Reverse Logistics Management - Coursework Example

Running head: logistics management Name Course Lecturer Date Introduction Logistics is usually defined as a process of handling items as the travel through a supply system back and forth. It is usually termed as the management of the flow of materials and services between their source and point of use by consumers and corporations. It involvesintegrating information from inventory, warehousing, packaging, transportation, handling and security. It adds the value of time and place utility. Reverse logistics involves handling of materials moving back through a supply. It is basically the flow of goods from the consumer to the retailer or producer. It account for a high percentage of losses incurred by firms in their production and hence the need for proper management. This paper will discuss the importance of logistic activities of demand forecasting and customer service in any reverse logistics operation. This paper will focus mainly on how demand forecasting and customer service adds value to reverse logistics in terms of place, form, and time utility. Discussion Logistics has over the years become a specialized function. It supplies services and processes that are required for flow of materials and goods efficiently. These processes according to Jan (2007, pg. 11) mainly include transportation, handling of goods and warehousing. Specialization of logistics function usually leads to formation of new departments which combine transport and handling together with warehousing options.Logistics can also be used as a coordinative function. Coordination of flow of raw materials from the source to the end user and the entire supply chain requires that the materials are supplied in good time. It also requires that supply be carried out in the means most suitable to reduce expenses involved. In most cases of demand and supply, the end user is always the consumer. In reverse logistics, there is a reversal of the chain of supply from the consumer to manufacturer. This however, does not affect the chain of supply as more goods are produced and supplied to the consumer. Furthermore, according to Dowlatshahi (2010) the returned goods can be reprocessed and hence, brought back to the market for use by the consumer. Reverse logistics being the process of planning,implementing, and controlling the efficient, cost effective flow of materials, is related to the reuse of products and materials. I t usually involves finished goods and relevant information moving from the point of consumption to production. It is mainly for purposes of proper disposal or recapture of value. This according to Jan (2007), may include remanufacture or refurbishing of goods. It involves sale of any surplus and returned machines for leasing out. In this case goods move at least one step back in the chain of supply from the customer. Customers require high standards to be maintained in the goods and products they purchase. Failure to meet these required standards may result in the goods being returned to the supplier and if not well managed this could to great losses. It is important for any logistics company to ensure that the period or timeline for return of goods or services is shortened. This will make it convenient for both the customers and the suppliers. It is important that reverse logistics be carried out efficiently as it plays a great role in customer retention. In some cases goods remain unsold after they have been passed down the chain of supply. Arrangements made in some industries whereby the supplier offers to purchase back the products not sold by the downstream retailers enable sales to be carried out without fear of risks involved. However, care should be taken as some retailers may take in higher supply than they require for their markets leading to a loss incurred by the supplier.According to Dowlatshahi (2010), returns can occur in any given situation. Some companies treat returned products as waste. Decision making is thus very important as it plays a role in reverse logistics and helps determine how products returned should be treated. Being uncertain of product returns in terms of time, quantity, and quality of returned products, it is important that steps be taken to manage the supply chain more efficiently. Management of reverse logistics should take into account the unpredictability of return of goods supplied and come up with concepts for dealing with the same. There are a number of processes that may be used to recover the quality of the products through reprocessing.There are three reverse manufacturing techniques that are worth noting. According to Jayaraman (2007), one of them is repair and maintenance of the products. Another technique involves refurbishing of the returned products. Remanufacturing is also considered as a good technique to deal with any returned products. Finally, cannibalization and reuse are other methods that can be used by the management to handle influx of returned products. Remanufacturing involves passing the products through a process of manufacturing to create a different or closely similar product. It is very helpful especially when demand for an alternative product rises or falls and can be used by manufacturers to prevent loss that may be as a result of unsold goods and products. Refurbishing on the other hand as stated by Jan (2007), involves using parts of returned product to create an improved product using parts from different products. It helps the manufacture to access markets that are interested in specifications of the product rather than the outward appearance. Repair and maintenance of returned products can also be done to make them acquire the desired standards. Most of the companies accumulate losses as a result of treating defective products as waste rather than carrying out their repair. Reverse logistics should take this into consideration when trying to minimize losses in the business. Goods that are usually returned back through the supply chain may include products that have failed but which can be repaired or reused. It also involves products that are obsolete but still have value. Ramirez (2011), states that these goods may also be part of a consignment that has been recalled by the manufacturer. Unsold products from retailers may also find their way back through the supply chain. Other products that may be involved in reverse logistics are parts repaired in the field but still have value, items that have secondary usage after they have exhausted their original use and waste which must be disposed or used for energy production. It also involves containers that should be returned to their origin. There are a number of things that influence the need for reverse logistics. Firstly, legislation and concern for the environment places the responsibility of final disposal of most products on the manufacturer. This therefore increases the need of management to ensure safe return of these disposable products.Secondly, in some cases there are increasednumbers of customer goods that are returned for credit. Ramirez (2011), states that while it is usually crafted to cover for any failed products, it usually expands to perfect goods that have not been sold and hence a buyer may simply return goods on impulse. Another reason for the need of good management in reverse logistics is the shortened product life cycles. Products according to Dowlatshahi (2010) become obsolete quickly and this inturn increases the possibility and potential for increase in returns for the manufacturer. There is also the need to reduce costs that drives the firm to engage in