30-07-2012, 02:37 PM
Reverse logistics
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A critical area of the supply chain is reverse logistics. Traditionally
defined as the process of moving product from its point of
consumption through channel members to the point of origin to
recapture value or ensure proper disposal, this chapter uses a more
holistic definition. Reverse logistics includes activities to avoid
returns, to reduce materials in the forward system so that fewer
materials flow back, and to ensure the possible reuse and recycling of
materials.
Returns can affect every channel member from consumers, retailers
and wholesalers to manufacturers. Returns are caused for different
reasons depending on who initiates them – end consumer, wholesaler
or retailer and manufacturer – and on the nature of the materials
involved – packaging or products. Reusable packaging is becoming
more and more common, especially in Europe where manufacturers
are required to take back packaging materials. This chapter will focus
mainly on reverse supply chain for products.
Installation or usage problems
Some customers experience problems with installation or usage of
their recently acquired products. They perceive the product to be
defective, while the reason for dissatisfaction is actually caused by
difficult set-up or installation procedures or unclear instructions. This
is a common problem in the computer industry where in some
categories such as CD-ROM drives, return rates of 25 to 40 per cent are
not uncommon. Complicated installation procedures and a lack of
clear and simple instructions exacerbate the issue.
Warranty claims
Defective products or parts can be sent back to retailers or the
manufacturer for repair. Products might either be dead on arrival, not
working according to specifications or cosmetically damaged. This
could happen either to the retailer or the end consumer. Alternatively,
products might break down during the course of their life cycle. If
the product is still within the warranty period extended by the
manufacturer customers might return their product to the manufacturer
or if that period has expired, customers could take up other
options such as taking the product to a specialist repair center.
Retail overstock
Manufacturers can provide resellers with the luxury of returning
unsold stock. This is a common practice in the book industry, for
example. Retailers that need to make their accounting figures look
good for the end of quarter or month will sometimes send significant
amounts of unsold stock back for credits, only to reorder it again after
the end of a financial period.
End of product life cycle or product replacement
Once a product has reached the end of its lifecycle, many
manufacturers want to get it out of the retailers’ shelves as soon as
possible to prevent sales cannibalization of the new version. This
means that the old products have to be disposed of. Manufacturers
either have to take the stock back, based upon the conditions agreed
with the retailers, or the latter need to dump the old version quickly.
Manufacture recall programs
Serious flaws in a product can lead to a recall, instigated either by the
manufacturer or a government agency. Common recalls appear in
the automotive, pharmaceutical, and the toy industry. Aside from the
safety issues in such situations, getting the discredited product out of
circulation and into designated storage centers as soon as possible is a
crucial part of damage limitation strategies. It is a grim deadline that
any company would prefer not to have to meet, but many do. The US
Consumer Product Safety Commission in 1999 reported 304 corrective
actions involving over 75 million consumer product units of various
types that either violated mandatory safety standards or presented a
substantial risk of injury to the public.