REVERSE LOGISTICS

BY ABHIJIT MUKHERJEE (07/MBA/22) BANHI GUHA (07/MBA/47)

DEFINATION Purpose of conforming to customer P requirements. OI Process of planning, implementing & N controlling the cost-effective flow of raw material, in-process T inventory, finished goods & related information. O F Purpose of O recapturing value of proper disposal. RI GI

POINT OF CONSUMPTION POINT OF CONSUMPTION

FORWARD Forecasting relatively One to many distribution points straightforward Product quality uniform Product packaging uniform Destination/Routing clear Disposition options clear Pricing relatively uniform Importance of speed recognized Forward distribution cost easily Inventory visible management consistent Product life cycle manageable Negotiable between parties Marketing methods well known straightforward Visibility of process more transparent

FORWARD VS. REVERSE LOGISTICS

REVERSE Forecasting more difficult Many to one distribution points Product quality not uniform Product packaging often damaged Destination not clear Disposition not clear Pricing dependent on many factors Speed not considered a priority Reverse cost less directly visible Inventory management not Product life consistent cycle issue more Negotiation complicated complex Marketing complicated by several Visibility factors of process less transparent

A sse ts u ti i ti n ( ra th e r w e ca n sa y re -u ti i ti n ) l za o l za o A sse ts re co ve ry ( to ca p tu re th e va l e , w h i o th e rw i se ch u o l w i lb e l st) Pro fi m a xi i ti n : C o st re d u cti n th ro u g h re cycl n g i o m za o t To fu l l th e E n vi n m e n ta l o b l g a ti n s, e . g ., W a ste o i ro fi l i re cycl n g , H a za rd o u s w a ste m a n a g e m e n t, e . g ., C a r sp e b a tte ri s d i o sa l C u sto m e r R e l ti n s M a n a g e m e n t, e . g ., a fte r sa l s e a o ce se rvi , b u y b a ck g u a ra n te e

IMPORTANCE OF REVERSE LOGISTICS

ACTIVITIES OF REVERSE LOGISTICS

Collection Combined inspection/ selection/sorting Re-processing or Direct recovery Redistribution

ACTIVITIES OF REVERSE LOGISTICS

Collection
Collection refers to bringing the products

from the customer to a point of recovery.

ACTIVITIES OF REVERSE LOGISTICS

Collection Combined inspection/ selection/sorting
In the inspection/selection and sorting

phase products are being sorted according to the planned recovery option and within each option, products are sorted according to their quality state and recovery route.

ACTIVITIES OF REVERSE LOGISTICS

Collection Combined inspection/ selection/sorting Re-processing or Direct recovery
Re-processing
Repair Refurbishing Remanufacturing/Retrievals Recycling Incineration

ACTIVITIES OF REVERSE LOGISTICS

Collection Combined inspection/ selection/sorting Re-processing or Direct recovery
Direct Recovery Reuse Resale

ACTIVITIES OF REVERSE LOGISTICS

Collection Combined inspection/ selection/sorting Re-processing or Direct recovery Redistribution
Redistribution is the process of bringing the

recovered goods to the new users.

DESIGN OF RSC NETWORK

The Convergent Network The Divergent Network

REVERSE LOGISTICS APPLICATION AREA

Publication houses (40-50% by volume): To take back the unsold volumes for reuse Beverage industries: To collect reuse the empty bottles, e.g., Coca cola & Pepsi Heavy industries: To collect and reuse the waste Consumer goods industry: To fulfill the commitments of after sale service and buy back guarantee Pharmaceutical industries: To collect the expired formulations and drugs for environment friendly disposal Automobile industries: To fulfill the commitments of after sale service and buy back guarantee

RETURN PERCENTAGES
INDUSTRY Magazine Publishing Book Publishers Book Distributors Greeting Cards Catalog Retailers Electronic Distributors Computer Manufacturers CD-ROMs Printers Mail Order Computer Manufactures Mass Merchandisers Auto Industry (Parts) Consumer Electronics Household Chemicals PERCENTAGE 50% 20-30% 10-20% 20-30% 18-35% 10-12% 10-20% 18-25% 4-8% 2-5% 4-15% 4-6% 4-5% 2-3%

Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, 19

PUBLISHING INDUSTRY
Highest rate of unsold copies (28% on

average)
Growth of large chain stores: More

square footage requires more books

To secure a prominent display in

superstores, publishers must supply large quantities of books

Superstores sell less than 70% of

books they order

Shorter shelf life

COMPUTER / ELECTRONIC INDUSTRY

S h o rte r l fe cycl s i e A p p roxi a te l 3 2 5 m i l o n P C s b e ca m e m y li

o b so l te i th e U S b e tw e e n 1 9 8 5 a n d e n 2005
O p p o rtu n i e s to re u se a n d cre a te va l e o u t ti u

o f a n e a rl o m n i re se n t a sse t y p
H o w to re co ve r a n d re u se m a te ri l as

co n ta i e d w i i E -w a ste ? n th n
Lead, copper, aluminum gold, plastics

and glass
E-waste includes computers,

televisions, cell phones, audio equipment and batteries

Remanufacturing of toner cartridges: 12,000

remanufacturers, employing 42,000 workers, sell nearly $1 billion annually

AUTOMOTIVE INDUSTRY
Three primary areas: Components in working order sold as is Other components, such as engines, alternators, starters, and transmissions are refurbished before they can be sold Materials are reclaimed through crushing or shredding Automotive recyclers handle more

than 37% of the nations ferrous scrap Remanufactured auto parts market is estimated at $34 billion, annually

RETAIL INDUSTRY
Profit margins are so slim

that good return management is critical Returns reduce the profitability of retailers marginally more than manufacturers
Returns reduce the

profitability of retailers by 4.3% The average amount that returns reduce profitability among manufacturers is 3.80%

BARRIERS TO REVERSE LOGISTICS

BARRIER Importance of reverse logistics relative to other issues Company policies Lack of systems Competitive issues Management inattention Financial resources Personal resources Legal issues PERCENTA GE 39.2% 35% 34.3% 33.7% 26.8% 19.0% 19.0% 14.1%

Source: Rogers and Tibben-Lembke, Going Backwards: Reverse Logistics Trends and

REVERSE LOGISTICS ELEMENT

Preventive Measures: To increase Quality minimize returns by defective products Return agreements with retailers / distributors Customer Service providing toll-free numbers that customers can call before
returning products

Compacting Disposition Cycle Time

Important to know beforehand what to do with returned goods When material often comes back in to a distribution center, it is not clear whether the items are: defective, can be reused, or refurbished, or need to be sent to a landfill The challenge of running a distribution system in forward is difficult employees have difficulty making decisions when the decision rules are not clearly stated and exceptions are often made

REVERSE LOGISTICS ELEMENT

Reverse Logistics Information Systems
The system should create a database at store level so that the retailer can begin tracking returned product and follow it all the way back through the supply chain Information system should also include detailed information programs about important reverse logistics measurements, such as returns rates, recovery rates, and returns inventory turnover Useful tools such as radio frequency (RF) are helpful. New innovations such as two-dimensional bar code and radio frequency identification license plates (RFID) may soon be in use extensively

Asset Recovery
This is a good cash generating opportunity for companies who can sell these goods that would be otherwise end up in landfills

REVERSE LOGISTICS ELEMENT

Negotiation
Negotiation is a key element for all parties of the reverse logistics process. Because of the inherent lack of expertise on product returns, negotiations usually are informal and approached without formal pricing guidelines. Firms often do not maximize the residual value of returned product

Financial Management
Probably the most difficult part of reverse logistic and also one of the most important Returns are sometimes charged against sales. People in the sales department may tend to fight returns and delay them as much as possible. Furthermore, accounts receivables are impacted by returns

Outsourcing
Reverse logistic is usually not a core competence of the firm. In many cases, however, it makes more sense for the firm to outsource their reverse logistics functions than keep those in-house.

RL TIPS FOR BETTER REPLACEMENT MANAGEMENT

1.Satisfy your customer as quickly as possible 2.Keep your customer informed 3.Promise to deliver 4.Keep your alternative organized 5.Keep a close eye on cost 6.Predict future requirements

CASE STUDIES

MUMBAI DABBAWALLAS
Started in 1880, the experience curve of

more than 125-year-old dabbawalla service. Supplies 2,00,000 lunch boxes everyday in the busy metropolis of Mumbai. They have 5,000 people on their payroll to ensure the prompt delivery of lunchboxes within Mumbai; these 'delivery boys' travel by local trains and use bicycles or walk to reach every nook and corner of Mumbai. The lunch boxes are delivered exactly at 12.30 pm. Later, the empty boxes are collected and taken back to the homes, catering services or hotels before 5 pm.