good management of reverse supply chain. This is usually done through reuse or recycling. Use of the internet prompts customers to purchase products due to aggressive marketing campaigns. In some cases, the customers are not satisfied with the products and may hence, return them to the manufacturer. There is also increased demand for repairs, upgrades and remanufacturing of products in the market. Manufacturers can take advantage of this through good management and hence increase there returns which will in turn offset any losses incurred. Some products in the market are easily replaced by consumers even when they have not losttheir value. This may be as a result of the need to buy new products due to prestige. Warranty is another reason for the need of reverse logistic activities. After goods are returned, the value of disposal is often determined. Another reason is the rental business whereby, used goods are returned to the supplier by the customer. According to Dowlatshahi (2010), it may involve furniture or appliances. In this case the manufacturer has to ascertain the value of the returned products taking into consideration their rate of depreciation. This will in turn help determine the price at which the supplier can charge the rented products to avoid a situation whereby, loss falls on him due to depreciation and inflation. There are basically five key components to the reverse supply chain.One of them according to Weeks and Gao (2010) is product acquisition. Any used product must be reacquired by the supplier in the reverse supply chain. After collection, reverse logistics comes into the picture with the products being transported for inspection, sorting, and disposition. During inspection and disposal, tests are done that help to determine what disposal action should be carried out. Some products may be sold as scrap while others may be reprocessed for resale. Products needing reconditioning are sorted out and remanufactured before their resale. For the reverse chain supply to be economically viable, a few things should be considered. Firstly, there is always uncertainty in the time return goods will get to the manufacturer. According to Weeks and Gao (2010), there is also uncertainty in the condition under which the said goods will arrive. This factor needs to be considered and managed accordingly.Secondly, having a diverse customer baseimplies that the return flow depends on the customers’ preferences and is thus determined by them. It is thus, important to have knowledge of the customer base. Time furthermore, is an important aspect in the reverse supply chain. It is important to ensure that repair and processing takes as short time as possible. This will ensure that the product for reuse also gets to the market quickly. It is also important for the firm to carry out value improvement of the goods in order to maximize the returns. Reverse logistics involves multiple parties in the supply chain and it’s therefore important to establish an efficient communication system. Inventory value in reverse logistics can be maximized through the ability to liquidate products and parts which have a secondary market. It can also be maximized by ensuring rapid returns of the products from the customers to the manufacturer for reuse as stated by Dowlatshahi (2010). There should also be controlled recycling that meets the standards set in legislation for protection of the environment. It is important to improve the data base and visibility of products in their life cycle and reduce disposition cycle times in order to increase cash flows. Reverse logistics takes into time creation of utility in terms of time, place, form and form utility to improve the value of goods or products that are returned to the manufacturer. Time utility according to Ramirez (2011), involves enhancing products marketability by making sure it’s available to the consumers at the right time. In this case it is important to ensure that the returned goods reach the manufacturer get reprocessed and delivered to the consumer again in good time. It helps improve the value of the goods as delay in transport may lead to depreciation or loss f value of the products. Form utility according to Dowlatshahi (2010), involves converting a product from its physical form to another. By doing this the marketability of the product is hence, increased. When it comes to reverse logistics, recycling and refurbishing of products plays a major role in their desirability in the market. Manufacturers usually take advantage of form utility to maximize the value of their products. Reprocessed goods are changed or remanufactured to suit the needs of potential customers in the market. Place utility on the other hand involves making the final product available to the final user. In this case it involves use of transport to move the goods to the consumers or in the case of returned products, back to the manufacturer. According to Ramirez (2011), it plays a big role in reverse logistics as it is important for the returned goods to move from the consumer to the producer. The manufacturers take advantage of this utility to increase the value of the products by ensuring that reprocessed goods reach the customers with ease. Another important utility that is involved in reverse logistics is possession utility. This involves transfer of ownership of a product either from the consumer to manufacturer in reverse supply or from the manufacturer to consumer. It is of great importance especially where the business involves leasing or renting out products. Conclusion In conclusion, reverse logistics management; place a big role in the economy. It is of great importance to the producers as well as to the customers. Good reverse logistic management will help any firm in maximization of profits and minimization of loss. It also plays a major role in customer retention. It also helps the customers get desired products and allows them to return obsolete goods that are financed by the manufacturer. Any business undertaking production must ensure steps are taken to maximize revenue generated by reprocessed goods as this will help to ease the losses that may be incurred as a result of the same. Form, place, time and possession utility should be taken advantage of to ensure maximum returns. Reverse logistics needs to be well managed as it accounts for a high percentage of loss incurred by firms every year. Streamlining the factors of production and improving on the quality of products would go a long way in eliminating losses. References Dowlatshahi, S 2010, A cost benefit analysis for the design and implementation of reverse logistics systems: case studies approach, International journal of production research. March, Vol.48, Issue 5, pp. 78-89. Jan, D 2007, Logistics outsourcing relationships: measurements, antecedents, and effects of logistics outsourcing performance, Springer, New York. Jayaraman, V 2007, Creating competitive advantages through new value creation: A reverse logistics perspective. Academy of management perspectives, Vol. 21, Issue 2, pp. 56-76. Ramirez, A 2011, Effect of reverse logistics and flexibility on organizational performance. Economics & Management, Vol.16, p. 873-881. Weeks, K & Gao, H 2010, An empirical study of impacts of production mix, production route efficiencies on operations performance and profitability: a reverse logistics approach. International journal of production research. Vol.48, Issue 4, p. 23-56. Zhang, B 2008, The game research on reverse logistics of enterprise under complete information state. China-USA Business review, Vol.7, Issue 10, p. 34-56. Read More