Chapter 19
Product returns and reverse logistics
management
Chapter 11: Strategic Leadership
Outline
• Logistics systems are traditionally designed to
handle product flows in one direction only.
• Product returns and waste management
requirements have led to products flowing back
from customers to suppliers and manufacturers.
• Unpredictability and lower volumes complicate
the process.
• The environment has to be taken into account
through environmental management systems, ISO
14000 and carbon footprint reduction.
• Closed-loop supply chains aim to achieve zero
waste by integrating forward and reverse supply
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chain activities.
Learning outcomes
• The returns management process
• The role of reverse logistics in returns management
• The way in which reverse logistics is managed
• The reasons for returning products
• The stages through which returned products move
• The difference between product recovery and waste
management
• Environmentally sound supply chain management
• ISO 14000
• The concept of closed-loop supply chains
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Role of reverse logistics in
returns management
Returns management is about:
• avoidance;
• gatekeeping; and
• disposition.
Reverse logistics:
• Part of returns management
• From point of consumption or intermediate point back
towards origin or away from the supply chain
• Recapture value or properly dispose of goods
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Product returns management
• Return products to source or for waste disposal
• Waste = by-product of manufacturing and consumption
– process, reuse, recycle and dispose of responsibly
• Returns management comprises wide array of activities
(see pp. 422–3)
Types of returns:
• Manufacturing
• Distribution
• Customer
Reasons for returns: see p. 423
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Path of returned products and
materials
Minimise number of items that need to enter return
flow through avoidance and gatekeeping.
Paths for returns (from most to least attractive):
• Return to vendor for refund
• Sell as new (repackaging may be required)
• Sell via auction or outlet
• Remanufacture or refurbish
• Sell to broker
• Donate to charity
• Recycle
• Dispose of in landfill
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Product recovery and waste
management
Consider waste disposal options in terms of environment.
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Differences between forward and
reverse logistics – management
Forward logistics:
•
•
•
•
•
Sales and marketing forecast plan
Single or limited origin of products
Distribution planning possible
High visibility
Cost known or can be estimated before shipping
Reverse logistics:
•
•
•
•
•
Difficult/impossible to forecast
Many-to-one distribution network
Reactive planning for distribution
Low visibility into product flows
Difficult to predetermine costs
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Differences between forward and
reverse logistics – costs
Cost category
Forward logistics
Reverse logistics
Transport
Lower bulk rates
Higher cost per unit
Inventory-holding
Generally higher
Low holding cost
Shrinkage
Higher
Lower due to various
factors
Obsolescence
Result of bad inventory
management
Higher cost, as products
less likely to still be sold
Collection
Distribution from DC
High cost of special
arrangements
Sorting
Standardised
Inspection cost
Handling
Lower cost (unitised)
High cost (single units)
Refurbishment
and repackaging
Non-existent
Variable, but often
applicable
Book value
Little change, except with
obsolescence
Always below market
value of new product
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Information management
challenges of reverse logistics
• Special information requirements of reverse
logistics cannot be handled by traditional ERP,
WMS and TMS.
• End-to-end information system should be able to
support:
• Warranty and return management
• Recall management
• Depot repair management
• Regulatory compliance management
• Business analytics and reporting
• etc.
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Life-cycle assessment (LCA)
Quantify the resource and energy use and
environmental burdens of a product or process
over its entire life cycle.
• Cradle-to-grave perspective
• Comparative nature
• Can also be used to compare distribution strategies
• Sustainability efforts can be included during:
– Design
– Source
– Manufacture
– Distribution
– Post-sales service
– Returns/recycling
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Stages in the reverse logistics
process
Typical stages of product returns to a warehouse:
• Receipt
– separately from normal inbound products
• Sort and stage
– preparation for returns processing
• Returns processing
– further sorting and capturing of information
• Returns analysis
– make decision on path that each item should take
• Support operations
– distribute items according to where they should go
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Logistics and the environment (1)
Environmentally sound supply chain management:
• Pressure from consumers, clients and government
• Compliance with composite framework of requirements
identified on behalf of an organisation’s stakeholders
• Legislative pressures traditionally main reason for change
• Sound environmental practices can have financial benefits
• Easily addressed in reverse logistics, packaging, transport
and facility location/network design
• Internal and external collaboration around issues needed
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Logistics and the environment (2)
• ISO 14000 – focus on environmental
management:
– Minimising harmful effects of activities
– Continual improvement in environmental performance
• Requirements and guidelines for an EMS:
– ID and control
– Continuously improve
– Systematic approach
• Benefits of implementation: see pp. 432–3
• Beware of fragmented procedures, conflicting
interests and lack of customer focus
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Logistics and the environment (3)
Carbon footprint:
• Measure greenhouse gases produced in units of CO2
• Fossil fuel combustion is the main source
• Various strategies for reduction: see p. 433
Closed-loop supply chains:
• Forward and reverse logistics activities combined into a
single system
• Zero-waste supply chain
• Maximise reuse, recycling and composting of materials
• Return products to manufacturer at end of useful life
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