Reverse Logistics with E-commerce Strategy

[Type text]

-

Submitted By:

Anand Konda, Anoop Kumar, Fahim Ahmed, Ranjan Shetty, VenkatRamana, Durgesh pandey.

Reverse Logistics with E-Commerce Strategy

1

Abstract

Emphasis on managing business processes across the boundaries one of the process is

called Return Logistics or Reverse Supply chain. In this paper we determine the current

practices, and develop information in surrounding trends of reverse logistics. It also covers how

the reverse supply chain can be interconnected with the help of E-commerce. Our ultimate goal

is to develop theory about the reverse supply chain process within firms with the help of E-

commerce. This research setting provides an opportunity to study both firm-level factors as

well as external factors that may influence how firms handle their returns management

processes.


2

Introduction

Many Companies have adopted and implemented supply chain initiatives, particularly as

they globalize their operations. Emphasis on managing business processes across the

boundaries one of the process is called Return Logistics or Reverse Supply chain which focuses

on the effective management that can be complicated by the boundary spanning nature of this

process within a firm and across the entire supply chain. Effective management is important

because return logistic or reverse supply chain can erode the profitability of a firm and can

impact relationship with customer and end users as well as impact of the firm’s reputation with

stakeholders. In this paper we determine the current practices, and develop information in

surrounding trends of reverse logistics. It also covers how the reverse supply chain can be

interconnected with the help of E-commerce.

E-commerce and logistics are the complement to each other, logistics is the

fundamental guarantee for e-commerce, and e-commerce is the future for the logistics, E-

commerce and logistics are the complement to each other. In trying to understand the nature

of e commerce and logistics involvement in return logistics or reverse supply chain, we focus on

three specific questions.

1. What is the role of reverse Supply chain process in a firms overall supply chain

strategies?

2. How are the E-commerce and logistic functional areas integrated in to reverse

supply chain process?

3. What external factors influence the reverse supply chain process within the firm?

We employ a qualitative methodology, due to the exploratory nature of the research

itself. Our ultimate goal is to develop theory about the reverse supply chain process within

firms with the help of E-commerce. This research setting provides an opportunity to study both

firm-level factors as well as external factors that may influence how firms handle their returns

management processes.

Reverse Logistics Defined According to the reverse logistics executive council, “Reverse logistics is the process of moving goods from their typical final destination to another point for the purpose of capturing value otherwise unavailable, or for their proper disposal”. Many other authors have defined reverse logistics or reverse supply chain as “RL /RSC is basically the process of planning, Implementing and controlling the efficient cost effective flow of raw materials, in-process inventory, finished good and related information for the purpose of conforming to customer requirement.”


3

Apart from the above definitions what we can put-forth is this paper is basic

understanding that

“Reverse logistics or Reverse supply chain management is done by a firm to

Minimize Loss in the process of capturing value without effecting the quality

available for enhancing customer satisfaction.”

Assumptions:

Goods are brought back for secondary sale.

Customer perceives that firm delivers good quality.

Reverse logistics need transparency and predominantly active in a firm while handling returned

materials.

The position of Reverse logistics is given low profile while compared to forward one.

Many firm’s face tough competition in terms of differentiating their return management

strategy with forward logistic the below figure gives a detailed structure of process inside

Forward and reverse logistics.


4

The importance of reverse logistics has increased. The companies are becoming aware of

their benefits. The rate of reverse logistic streams can be dangerously high for some companies

but having a good management of these streams can lead to a significant increase in the

bottom line. Reverse logistics are environmental friendly because of the reuse, refurbish and

recycle, leaving the landfill as the last option. Some articles point out the customer’s loyalty and

the strategic use as benefits of reverse logistics as well. Key reverse logistics challenges in

current scenario:

Retailers and vendors need to process returns at a high proficiency level for quick,

efficient and cost effective collection and return.

Customer requirement also demand a high standard of service that includes accuracy

and timeliness in the pickup and return process.

The logistic company must shorten the link from return origination to resell process

Slow processing and high inventory, unauthorized returns, unknown cost, low customer

repair confidence.

Slow or incomplete data collection leads to process uncertainty.

Makers or manufactures should use product system designs that make recovery and

reuse and reissue possible, efficient and profitable.

Some important preparations that must be addressed when setting up a reverse logistics

programme include:

Executive management buy in and championship.

Clear management guidelines detailing returns management objectives.

Adequate budgeting of funds and Human resources.


5

Surrounding trends of reverse logistics When goods come back in the supply chain to the manufacturer there are several ways to

redistribute it, and these are the surrounding trends in current scenario:

Sell via outlet: This option is usually chosen by brand sensitive companies.

Manufacturers take back returns and sell them in their own outlet stores. These outlet

stores are often highly profitable. The margins for the manufacturer are even higher

than if the product was sold to a retailer.

