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Chapter 11: Strategic Leadership
Outline
• Logistics systems are traditionally designed to handle product flows in one direction only.
• Product returns and waste management requirements have led to products flowing back from customers to suppliers and manufacturers.
• Unpredictability and lower volumes complicate the process.
• The environment has to be taken into account through environmental management systems, ISO 14000 and carbon footprint reduction.
• Closed-loop supply chains aim to achieve zero waste by integrating forward and reverse supply chain activities.
Chapter 11: Strategic Leadership
Learning outcomes
• The returns management process
• The role of reverse logistics in returns management
• The way in which reverse logistics is managed
• The reasons for returning products
• The stages through which returned products move
• The difference between product recovery and waste management
• Environmentally sound supply chain management
• ISO 14000
• The concept of closed-loop supply chains
Chapter 11: Strategic Leadership
Role of reverse logistics in returns management
Returns management is about:• avoidance;
• gatekeeping; and
• disposition.
Reverse logistics:• Part of returns management
• From point of consumption or intermediate point back towards origin or away from the supply chain
• Recapture value or properly dispose of goods
Chapter 11: Strategic Leadership
Product returns management
• Return products to source or for waste disposal
• Waste = by-product of manufacturing and consumption
– process, reuse, recycle and dispose of responsibly
• Returns management comprises wide array of activities
(see pp. 422–3)
Types of returns:
• Manufacturing
• Distribution
• Customer
Reasons for returns: see p. 423
Chapter 11: Strategic Leadership
Path of returned products and materials
Minimise number of items that need to enter return flow through avoidance and gatekeeping.
Paths for returns (from most to least attractive):• Return to vendor for refund
• Sell as new (repackaging may be required)
• Sell via auction or outlet
• Remanufacture or refurbish
• Sell to broker
• Donate to charity
• Recycle
• Dispose of in landfill
Chapter 11: Strategic Leadership
Product recovery and waste managementConsider waste disposal options in terms of environment.
Chapter 11: Strategic Leadership
Differences between forward and reverse logistics – management
Forward logistics:• Sales and marketing forecast plan• Single or limited origin of products• Distribution planning possible• High visibility• Cost known or can be estimated before shipping
Reverse logistics:• Difficult/impossible to forecast• Many-to-one distribution network• Reactive planning for distribution• Low visibility into product flows• Difficult to predetermine costs
Chapter 11: Strategic Leadership
Differences between forward and reverse logistics – costs
Cost category Forward logistics Reverse logistics
Transport Lower bulk rates Higher cost per unit
Inventory-holding Generally higher Low holding cost
Shrinkage Higher Lower due to various factors
Obsolescence Result of bad inventory management
Higher cost, as products less likely to still be sold
Collection Distribution from DC High cost of special arrangements
Sorting Standardised Inspection cost
Handling Lower cost (unitised) High cost (single units)
Refurbishment and repackaging
Non-existent Variable, but often applicable
Book value Little change, except with obsolescence
Always below market value of new product
Chapter 11: Strategic Leadership
Information management challenges of reverse logistics• Special information requirements of reverse logistics cannot be handled by traditional ERP, WMS and TMS.
• End-to-end information system should be able to support:• Warranty and return management
• Recall management
• Depot repair management
• Regulatory compliance management
• Business analytics and reporting
• etc.
Chapter 11: Strategic Leadership
Life-cycle assessment (LCA)
Quantify the resource and energy use and environmental burdens of a product or process over its entire life cycle.• Cradle-to-grave perspective
• Comparative nature
• Can also be used to compare distribution strategies
• Sustainability efforts can be included during:– Design
– Source
– Manufacture
– Distribution
– Post-sales service
– Returns/recycling
Chapter 11: Strategic Leadership
Stages in the reverse logistics process
Typical stages of product returns to a warehouse:• Receipt
– separately from normal inbound products
• Sort and stage– preparation for returns processing
• Returns processing– further sorting and capturing of information
• Returns analysis– make decision on path that each item should take
• Support operations– distribute items according to where they should go
Chapter 11: Strategic Leadership
Logistics and the environment (1)
Environmentally sound supply chain management:• Pressure from consumers, clients and government
• Compliance with composite framework of requirements identified on behalf of an organisation’s stakeholders
• Legislative pressures traditionally main reason for change
• Sound environmental practices can have financial benefits
• Easily addressed in reverse logistics, packaging, transport and facility location/network design
• Internal and external collaboration around issues needed
Chapter 11: Strategic Leadership
Logistics and the environment (2)
• ISO 14000 – focus on environmental management:
– Minimising harmful effects of activities
– Continual improvement in environmental performance
• Requirements and guidelines for an EMS:– ID and control
– Continuously improve
– Systematic approach
• Benefits of implementation: see pp. 432–3
• Beware of fragmented procedures, conflicting interests and lack of customer focus
Chapter 11: Strategic Leadership
Logistics and the environment (3)
Carbon footprint:
• Measure greenhouse gases produced in units of CO2
• Fossil fuel combustion is the main source
• Various strategies for reduction: see p. 433
Closed-loop supply chains:• Forward and reverse logistics activities combined into a single system
• Zero-waste supply chain
• Maximise reuse, recycling and composting of materials
• Return products to manufacturer at end of useful life