 32(3), pp. 223-244. Tibben-Lembke, R. S. and Rogers, D. S. (2002). Differences between forward and reverse logistics in a retail environment. Supply Chain Management: An International Journal, 7(5), pp. 271-282. Read More