Sell to secondary market: The type of products sold to secondary markets are usually

closeouts, surplus and salvage items. Firms that buy these products at low prices

operate this market. Then they sell them through their own stores or to other

mark−down retailers.

Remanufacture or refurbish: Specially used for electronic equipment, domestic

appliances and industrial machines. The manufacturer diagnoses the problem and

repairs the item, sometimes with a loss of quality but conserving the product identity.


6

Donate to charity: When the product is usable but need some reparations or it is out of

season to give it to a charitable organization is an alternative. This option can lead to tax

advantages.

Recycling: An ecological motivation is behind recycling. Some legislation and groups of

pressure have pushed manufacturers to adopt environmental friendly plans. To reduce

the amount of materials used in doing a product, to reuse and recycling the product is

the goal. And this order is important, first material reduction to maximum, then

maximize the reuse and finally recycling. The items for recycling are usually sent to

specialized companies.

Auction returned goods on the internet: This application might increase. Even if the

manufacturer has to pay for this service to internet auctioneers, the cost of the

transaction is lower than absorbing the costs of shipping the products back and

disposing them.

Landfill: Landfill and incineration capacities are almost saturated in the industrial

countries. Disposal should be the last option. The manufacturer will dispose the product

at the lowest cost.

Reverse supply chain interconnected with the help of E-commerce

Applications of technological solutions in logistics, the technology planning component is

fundamental to and effective objectives for example E-commerce facilitates open, real-time

communication and data exchange as it creates platform for reverse logistics through forward

logistics, which improve client links and business relationship in a transparent and effective

manner. A return logistics plan should clearly. Automating the returns process provides several

areas of opportunity.

Cost reduction – Returns cost savings can be found in people, processes and inventory.

Better decision making at the point of authorization such as whether to accept a return

and, if so, where best to route it, and having visibility to downstream functions will pull

cost from the returns process

Customer Service – Customers will continue to buy from companies that are easy to do

business. Companies with effective and flexible returns programs, like an REI or

Nordstrom, attract repeat buyers because their customers trust them, in part, because

of their returns policies.


7

Efficiency – Returns are unpredictable and companies do not typically control a

significant portion of the process, making manual returns processes highly inefficient

and disruptive. Wasted freight and duplicate efforts kill efficiency

Control – Effectively controlling a manual returns process is near impossible. People

make poor decisions if all they have is limited, if any, information and rudimentary tools

to help guide the process and, without tools, the process degrades to near chaos. Tools

that provide process discipline and guidance will go a long way to improving process

control, which will drive the other benefits.

E-Commerce Fulfillment

Ecommerce fulfillment is the buzzword today among smart and conscious buyers. And the

reasons are many. To begin with it cuts down maximum expenditure in shipping costs, postage

materials and processing costs. It is also very advisable to assign this to a third party so that you

do not have to bother about space for warehousing, as these companies are specialized in

those. Well, you might think that this means that you are not in control. But this is not so, as

you can always ask for such details as regular updates on state of orders, stock levels, returns

and many more.

Application of technological solutions in logistics

RFID: - Allows wireless transmission of information for product identification and

tracking throughout the manufacturing and distribution value chain.

GPS: - GPS satellite technology combined with mobile data terminals help in

communication and tracking of product and navigation of people and transportation

equipment to optimize costs and time.

Logistics hardware: - Use of robotics and optical Scanners.

Supply Chain Management solution: - Software used for order entry, warehouse online

receiving, finished goods inventory control, freight and audit payment and others. It also

helps in optimization of supply chain costs and time.

Global system for Mobile Communication (GSM)/ General Packet Radio Services

(GPRS): - Application in obtaining real-time data voice and data communication, fleet

tracking and individual vehicle tracking.

Automobile safety systems:- Improved automobile safety technologies like child safety

and child restraint systems, rollover injury risk, vehicle-to-vehicle compatibility, airbag


8

system performance, occupant injury tolerance, blunt traumatic aortic injury, side-

impact injury patterns, crash investigation variables, automotive fire safety, anti-lock

braking systems, electronic stability control systems, active steering systems, tire

pressure monitoring systems, avoidance systems adaptive to cruise control and others.

Role of reverse Supply chain process in a firms overall supply chain

strategies Inventory Cost Reduction

The process enables material currently owned by the company and received through

their reverse supply chain to be removed from the waste stream and utilized to fulfill service

part demand. This process also eliminates the need to purchase new components exclusively

from the procurement channel - to maintain a specific days-on-hand supply, thus dramatically

reducing inventory acquisition costs as well as scrap disposition expenses which eliminates the

need and cost to procure new components by utilizing materials returned through multiple

reverse supply channels.

Generate Bottom Line Revenue

Components that pass the stringent testing and screening process and are not required

for service parts inventory can be sold on the secondary market. This channel allows excess

service supply inventory not required to generate a new revenue stream through remarketing.

