Reverse logistics stands for all operations related to the reuse of products and materials. It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics."The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business.
Normally, logistics deal with events that bring the product towards the customer. In the case of reverse, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer. Under normal circumstances when, say, in case a new laptop turns out to be defective, the consumer would return it to the retailer, who returns it to the distributor, who in turn gives it back to the manufacturer. This causes consumer dissatisfaction, cash lockdown for the retailer, and a rise in the distributor’s inventory. This is where a reverse logistics company steps in to reduce the time and cost involved in the backward chain.
Only a handful of specialists, such as New Delhi-based RT Outsourcing, Kolkata-based Aforeserve.com Ltd, and Yantra Solutions Pvt. Ltd, the India business of Massachusetts-based Yantra Corp., are active in the business. Wipro Technologies, India’s third largest software services provider, has its own reverse logistics division.According to Chaturvedi, in India, aftermarket returns that form part of the reverse logistics industry are estimated at $10-15 billion.Aftermarket is the secondary market that supplies accessories, spare parts, second-hand equipment, and other goods and services used in the repair and maintenance of returned products.In contrast, the logistics industry contributes around 13% of India’s $1 trillion gross domestic product (GDP).
Business Implications
In today's marketplace, many retailers treat merchandise returns as individual, disjointed transactions. "The challenge for retailers and vendors is to process returns at a proficiency level that allows quick, efficient and cost-effective collection and return of merchandise. Customer requirements facilitate demand for a high standard of service that includes accuracy and timeliness. It’s the logistic company's responsibility to shorten the link from return origination to the time of resell. By following returns management best practices, retailers can achieve a returns process that addresses both the operational and customer retention issues associated with merchandise returns. Further, because of the connection between reverse logistics and customer retention, it has become a key component within Service Lifecycle Management (SLM), a business strategy aimed at retaining customers by bundling even more coordination of a company's services data together to achieve greater efficiency in its operations. Reverse logistics is more than just returns management, it is "activities related to returns avoidance, gatekeeping, disposal and all other after-market supply chain issues".Returns management – increasingly being recognized as affecting competitive positioning – provides an important link between marketing and logistics. The broad nature of its cross-functional impact suggests that firms would benefit by improving internal integration efforts. In particular, a firm's ability to react to and plan for the influence of external factors on the returns management process is improved by such internal integration. Third-party logistics providers see that up to 7% of an enterprise's gross sales are captured by return costs. Almost all reverse logistics contracts are customized to fit the size and type of company contracting. The 3PL's themselves realize 12% to 15% profits on this business.
Return of unsold goods
In certain industries, goods are distributed to downstream members in the supply chain with the understanding that the goods may be returned for credit if they are not sold. Newspapers and magazines serve as examples. This acts as an incentive for downstream members to carry more stock, because the risk of obsolescence is borne by the upstream supply chain members. However, there is also a distinct risk attached to this logistics concept. The downstream member in the supply chain might exploit the situation by ordering more stock than is required and returning large volumes. In this way, the downstream partner is able to offer high level of service without carrying the risks associated with large inventories. The supplier effectively finances the inventory for the downstream member. It is therefore important to analyze customers’ account for hidden cost.
E-waste and its disposal
E-waste refers to discarded electronic and electrical products. Reverse outsourcing could also receive impetus from government efforts to reduce e-waste that’s piling up as companies and consumers replace products ranging from mobile phones to computers that are becoming obsolete more rapidly.
The Union ministry of environment and forests is on the verge of finalizing one of the most stringent e-waste disposal regimes in the world that will make manufacturers of products personally liable if they don’t have environmentally safe procedures for the disposal of e-waste in place, The Economic Times reported last month. “So for entrepreneurs who are focused on this, it’s going to be a huge opportunity,” he said.Future Group, which runs a number of retail chains across product categories including Big Bazaar, started reverse logistics in-house two years ago.
It was also the first retailer in India to start such a unit and is considering offering its expertise to other retailers. The group currently offers product return facilities in its fashion and furniture businesses.
Average spending on reverse logistics is about 10-15% for garment firms and about 20% for furniture companies, according to Anshuman Singh, managing director and chief executive officer of Future Logistic Solutions Ltd.
“It is a very tedious and specialized job and not every retailer can do it,” Singh said. “As we already have our warehouses and other facilities, we plan to offer reverse logistics to other retailers as well.”
Conclusion-
Reverse logistic is sunrise industry within logistic industry.Marketers of electronic goods and garment industry are recognizing the importance of reverse logistic in their overall supply chain management.Thanks to rise of reverse logistic which has touched common man.Now consumer have got option of disposing their used electronic goods and items profitably.
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