MUMBAI DABBAWALLAS
On an average, every Tiffin box changes hands four

times and travels 60-70 kilometers in its journey to reach its eventual destination. Each box is differentiated and sorted along the route on the basis of markings on the lid, which give an indication of the source as well as the destination address.
For instance, Bhalekar's lunch would carry the

coding 3MC4, 3 for the carrier who delivers in Nariman Point, MC for his office in Mafatlal Centre and 4 for the floor his office is located on. In another code below it, 10 is the number for the Churchgate station where the tiffin is offloaded and D for Dahisar station where it was collected.

MUMBAI DABBAWALLAS
Current competition: The dabbawallas do face

competition from fast food joints as well as office canteens. However, since neither of these serve home food, the dabbawallas' core offering remains unchallenged. They generally tend to be middle-class citizens who, for reasons of economy, hygiene, caste and dietary restrictions or simply because they prefer whole-some food from their kitchen, rely on the dabbawala to deliver a home cooked mid-day meal.

MUMBAI DABBAWALLAS
New customers are generally acquired through

referrals. Some are solicited by dabbawalas on railway platforms. Addresses are passed on to the dabbawala operating in the specific area, who then visits the customer to finalize arrangements. Today customers can also log onto the website www.webrishi.com to access the service. Service charges vary from Rs 150 to Rs 300 per Tiffin per month, depending on location and collection time. Money is collected in the first week of every month and remitted to the mukadam on the first Sunday. He then divides the money equally among members of that group. It is assumed that one dabbawala can handle not more than 30-35 customers given that each Tiffin weighs around 2 kgs. And this is the benchmark that every group tries to achieve.

MUMBAI DABBAWALLAS
Typically, a twenty member group has 675

customers and earns Rs 1,00,000 per month which is divided equally even if one dabbawala has 40 customers while another has 30. Groups compete with each other, but members within a group do not. From his earnings of between Rs 5,000 to Rs 6,000, every dabbawala contributes Rs 15 per month to the association. The amount is utilized for the community's upliftment, loans and marriage halls at concessional rates.

MUMBAI DABBAWALLAS
If a customer complains of poor service, the

association can shift the customer's account to another dabbawala. No dabbawala is allowed to undercut another. Before looking into internal disputes, the association charges a token Rs 100 to ensure that only genuinely aggrieved members interested in a solution come to it with their problems, and the officials' time is not wasted on petty bickering.

DABBAWALA METHODOLOGY
"Error is horror," is operational motto. In the event

of a dabbawalla meeting with an accident en route, alternative arrangements are made to deliver the lunch boxes. The dabbawallas must be extremely disciplined. Consuming alcohol while on duty attracts a fine of Rs 1,000. Unwarranted absenteeism is not tolerated and is treated with a similar fine. Every dabbawalla gets a weekly off, usually on Sunday. The Gandhi cap serves as a potent symbol of identification in the crowded railway stations. Not wearing the cap attracts a fine of Rs 25.

LEARNING FROM DABBAWALAS

The belief that technology is indispensable to

solve complex problems was shattered. FMCGs and other industries can learn a lot from the simple supply chain logistics and efficient reverse logistics (transfer of empty lunch boxes to the source location) The concept of multi-level coding (colour coding on the lunch boxes for identification) and reverse logistics can be implemented in industries as diverse as soft drinks (where logistics becomes an important aspect, transporting the filled bottles to retailers and collecting empty bottles back to the plants), pharmaceuticals and other FMCG areas.

LEARNING FROM DABBAWALAS

The

bar coding mechanism (a computerised format) which is prevalent and expensive, be simplified with just colour/ number coding In small and medium scale organisations where bar coding systems would require a lot of resources, these systems can prove to be very efficient and cost effective. Moreover, the dependence on technology could be drastically reduced. The most enduring lesson that we learnt was to put the customer ahead of everything else. It is said that when Prince Charles expressed a desire to meet them during his visit in 2003, the dabbawallas requested him to schedule the meeting such that it did not interfere with their mid-day delivery timings.