Depending upon the type of components and market demand, this channel can not only

balance the cost for the testing and screening process, but can return millions of dollars in

revenue back to the company's bottom line.

Finding the right partners

Very few manufacturers are inclined to invest in a dedicated department or a specific

group of individuals to manage this process. To take advantage of the efficiencies discussed, it

is recommended to adopt an outsourced model that leverages the expertise of a reverse supply

chain partner. A reverse supply chain specialist will have the processes and procedures in place

to implement a full scale recovery option suited to meet your organizations individual needs. It

is strongly recommend not to "home-grow" or partner with a "first-timer" as the processes and

best practice models that come with experience will enhance your total recovery value and

experience.


9

E-commerce and logistic functional areas integrated in to reverse supply

chain process Information lies at the very heart of an effective logistics strategy. Technology will play a

key role in ensuring efficient SCM. The emerging trends reflect that most manufactures are

automating processes, which will increase production and reduce the costs. The major E-

commerce requirement in reverse supply chain / Reverse logistics fall into these broad

categories:

Appropriate technology identification based on the business requirements.

Architecture design.

Field installation and testing.

Product implementation and enhancement.

Application development.

System and data integration.

Operational Testing

Huge real-time and offline data processing and presentation.

Timely delivery of information.

Research and Development.

Emission calculators.

Reporting and analytic tools

External Factors

Functional

Integration

Strategic

/Operational

policies and

Practices

Supply Chain

Orientation


10

External factors influence the reverse supply chain process within the

firm Another issue that became evident throughout this research relates to the external

influences on the way the firms perceive, strategize or manage the returns process. External influences derive from customers, the competitive environment and the regulatory environment. These factors provide an interesting context for evaluating many of the returns management issues discussed previously, and here are the details of how a firm can achieve supply chain excellence:

Level I: - Business practices – working hard to instill best practices in individual

department within your link. Level II: - Link excellence – looking within your link for opportunities to remove

boundaries between departments and pursue continuous improvements. Level III: - Visibility – Turing the lights on outside your organization to asses the

information that needs to be shared with other members of your supply chain – revealing what is and isn’t working.

Level IV: - Collaboration – working with other suppliers, vendors and customers to maximize customer satisfaction and drive out costs throughout the chain.

Level V: - Synthesis – synchronizing new ways of thinking and strategies to provide even greater cost reduction and enhanced customer satisfaction.

Level VI: - Velocity – reducing the lead-time to incorporate continuous improvement throughout the supply chain.

Conclusion In the Global environment, innovation in handling the returned goods are essential to

increase the effectiveness of the supply chain which intern increases the profit and minimize

losses of the product cycle, it is important for Reverse Logistics as a Strategic Weapon of a

firm’s success some of the important analysis are:

Reduce the risk of buying products that may not be “hot selling” items.

Increase the switching costs of changing suppliers.

Clean out customer inventories, so that they can purchase more new goods.

Fresher inventories can demand better prices, which in turn, protects margin.

A holistic view of reverse logistics is essential for a profitable and sustained business

strategy.

There may be more factors we have not yet discovered. Based on this work the model

needs to be further developed, but we believe theory will become an increasingly valuable tool

to manage return flows within supply chains.


11

Bibliography

The IUP Journal of SCM – Volume- VII, No’s.1&2 March & June-2010

Smart Logistics – Network 18 magazine – Volume-01- Issue 03, June 2010

Smart Logistics – Network 18 magazine – Volume-01- Issue 01, April 2010

Smart Logistics – Network 18 magazine – Volume-01- Issue 02, May 2010

Logistic Management – Network 18 – Volume -03 –Issue 09 –January 2010

Logistic Management – Network 18 – Volume -03 –Issue 10 –February 2010

Logistics – Donald Waters – ISBN-0-333-96369-5

Business Logistics/ SCM – Ronald h.Ballou, Samir K. Srivastava – Fifth Edition ISBN-978-81-317-

0584-1

Completing the supply chain Model - Paloma Rengel & Christoph Seydl –May 29-2002

The returns management process in supply chain strategy - Diane Mollenkopf, Ivan Russo &

Robert Frankel –May 2007 - www.emeraldinsight.com/0960-0035.htm

http://www.rlmagazine.com/edition16p12.php

Identifying the factors influencing the performance of reverse supply chains - J. Y. Hong, E. H.

Suh, L. Y. Hou –September 2008

Going Backwards: Reverse Logistics Trends and Practices - University of Nevada, Reno - Center for Logistics Management - Dr. Dale S. Rogers - Dr. Ronald S. Tibben-Lembke - 1998, Reverse Logistics Executive Council

Reverse Logistics with E-commerce Strategy

Documents

Transcript of Reverse Logistics with E-commerce Strategy