Reverse Logistics

As Supply Chain Activities are evolving and partnering changes in business models, the focus and activities are not restricted to the management of raw materials and finished goods from point of origin from the vendors to plants and further on to the end customers. There is another extension to Supply Chain Process called as Reverse Logistics.

Reverse Logistics as the name denotes, deals with the planning, process and flow of finished goods inventory, packaging materials and parts of finished product back from end customer to the product company as sales return or warranty return or unsold inventory with trading partners. Reverse Logistics planning further re-captures value from these materials as much as possible by way of re salvaging, repair, refurbishing, recycling etc.

Globally awareness about Hazardous waste generation and disposal is increasing and leading to legislations being passed by the various countries. Europe has been the leader to implement legislation about ensuring that the product companies take responsibility for reverse logistics of all product wastage arising out of any supply chain activity. The European Union has passed bills on Waste Electrical and Electronic Equipment and Restriction of Hazardous Substances.

Green Logistics initiative has outlined a detailed process for the suppliers and manufacturers to adapt color coding systems to identify different kinds of waste reusable, recyclable, green waste, etc.. Packaging retrieval, salvaging and scrapping process have been well developed with the entry of many small and medium sector companies investing in setting up scrap salvaging activity as commercial ventures.

Awareness has further pushed companies to adopt standards and measures in ensuring recycling and e-waste in a bid to take responsibility towards minimizing environmental impacts and reducing scrap besides ensuring complete recovery of waste materials.

Automotive After Market and Electronic Equipment and Computer Hardware industries have developed successful Reverse logistics practices and have managed to integrate reverse logistics as a important marketing strategy to project the company’s social responsibility in the area of waste management as well as to contribute to the developmental activities in society by donating funds arising out of scrap disposal and recycling.

While many developing countries are yet to pass legislation concerning environmental safeguards, recycling, e-waste disposal processes, the Multinational Organizations have already adapted processes of reverse logistics and implemented them in all countries wherever they have operations.

Automotive after Market industry has developed the successful practice of producing refurbished parts and recycled components that are sold through the spares markets. A lot of value has been unlocked from the reusable parts of vehicles especially starters and alternators.

Re-engineering products with re-used material has yielded in the saving of tons of raw materials, besides providing and generating employment to hundreds of people involved in setting up small outfits to dismantle the parts. As per industry estimates, this activity has employed over 12000 in the US alone and the reused auto parts make up for over 36 billion dollars as estimated by Auto Parts Re-Manufacturers Association.

In the computer hardware and peripherals industry case study, HP makes for a good example. HP has developed supply chain model of collecting the used cartridges and other consumables through e-bins prominently displayed with the retailer outlets.

The reverse logistics for this particular process is designed to collect the waste locally from all e-bins, consolidate and ship out to regional centers that are located at gateway ports in the country. Such consolidated waste is further forwarded to recycling plants identified within the country to another nearby location overseas.

Recycling plants manage to salvage metals and other materials before using the plastic raw material as the raw material to manufacture some other items such as bottles etc. It is reported that HP has allocated the funds generated out of such activity to sponsor events directed at fulfillment of its social responsibility and community development projects.

Today taking responsibility to take back the packaging and products has been found not only to yield scrap and salvage value but is increasingly being looked upon as corporate responsibility and part of corporate governance and good practice adopted by responsible companies. No doubt this provides value to marketing strategy too and improves stature business.