Reverse Supply Chain ManagementDr. P.ChandiranLIBA

Definition

•Reverse supply chain or reverse logistics is the series of activities required to retrieve a used product from a customer and dispose of it properly or reuse after processing .

•The chain connects end users with manufacturer in reverse direction.

Forward SCN-Characteristics

•Upstream-Convergent•Downstream-Divergent•Flow in forward direction•Value addition for the product takes place•Inventory is kept in most of the nodes•Customer demand drives the flow speed•Material handling and Transportation are

done with utmost care

Forward SCN-Functions

•Meet the demand•Value provider•Image enhancer•Provides competitiveness•Support new product development•Backbone of Marketing

Reverse Supply Chain Network-Characteristics•Convergent in nature from end-user to

manufacturer•Reverse flow of used products•Supply driven•Relatively slow movement•Value declines with time while moving

upstream•Very small value addition in some cases•MH and transportation are not with care• Inventory available in different nodes

Some examples of corporations practicing reverse supply chain for EOL products in some forms•Canon•Xerox•Kodak•Exide•Oce copiers•IBM

Drivers of RSC Initiatives

•Environmental legislations•Economic value from returns•Green Image•Material Resource constraints like lead

and other precious resources

Role of Informal Sectors in Solid Waste Collection•Solid waste includes Plastics, paper,

Polythene, metals and PET bottles and Glass bottles

•Mostly collected by waste pickers and local body lower level sanitary workers

Retail Returns

•Due to liberal return policy•Damaged returns•Excess stock returns due to wrong

forecasting•Warranty returns and service returns

Product Acquisition•The collection of used products potentially

accounts for a significant part of the total cost, which can be compared with the last mile issue in distribution of products in the forward supply chain.

•The collection may occur by door to door, through service centre, through sales centre and sometimes by customers. In the case of paper and plastic, people go to individual houses and collect paper products.

Collection Points• In the case of batteries, the point of purchase acts

as collection centre (retailers). In the case of tyre re-treading, customer brings old tyres to re-treading centers.

• Canon used to collect empty cartridges used in their printer through collection boxes kept at different places. Customers can deposit their used cartridges in these boxes and a courier company can send this to refilling.

• Dupont operates several facilities for recycling nylon from using carpeting material. Carpet dealers collect the carpet waste.

Inspection and Testing• The location of the test and grade operation should be near to

collection centers. Early testing might save transportation of useless products. On the other hand, sophisticated testing might involve expensive equipments, which can only be afforded at a few locations. The economy of operating a test center also should be considered while designing the network.

• Companies like Bosch which produces Power tools, used to fix sensors so that it will give an idea that whether the motors inside the tool are worth remanufacturing or not. This idea definitely helps the company to reduce costs

Remanufacturing options• Often, the reprocessing stage requires the highest investments

within reverse logistics network. The process involves

disassembly, repair work, reuse in new products and re-assembly.

The critical issues involved are how to reduce the uncertainty in

the supply of products to be manufactured, how to ensure a

sustainable volume of products to be manufactured and whether to

outsource remanufacturing (open-loop system) or to integrate with

existing operation (closed-loop system)  

Manufacturer Distributor Customers

Collection Sorting & Grading

Disposal

Closed loop supply chain

Manufacturer Distributor Customer Collection

Third party Recycling

Secondary Market

Open loop supply chain system

Important managerial issues in RSCM-Network Design•Collection – Recovery channels its roles• Inspection of returned products-location of

facilities•Reverse Supply Chain Network Design Options•Role of Forward Supply Chains• Integration of FSC and RSC•Role of 3PL•Most of the reverse supply chain activities

takes place in downstream forward supply chain of lead organisation.

Important issues Forecasting Returns•Issues in forecasting•Impact on remanufacturing•Impact on Logistics•Models for forecasting

Logistics-Transportation and warehousing•Many to one transportation•Difficult to integrate with forward

logistics•Using same trucks used for forward

distribution is difficult for handling returns but possible

•Returns situation are different for different players in the SC

Incentive system for collection

•Promotion-exchange scheme•Mass collection scheme organized by

service centres•Competition between organized players

and unorganized sectors•Design of incentive system and tracking•Identification and tracking